Price Versus Value

by Mark J. Sheffield

Price –  noun : 1. The amount of money expected, required, or given in payment for something.

Value – noun : 1. The regard that something is held to deserve; the importance, worth, or usefulness of something.

In my 27 years in the powersports industry, I’ve ready many articles talking about the things that matter most to consumers. I can’t remember the last time I saw price in the top three. However, when I talk to owners and managers, most of them want me to believe that the majority of consumers are price shoppers. There’s definitely a disconnect.

What is the definition of price? In simplest terms, it’s the money that is exchanged for a good or service. While the price is often negotiable, it’s still a black and white concept. Customer X pays Y for product Z.

While many dealerships are focused on pricing, what we should really be focused on is the value of what we are selling. What’s the definition of value? It’s the perceived worth of a product or service. Price is a component of value, but it’s just one of many components, and it might not even be the most important one.

Assume we are selling a new sport model side-by-side. What are some of the factors that influence value?

  • Brand: Certain brand names come with social credibility. While a customer might be able to buy a utility vehicle from the front lot of the local hardware store, when he or she pulls up to the off-road park with that off-brand vehicle and the front shocks look like they came off a screen door, there’s probably not going to be a group of people coming over to ask questions about the suspension travel.
  • Reputation: Buy any new product, and chances are that within a few days you are going to receive some form of a customer service survey. It might pertain to the product you purchased, or the retailer you purchased it from. We are bombarded with these surveys, and that’s because what you have to say about the product and the retailer matters. Customers want to purchase reliable vehicles from reputable dealers. If your dealership has a Google rank of 2.3, and you don’t think that costs you money, then you have a lot to learn.
  • Experience: I frequent certain stores because they greet me by name when I come through the front door. Everyone likes to feel like they are important. Greeting a customer using his or her name, and then asking about how the family is doing, will set you apart from most every other business on the planet. This level of service doesn’t come cheap; you’ve got to have a strong culture and great employees. But when you offer this level of service, price is rarely a topic that anyone spends much time on.
  • Transparency: Purchasing a new automobile is a miserable experience. Consumers rate buying a new car up there with going to the dentist, getting sued, and dying. Why is that? Because the car buying experience has been optimized for speed and efficiency, not for the experience. The auto industry uses more smoke and mirrors than David Copperfield does in his Vegas magic shows. During their lives, most people are going to purchase four or five vehicles, and most car buyers need a vehicle. Auto dealers have a steady stream of potential customers, and if someone doesn’t return, there are plenty of replacement customers. In the powersports industry, we don’t sell needs, we sell wants. Treat a customer badly, and they might never buy another motorcycle from your dealership (or possibly from any other dealership). Set expectations for your customers, and then meet or exceed them.
  • Honesty and Integrity: Say what you are going to do, and then do what you said you would do. If you tell a customer that you have the best service department in the state and that you’ll treat them with white gloves, be prepared to deliver on that commitment. If finance told the customer you’d get her the best rate on her financing, then don’t mark it up a couple of points.

I could go on for a few more pages listing out components that impact value, but I don’t need to. Stay in tune with your business, your customers, and your employees, and you’ll know what you are good at and where you need to improve. Work hard to optimize the customer experience and you’ll soon find yourself spending less time talking about price.

If you believe that most customers are price shoppers, then for your dealership you may be right. But, be willing to acknowledge that this may be a situation you created. If you focus only on price, then yes, you will have a lot of price shoppers. Instead of focusing on price, start focusing on value. Wow your customers, be honest with them, create a relationship that’s more than business-to-customer. Focus on price, and everyone loses. Focus on value, and everyone wins.

Mark J. Sheffield, Spader 20 Group Facilitator