Questions

Have a question for myself or the community about dealer websites, lead vendors, crm/ilm or something general about Internet sales? Email me, and I'll post it on the site.

Web Tools

Lower Volume + Lower Profits = Disaster

Posted by Grant Cardone | Saturday, April 4, 2009 | Posted in Best Practices

Guest Posting by Grant Cardone

Price is always a very sensitive issue, especially during times of contraction when money is tight; consumers are scared and more selective with their money. The first response (incorrectly) is to reduce price in order to make up for less volume. It is a myth that a lower price will sell your product and in fact, a formula for disaster and guarantee of failure for most.

Unless you are Wal-Mart or the Dollar Store whose entire business model is built around very small margins and high volumes, the lowest price model will fail the individual and the company. Selling by price is an indication of a weak-minded and poorly trained individual or organization that looks for squirrel-like solutions to their challenges. I can show you an almost endless list of companies that have used the lowest price model that have filed for bankruptcy or closed their doors this year alone!

Do the math. Lower Volumes + Lower Profits = DISASTER. If you reduce price 50% you would have to sell twice as much product to be even, which during a period of economic contraction replacing loss volume would be more difficult than just learning the skill of holding price.

A lower price will NOT solve your problems and could actually reduce the perceived value in your product.

Know that the public is being conditioned that things are tight and they will be more selective with their purchases. That means they will not just be shopping you against similar products but also unlike products. “Do we buy a car or redo the kitchen?” In this case, lowering your price will have nothing to do with their decision and only building value will.

RULE – MONEY MOVES TOWARD VALUE, NEVER THE LOWEST PRICE!

If not completely sold on the value proposition of your product or service, the prospect will elect do something else with his/her money! (By the way, doing nothing is something else.)

If you don’t know that the lower price/lower volume formula is a recipe for disaster you and your people will believe it (incorrectly) to be an option. Also, during periods of contraction experience is worthless and skills are everything! The ability to sell your product and justify the price by really building value, selling yourself, your company and creating a true value proposition is more valuable than experience.

Get yourself and your company thoroughly handled on the fact that lower price and lower volumes is a formula for disaster. It costs less money to train people than it costs to give your product away, especially since lowering price doesn’t guarantee a sale and won’t make up for the reduction in volume.

About the Aurthor: Grant Cardone is a speaker, author, sales trainer and CEO of Cardone Training Technologies. Author of Sell To Survive and other Audio, Video, and training programs, for more information on Mr. Cardone visit grantcardone.com

Share and Enjoy:

Stay Connected!

Subscribe to our RSS feed, find us on Facebook or follow us on Twitter!

6 Comments

Chris K

April 4th, 2009

It’s also a shame to see Hyundai and Ford moving towards a position of weakness offering to take care of payments if you lose your job. It might persuade some to visit their dealerships, but gimmicks like these will be short lived. Remember when Chrysler locked people into $2.99 Gas? Well gas is now $2 – and that gimmick was short lived. Like all other dealer gimmicks such as free tires for life, free oil changes, free this and free that – dealers might want to consider these since nothing’s for free. In fact these ‘gimmick’ dealers are simply sinking deeper into their money pit holes perpetuating promises that cost them big money, while creating confusion by consumers. They are supplementing their service business at the expense of their sales people – the most important person at a dealership.
Chris K

April 4th, 2009

… next to the customer! That is.
Walt Kustra

April 5th, 2009

Great insight Chris. Its especially disheartening to see this from Ford whom I truly believe has “made the turn” in terms of quality and public perception. Its a shame for a company to finally have viable contenders as far as product and see them fall back on a poor business model.
Kevin Frye

April 6th, 2009

Ahhhh – the eternal question – does “value” mean “more for less”? Or is it something else? Value is one of those things that are defined in the eyes of the beholder – and part of a great sales rep’s job is to determine how their customer defines value, and then sell to meet those needs… Nice piece Grant, I enjoyed it…
Mitch Gallant

April 7th, 2009

I agree with Grant’s article and everything he’s put forth. When it comes to Ford and Hyundai’s “payment insurance” gimmicks, I believe they’ve done their homework. I can’t speak directly for Hyundai but I’ve spoken to Ford reps and watched Ford’s CEO(’s Canada as well) stand up and speak in detail about a predatory marketing stance. The gimmick in question is nothing more then a calculated incentive for folks to put one worry aside. Let’s face it, the economy is the big pink elephant in the room, they’ve done nothing more then load our lips for an objection, allowing us to then do our jobs a little better, build value and steal business from other manufacturers.
Mat Koenig

April 10th, 2009

Great stuff Grant. What I appreciate most about what you wrote is that you did NOT say: “Keep prices high to give a perceived higher value.”

You emphasize the need for showing the buyer the VALUE of your product. Whether someone is selling KIA or BMW there is value in the product. If the consumer walked on the lot, sent an email or jumped online to chat about your car they already have some level of perceived value and dropping price for no reason will lover that perception of value.

Again, thakns for the post Grant, great stuff!