Pricing is perhaps the toughest issue facing independent tire dealers today. Nearly every tire manufacturer has raised prices to cope with increasing raw materials costs and higher logistics and fuel costs.
Meanwhile, consumer living costs continue their relentless rise, while big retailers leverage their size to keep prices down.
These factors are making it difficult for the small tire retailer to stay afloat. It can be very tempting, then, for that dealer to keep prices low – and even push them down further – at the expense of profitability. Tempting as that strategy is, it simply won’t pay in the long run. Independent business consultants explain why:
• The cheapest-tire-in-town strategy might bring them in, but it won’t keep them. This strategy brings small short-term wins but big long-term losses.
• You’ll make less money. A small dealer can’t make up the difference in volume like a mass merchant can.
• You’ll attract customers whose only concern is price. These customers will readily go elsewhere when enticed with a lower price.
• You’ll drive away high-end, profitable and potentially long-term customers.
• When you have to raise prices for some reason, the customers you attracted based solely on price may decide to go elsewhere for their tires.
When considering pricing strategy, remember that ‘competitive’ is not the same as ‘cheap.’ Experts recommend charging a reasonable price, based on your costs and the value – both real and perceived – of your tires and services.
Market your dealership as one that provides the best value – through outstanding expertise and thorough service – not just the best price.
As idealistic as it sounds, the real basis for steady, long-term growth in the independent tire biz is attracting customers who appreciate the value you offer. Small, independent dealerships can win the retail game if they offer the top-notch service and knowledge that mass merchants can’t.
Convince your customers of your value. Once you do that, you won’t have to aim low.
– Source: Tire Review Business Toolbox
