Price vs Value – How to Win by Focusing on Value.
It was a busy Friday morning when Tom called me for an update on his vehicle. I let Tom know his car would be ready at the end of the day. There was a pause, and then he blindsided me with this, “You know Joe, I did a little research on that water pump you’re replacing on my car. I can get that same part for $30 less, why does your part cost so much?” I fired back at him by saying, “that’s impossible, it can’t be.” I went on and on attempting to defend myself, but I could tell I wasn’t getting through to him. After a few more words back and forth, Tom finally said, “Look you started the job, so you might as well finish it.”
You’re probably thinking Tom went online to check the part. Well, this happened in 1980, my first year in business, and years before the internet even existed. Tom simply called a local part store. The parts store gave him a discounted price and then figured he would challenge me.
Consumers checking your prices is nothing new – it just a whole lot easier these days with the internet. Now, let’s clarify one thing: I am not going to tell you in this article there is a foolproof way to train customers not to go online to check your prices or call other shops. However, what I can tell you with certainty is that if you continue to focus on products and not the customer experience, you are telling people to please check your prices.
Consider this: you’re out to dinner at a fancy restaurant and you ask the waiter to bring you the wine list. As you scan the list you recognize a brand and then look at the price. Do you google the bottle of wine to see what it really costs? Probably not. We all know that a $10 bottle of wine in the store can cost over $40 at the restaurant. But you order it anyway. Why?
The restaurant is selling more than wine and food, it’s selling the experience. If all goes the way it should, we pay for the meal and the bottle of wine, and we are okay with it.
Our business is not different, we need to focus on the experience, not the products. Yes, we install water pumps, control arms and radiators, but that should not be our main focus. Our focus should be on the value and benefit of doing business with US. Now, with that being said, there’s a delicate balance between being competitive and being profitable. However, as value goes up, price becomes less of an issue.
Here is the difference between our business and product driven business; when you buy a product like a watch or a cell phone, the experience lives on long after the sale. Every time you put the watch on or use your phone, you are continuing the experience, and if the product is high quality, the experience gets reinforced over and over every time you use it. With auto repair, what we do does not live on much after the sale. Once a customer leaves with a new timing belt and water pump there’s not much about that repair that lives on in the eyes of the consumer, except the customer experience. Your entire sales process – your marketing, the look of your shop, the people you employ, etc. – must tell the customer what you sell is worth the price.
Let’s remember one thing, your prices will be challenged from time to time, so here are a few more tips. Get the right training for your service advisors, especially in the area of customer service. Ensure your marketing communicates your brand and your culture, and please be careful with discounting. Claims that you have the best price on tires or brakes only challenges customers to check online to see if its true. Most importantly, communicate the benefits of doing business with your company.
Let’s get back to Tom. After 39 years, Tom and his family are still my customers. I have to believe it’s because Tom appreciates the level of service we have given him throughout the years and the relationship we have built. Tom has learned what Warren Buffet has often said, “Price is what you pay, value is what you get”.