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The ‘Loss Leader’ Approach

Want to boost sales? Try the “loss leader” approach. This sales technique involves significantly reducing the price of one item and using that as the “lead” to get customers into your tire store. Once a customer walks in the door, they’ll see other items of interest.

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In general, the loss leader technique works best on items that are widely used – low-end passenger tires, oil changes or windshield wipers, for instance. Experts recommend stocking up on extra quantities of one or two of your best-selling items, and featuring them in your flyers and other advertising materials.

In those materials, make sure you include the phrase, “while supplies last.” This will prevent customers from driving to your dealership and then angrily finding out the tire they wanted is out of stock. Another way to prevent that angry customer is to place per-customer limits on purchases of the lead item.

Still, order as many of each lead item as you can, and try to set up a relationship with a distributor or wholesaler that can get you additional product as needed.

Another plus of using the loss leader technique: Buying at higher-than-normal quantities from your suppliers may qualify you for an extra discount and increase your margins as a result.

If you’re overstocked on a particular item, that product is perfect to use as a loss leader. Instead of shipping some back to the supplier or being stuck with it, reduce the price and use that item as your lead in all of your advertising.

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This concept is not limited to tires and accessories. A tire dealership can bring in extra traffic by offering deeply discounted services, as well. Inexpensive yet quality tire rotations, alignments, brake pads and more can be great loss leaders for a small tire dealership. In theory, once customers have seen the quality of your work, it’s likely they will purchase services from you again in the future.

There is no limit to the number of items you can promote at discounted loss-leader prices. But, the general rule is: The lower the price, the more customers you’ll attract.

5 Sales Boosters: Ways to leverage your sales staff to rev up your tire and service sales

1. Hire salespeople on the basis of their sales ability, not on their knowledge of the tire industry. Sales ability, in general, is more important; a good salesperson can almost always learn about the tires and services you sell, but a person who knows a lot about tires may not necessarily be a good salesperson.

2. Communicate regularly with your sales staff. Because they interact with customers on a daily basis, they may have unique ideas about how your business can increase sales.

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3. Base your salespeople’s commission on profit margin, not just sales volume. Why? Because they may offer larger-than-necessary discounts to get a sale.

4. Make sure your business operations effectively support all sales activities. For example, when salespeople need quotes, they should get those quotes quickly. When salespeople need to speak with technical experts to get answers for customers, those experts should be easily reachable. And, when your sales staff needs your approval for any special terms or pricing, keep the channel open and be available to provide an answer.

5. Review your “sales to sales-expense” ratio. A sales person may make $3,000 in sales during a month, but spend $1,000 in phone calls, travel and other expenses. Another salesperson might also make $3,000 in sales for the month but spend only $300. The latter would presumably be more profitable to your operation.

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