by Michael D. Hargrove Tweet
What do we do when our customer tells us, “That’s not enough for my trade!”? If we tell them our manager is willing to pay, let’s say, $8,000 for their present vehicle, don’t they always want $10,000, $12,000, or something even more unrealistic?!
I’m assuming we’ve already done a silent devaluation when we walked them around their present vehicle out on the lot. And we’ve already tried showing them two figures, one with the reconditioning done by them and one with us doing the reconditioning. But what do we do when the strategy of explaining wholesale book less the reconditioning their car will need doesn’t satisfy them?
Most of us will ask them where they come up with their figures and they tells us things like, “I’ve checked Kelly Blue Book online myself, I’ve checked Edmonds, I’ve checked with my credit union, I’ve reviewed the local newspapers, or I had a neighbor who said she’d pay me that if she were still in the market.” Does that sound familiar?
Many of us then try to fade our number or we try the “wholesale to wholesale, retail to retail” technique, or we try showing them published figures from the local auctions in our area. Some of us may go through the “sell it yourself” scenario, (you know, “Mr. Customer, you could always just sell your car yourself, right? But then you’d have to advertise it and recondition it yourself. And do you really want to have to worry about bad checks, trade ins, and having weirdos knocking on your door at all hours of the day or night?” ) but what if after using these things the customer is still stuck on their figure?
Everyone knows these techniques and each one of them works…sometimes. The problem with all of these, however, is that 1) everyone knows them, and 2) at their core, they are all designed to convince our customer that their car isn’t worth the $12,000 they think it is.
The power of the following negotiating strategy is that it actually gives our customer the $12K they want, and makes them turn it down. It’s called Guaranty Future Value.
It goes something like this:
“Mr. Customer, that $8,000 figure is simply the dollar amount my manager is guarantying our owner your car would be worth. It’s his opinion based on all the stuff I’ve already covered with you” (wholesale less reconditioning).
“Like any good business owner, our dealer wants his working capital turned every 30 to 45 days, in this case his inventory. And that $8,000 is the simply dollar amount my manager is confident enough to guaranty our owner your car would be worth should he have to liquidate or quick sell it.
But, frankly, he doesn’t sound any more confident than you. You seem pretty confident that your car will bring $12,000. Right? How come?” (Now, we let them tell us where they came up with their figures. Even if we’ve already asked them this, it’s a good idea to let them tell us again.)
Once they’ve gone through all the reasons why they think their car is worth the $12K they want, we continue with, “Well, I think there’s another way we can approach this. I’d still have to check with my boss of course, but if you were willing to guaranty our owner the value of your vehicle, I bet you we could get you what you want for your car. What do you think?”
When our customer asks us what we mean, we continue with, “It’s simple. If, after thirty days, we aren’t able to get at least $12,000 for your car, based on what you’ve told me though we should, but if for some reason we’re not able to sell your car for at least $12,000, you’ll agree to either buy it back and sell it yourself or simply make up the difference. At that time, it’ll be your choice, whatever works best for you. How’s that sound?”
Evidently this technique has been around for a long time. I was first introduced to it in late 2003, since then, here’s what you guys have told me your customer’s responses have been.
The most common response by far is the customer says they’re not comfortable doing that or that they want it to be a clean deal with nothing hanging over them. We should respond with this, “I understand. Then you can appreciated how difficult my manager’s job is, right? I guess confidence in a number has a lot to do with whether your buying or selling, huh? That’s okay. How much over $8,000 are you willing to guaranty?” Now, they usually either bump themselves or accept the $8,000 and go to another area of the negotiations.
This technique, by the way, was not designed to get the customer to accept $8,000, or at least that’s what the guy who shared it with me said. It’s simply designed to help them see it from the manager’s point of view and hopefully get them to be more flexible.
The second most common response you guys have told me the customer gives you is they don’t want to guaranty it but they still want $12,000. To that we should respond with this, “Mr. Customer, you’re not comfortable guarantying $12,000 and it’s YOUR truck…how’s my manager going to do that?” (Wait and let them mull this over for a moment, then finish with,) “C’mon, if you’re willing to be a little flexible I’ll get him to be flexible too.” Now, they usually bump their figure some.
The third most common response is that the customer will say “I don’t care about all that stuff, son, $12,000 is just what I want.” To this we could reply, “Mr. Customer, my manager WANTS you to pay too much for his car too…but that ain’t going to happen either, is it?” When our customer says no it won’t, then they just bumped themselves.
Like I said, I was first exposed to this strategy at one my of workshops many years ago. The gentleman who shared it with us that day said he’d been using it himself very successfully for years. And in all that time not one customer had ever told him that they’d go ahead and guaranty it. Since teaching it myself, none of you have told me of anyone willing to guaranty the future value of their trade in. But just in case someone does take us up on our offer, we can do one of the following:
1) Take it back to the desk, come back to the customer and say, “My manger wasn’t comfortable doing that. Your satisfaction is more important than the few dollars we would make and he knows your car isn’t worth what you’re thinking. He’s not comfortable hanging that guaranty monkey on your back. But he did have a couple other wholesalers call him back and he could give us $8,250!” and just work the deal the way we do already.
2) We could take the car in for $12,000 and have the customer cut us a hold check for the difference or do a conditional sales contract for their trade. At the point when they are writing out the check, you might find them a little more willing to be flexible.
3) We could work the rest of the negotiations assuming they are going to guaranty their trade. Then at the end of the negotiations, we could say, “You know, if you’d be willing to be a little flexible on your monthly budget, I might be able to get my manager to step up on your trade and take that guaranty cloud from over your head.”
In the years that I’ve been teaching this particular technique, sales people have given me tremendous feedback about it’s success. They say that it’s different, their customers haven’t heard it before, and it’s getting them additional gross profit. Most importantly, it’s helping them assist their customers through one of the most difficult parts of the negotiations. I hope the same happens for you.
This, like all new techniques, needs to be personalized to our own selling style, our own selling rhythm, and our own vocabulary. Then it needs to be practiced until we own it. And like all other techniques, it’ll only work when we are willing to use it.
How soon will you get started?
© Copyright 2013 by Michael D. Hargrove and Bottom Line Underwriters, Inc. All rights reserved. Michael D. Hargrove is the founder and president of Bottom Line Underwriters Inc.