The truck tire business is a dog-eat-dog world. The marketplace is such that fleets expect you to cut your price on new tires and retreads to gain or even keep their business. Amazingly, even in times like these when demand for truck tires outstrips supply, commercial tire dealers and tire manufacturers are still cutting prices.
What's going to happen when the supply exceeds demand. I'll tell you what: Cats are going to rule the world!
How did this market phenomenon—where the way to sell tires is simply to cut the price—come about? Did the guy who invented the wheel (and the tire not long after) dream up this sales technique, too? He must have, because it seems to have been around as long as dirt.
It's funny because this is just how the automobile market works. When you go to buy a car, you know haggling with the salesman is part of the car shopping/buying experience. (And for almost all of us, it's the part we dread the most.)
But do you ever even consider asking for a better price when you buy beer, a new suit or rent an apartment? No, because we just know that the price is firm unless there's a ``blue light special.''
But somehow, the collective commercial tire industry has developed weak knees and caves any time a fleet manager says, ``I can buy it cheaper from So-And-So.'' As a result we've got an industry in which margins are paper-thin, dealers are consolidating to stay in business, and those who aren't are being forced to change the products they sell.
And who is to blame? The fleets for demanding ridiculous price cuts? The competition for dropping their prices?
No, price cuts are self-inflicted wounds. No one can lower your prices other than you. You are the culprit.
I attended a workshop conducted by Lawrence Steinmetz, who specializes in training people on how to sell at prices higher than their competition's. The following are some insights from this seminar.
Many truck tire salespeople invite price hammering when they make their sales calls. They actually communicate that their prices are high by saying things like, ``Are you sitting down?'' ``How does $X sound to you?'' and even, ``Fasten your seat belt!'' when they deliver their tire price.
The next thing that happens is the fleet manager says, ``Hey, I can get it 20 percent cheaper down the street!''
And why is this a surprise? These salespeople proclaim that the price is too high. (It's as if they have flashing blue lights on their heads!)
Then they crack and say something like, ``Well, look I want to work with you on this,'' or ``Let me sharpen my pencil,'' or ``What will it take to get your business?'' And then there is the ever popular, ``Tell me where I need to be!''
How do you set tire and retread prices?
Some dealers base them on the competition's prices. This makes no sense. Most businesses go broke by cutting prices. No one goes broke by raising prices.
Why base your prices on what the competitor down the street does? He's going out of business, and you're trying to beat him to it!
Other dealers base their prices on cost. This isn't too bright either, since the better you get in reducing your costs, the lower your prices will be, and the higher your cost, the more money you'll make!
What you really need to do is drive your costs down and your prices up in order to increase your margins.
So what should you do when placed in this difficult situation? Hang tough! Ask for prices that are higher than the competition and stick with them.
Learn when your customer is lying to you. When he says, ``I can get the same tires and services for less money,'' what he is really saying is, ``I want your tires and service at someone else's price.''
Observe where he is looking when he is talking to you. Does he look away, check the dirt under his fingernails, or adjust papers on his desk? Does he do anything but look you in the eye?
If he doesn't look you in the eye, then he is lying.
If he uses the subjunctive form of talking designed to scare people, which includes the words, ``if,'' ``unless,'' ``either...or'' as in, ``If you don't lower your price, we're done talking,'' or ``Either you lower your price or you're outta here,'' then he's lying.
Now if he uses the imperative (command) form of talking such as, ``I'm not buying from you!'' he's got a better deal.
When you know he's lying, don't crack. Be aware that buyers are all good liars—or should I say negotiators? The difference is you can go to hell for lying, but you get a lower price for negotiating.
Here are a few guidelines for hanging tough on your price and getting the fleet to accept it.
1) Look the fleet manager right in the eye when you lay the price on him. You must have credibility.
2) Acknowledge that your price is higher. When he says, ``I can get it for 20-percent less from the guy down the street,'' say ``So?'' or ``Ahuh'' and then shut up. This implies you know it and don't intend to do anything about it.
3) The customer then will say something like, ``What makes you think I'm going to pay that?'' That's your cue for giving your full features and benefits sales presentation that will justify your higher prices.
Or if he says, ``I'm not paying that much for your product,'' say: ``Why not?'' This also implies you're not going to cut your price. After he tells you, go on selling your product, ``That's right. The price is higher, but you're going to get....''
4) Use testimonials in your sales presentation. Fleet buyers are really afraid they will be paying more than other fleets for your tires and service. If they know they will be paying what other fleets are paying, then they don't have to negotiate, which is something most people don't like to do anyway.
5) Finally, you have several tire products in your bag of tricks. If price really is an issue and the customer says he can only pay, for example, 20-percent less than your price, offer the fleet a 20-percent lesser quality tire for 20-percent less money. But if he wants the premium tire product, he's got to pay the premium price. Hang tough.
Remember that a low price makes a negative statement about your product or services. It implies they are not worth much. A high price makes a much more positive statement about the quality you are offering. And price is always more significant in the minds of the seller than the buyer.
Of course, from time to time you will lose or fail to make a sale because your price is too high. But if you haven't lost a few sales for high prices, then your prices are too low.
Mr. Steinmetz has a selection of books, audio and videocassettes that may aid in your sales training. If you are interested in them, contact Horizon Publications Inc. at (800) 323-2835.
Any technique that will help your dealership be profitable is a good investment. And getting the tire industry out of the price-cutting quagmire and into a more profitable position would be a benefit to the entire industry as well as its customers.