In a previous blog post we discussed Convenience as a Pricing Strategy. In that post we talked about how instead of discounting your services you can actually charge premiums by making your dealership more convenient for customers.
One of the most common questions we get from dealers (especially in response to that post), is whether or not they should be using coupons to incentivize customers with cheap oil changes and other services they offer. In the previous post we were not saying that coupons or discounts are a bad thing. Coupons can be extremely effective when used the right way.
The problem with sending out mass coupons to each and every one of the customers in your DMS is that a lot of those people would have come in to get their oil changed or have their car serviced regardless. By sending the coupon to those shoppers, you have actually cost yourself money you would have gotten from those buyers paying full price.
So how should you use coupons?
The answer is Segmentation or sorting your customers into different groups.
In this instance the goal is to separate the Price Buyers - those who just go for the lowest price - from the Value Buyers - those customers who are willing to pay a little bit more if they get more value or convenience. We call this Segmenting by Willingness to Pay, and it is vital in using coupons to increase business while still maximizing profits.
So how do you separate those types of customers?
A lot of your Value Buyers are going to be easy to spot right away. These are the customers who use your service department regularly. They come to you because they probably bought their car there, (your familiar) and they live within 10-15 miles of the dealership, (you’re convenient).
A good way to start searching for Price Buyers is to look at shoppers who bought a car through you or did service with you and are no longer coming in. Another place to look is owners of your brand who are on the fringes of your market area and not doing business with you. These are the shoppers you should be targeting with coupons.
By sending these shoppers coupons you will be able to gauge their response and determine if price is the reason they are not doing business with you. If they respond to the offers, it is safe to assume that price is their driving motivator as they were willing to change their behavior in response to the discounts.
If they do not, then it is likely that they are Value Buyers, and the coupons were not enough to make them drive further or stop using the service provider they are comfortable with. It is then up to you to decide if you want to fight for these prospects by making yourself more convenient to them or increasing the value that you are offering. You can learn more about that in the first post here:
By fencing your customers like this, you will be able to increase your market share with conquest customers and learn more about your market without giving up money unnecessarily.
If you need any help in segmenting your customers or would like to learn more about what Edifice can help you with, click the button below and an Edifice Representative will reach out to you within one business day.