Pricing Strategies & Advertising Fun, Volume 3

Pricing and aging inventory. One strategy is to keep dropping the price until it goes away. This can be an effective strategy, but generally it then becomes a matter of how much of a loss you are willing to take.

Since 1982, manufacturers have been offering dealer cash incentives and customer rebates non-stop. It's the kind of thing that once you're in there, how do you get out? It's the competition game. Because of these rebates, when the model year changes, strange things sometimes happen where the new model has rebates and the old one does not, or they both have and there is no advantage for the customer to buy the old one. In these situations, I can only recommend that you move quickly and make it leave your lot prior to these kind of problems. I remember one vehicle we took a $10,000 loss to finally move it due to the new model having financing incentives and the old one having only a rebate. This made the new one much more appealing. It was our fault for not being more proactive. We let too much time get past us and felt compelled to drop the price until it went away.

I hate losing money on a vehicle, so I am going to offer some other strategies to give you some ideas of ways to stay profitable and keep your aging inventory moving. Aging inventory is a problem for every dealer; however, some are just more proactive about dealing with it. Any dealer who never has aging inventory is not taking enough risk and is losing a good deal of business. It's not the aging inventory, it's how it is dealt with that makes the difference.

When it comes to commercial upfitted trucks, one year doesn't make much difference over another. It is not a status symbol, it is a work truck, hired to do a job. If it is new, it is new. It doesn't matter what year it is. Most car dealers, are very concerned about what year it is and their general goal is to have the prior year models gone when the new ones come out, although this is not a good strategy in my mind. Having them gone within 3 or 4 months of the new model introduction would be a better strategy. The old models are an opportunity when the new models come out, but after 3-4 months, that opportunity wanes. When I was at dealerships, the new models would come out in early September generally and the goal was to have the prior year models gone by January 1st. We set March 1st as a do or die line. That strategy provided substantially greater profits because October was typically our best month with a good selection of prior models and newer ones at the same time. The old closeout sale. I would be more flexible on the do or die date with the commercial trucks, but generally the goal was the same. This worked very well over a lot of years experience.

If the theory is being challenged by some units that just don't want to find a home, there are some things to try before losing money. The really cool thing about an upfitted truck is that the body is not a permanent part of the truck. It can be changed. So, when it comes to older inventory, sometimes low price can make it move quicker. My first thought would be to trade it with one of my other dealer friends where we trade old inventory with each other. What is old on their lot, becomes new on your lot and vice-versa. This works extremely well all around. I used to do it every month by trading a couple of old units with other dealers and try something that I might not have tried before.

If I had an 11' service body or combo body on a F450 or something like that as a past year model hanging around, my second thought would be to pop the body off and put a cheap flatbed on it which will drop the price about $6-8,000. I used to have anywhere between 1 and 5 bodies on the ground at any one time; however, I kept good track of them, made sure they were installed as quickly as possible and had other tracking methods so that everyone involved knew what was being done. It is always better to swap bodies so that none are on the ground if you can do that. In this case, I might move the service body to a newer model and the flatbed from the new model onto the older model. Make sure all the paper trails are covered, stickers changed, lending institutions notified, etc. Make sure that the cost of the changes are charged to the appropriate vehicles. In this case, the cost of the transfers should go to the old unit. If it were sold, it would be charged to the sale and not the stock. Even though you need to keep records and keep track, this strategy will keep you profitable and help move the old inventory effectively.

Here's some even less expensive strategies that have paid off in the past: Take the old unit and run it through detail and get it sparkling. Chances are it is a bit dingy from being on the lot a while. Put it up front. I might even spend some more money on it and put some aluminum wheels on it or something like that to give it a different appeal. Make it look like the freshest piece on your lot. Keep it right up front so you can show it to the most people. Get your body company to help you get it in prime shape. Believe me, they want you to sell it so they can sell you another one, so they will help you or you might think about that when choosing your next body company. If they aren't supporting your marketing needs at a time like this, they are not worthy of your business in my mind. Maybe it needs some touch up painting. Maybe you need to add a rack to it. It's all merchandising. Make it saleable.

Here's some more ideas:

1. Take it out and show prospects when you are prospecting.
2. Put a great display together to bring attention to it. Create a theme display.
3. Sell it to your parts department for a delivery vehicle. (I did this once or twice. . .)
4. Send out a target flyer to the best potential buyers.
5. Expand your marketing area on this vehicle.
6. Combine it with another vehicle for a package deal.
7. Try some other marketing incentives like including a dumping trailer in the deal or season tickets to the popular football or baseball team, or a gas card, or a trip somewhere.
8. Do a deal with a radio or TV station to give away the truck by trading it for advertising and get 3-4 times value.

My main point is there are a long list of things that can be done to move aged inventory. I encourage you to try some of these and if you find better ideas, please let me know. I'm always on the hunt as I hope you are. Good hunting.