There is a serious disagreement brewing in the aftermarket and it cuts to the core of what jopbbers do, how and whether you prosper, and what is to become of those members of the aftermarket who are lagging behind.
I am, of course, talking about the price battle. Forget for a minute the rhetoric about how customers don’t care about price. It is just not so. Price has become critically important.
Competitive pricing is the price of admission to the market, the entry fee to the race if you will. Without it, you are left watching as the field streams by.
I am aware of the research that says that price does not hit the top of the list when compared to the quality of the products and the service you provide. But, when those latter two are perceived as being equal, suddenly price is what comes to the top, and you’re left fighting a battle to maintain margins on brand name parts that are a shadow of what they were only a few years ago.
So, what do you do? Do you ride the price roller coaster down to the bottom, or do you seek ways to differentiate yourself?
Those of you who read the cover story in the October issue–“How to Freeze Out the Competition: Canada’s Top Jobbers Tell How”–got an inkling of what I’m talking about here. To put it bluntly, make the other guy fight on price and soon he won’t be able to afford to offer anything else.
The fact is that price is a beast that just won’t die. So you can afford to relax just a bit. Don’t lie awake at night, tied in knots over the fact that you’re not going to make as much from a part today as you did yesterday. It is going to happen. There is nothing you can do about it. You are destined to make less tomorrow from the staple items you are selling today.
The solution is not to try to kill the beast, but to outrun it. Sell something different. Continually update your product mix. No, I am not suggesting you open up a dollar store, though you might feel you’re running one right now.
What I am reminding you of is the basics of product lifecycle. Think about DVD players. When they first came onto the consumer market, they were a couple of thousand dollars. Within a couple of years, pricing had dropped to about a grand; last year they were a couple of hundred, and yesterday I saw one at an electronics store for 89 bucks. Do you think that the players in that market aren’t having the same price discussion that we have every day?
You might not think that this is applicable to the aftermarket, but it is. You need to be very careful about how you price new categories of products, even new applications. Price them too low to begin with and you are short-changing yourself.
Think about items connected to the technology in cars, such as anything designed for OBD II systems. High-tech wheel bearings. MLS gaskets. These are high-value product categories with little in the way of second and third line competition.
You can decide that you are scared of what the competition might do tomorrow and price accordingly today, or you can choose to take advantage of your position, perhaps your inventory investment, combine it with top-level service and support, and sell that value to the customer, for a price.
There is nothing wrong with this. It is about profit and you need it. You’re not going to be able to provide quality service to your customer without it. I have said it before, and so have others: profit is not a bad word.
You cannot kill the beast that is price, but with the right strategy you can force it to find another home.