NASHVILLE, Tenn.—It's inevitable that customers will object to prices, but tire dealers who are prepared to deal effectively with price objections can make more sales at higher margins.
That's the message Tom Reilly, owner of Sales Motivational Services in Chesterfield, Mo., delivered at a workshop titled "Crush Price Objections." It was held during the recent 2000 World ITRA Expo at the Opryland Hotel and Convention Center in Nashville.
Mr. Reilly said research shows one out of six customers is a true price shopper who is "really focused more on what they're giving up than what they're getting in return."
Raising price objections is a negotiating tactic for many shoppers, he said. But the dealer who is prepared to justify his or her price in terms of value—extra service or other amenities, for example—is more likely to overcome price objections and make a sale.
Mr. Reilly cited a study where 75 percent of 3,500 salespersons reduced the price in reaction to buyer resistance, while only 18 percent of the sales people tried to close a deal without providing a discount.
"Most of the price resistance we deal with is the result of a self-inflicted injury," he said. A dealer shouldn't automatically discount prices or send signals to the buyer that he might drop them.
Appealing to customers to empathize with you doesn't work either, he said, because "buyers don't care about your costs." The key to making a sale is to make the customer feel the purchase is at least an equitable—or better—exchange.
"Buyers don't care about price when what they're getting is better than what they're giving," Mr. Reilly said.
Dealers who decide to compete primarily on price are indirectly sending customers to the competition, he said.
It's impossible for independent dealers to compete on prices with discounters or mass merchandisers, he said, adding: "You can't `out-Wal-Mart' Wal-Mart. You can't `out-Sam's' Sam's."
Price shoppers are less loyal than other customers and may cause more aggravation than they are worth, he added.
A trucking company analyzed its customer base, Mr. Reilly said, and determined that 1 percent of its customers took 40 percent of its managers' time. These customers also had more complaints and were more difficult to collect from.
"Kiss them (difficult customers) goodbye," he said. "You don't need that type of business."
To avoid price resistance, Mr. Reilly said the seller should raise questions about non-price issues such as usage. Avoid using the word "price," he said, and talk about the buyer's "budget range."
If the buyer mentions the competition, he told dealers to be proactive and find out what the buyer thinks about the competitor and what issues the buyer considers important. "Talk about customizing your solution to the buyer's needs," he said.
Another survey of 1,000 salespeople for companies of all sizes revealed top-performing sellers spent, on average, more than 60 percent of a sales call listening to the buyer, Mr. Reilly said. These sales persons also never made a specific product or service recommendation until at least 40 percent of the sales call's time had elapsed.
He also stressed the importance of using analogies to make persuasive points with the customer.
Mr. Reilly told about a customer his son, Paul, encountered while working at a car wash. The man was driving a $70,000 luxury car and told Paul he wanted a budget-priced car wash.
When Mr. Reilly's son asked the customer if he ordered the cheapest wine when he dined at an expensive restaurant, the customer saw the point and upgraded to a custom wash and wax job.
"The analogy is one of the most powerful tools you can use in persuading someone to accept your point of view," Mr. Reilly said.
He suggested the seller meet buyer price objections by drawing the conversation out and stressing value-added features of the product or added service after the sale.
Mr. Reilly told dealers to keep their emotions under control, even if a buyer rejects an offer.
"When you're negotiating, you can't deal with someone else's emotions unless you can control your own first," he advised.
Dealers ultimately can appeal to a buyer's sense of security and safety. "70 percent of the people in this country are low-risk individuals," he said. "Tires are not the place to save money."