Three Tips for Car Dealerships to Survive the Recession

Recessions hit businesses hard, period--even necessities become harder and harder to sell in times of economic uncertainties. Naturally, industries built on big ticket items, such as cars and houses, 

Recessions hit businesses hard, period--even necessities become harder and harder to sell in times of economic uncertainties. Naturally, industries built on big ticket items, such as cars and houses, become particularly affected by the unpleasant climate.

Looking at the car business today, there are no sure-fire answers or guaranteed quick fixes to overcome the obstacles car dealerships are facing. But, there are tried and true principles of strategy and management that, if applied and applied well, will surely benefit the business.

Tip #1 for Car Dealerships to Survive the Recession: Price it Right

While trying to survive the recession, it's tempting to drastically cut prices to get customers onto the lot and into the dealership. Lowering prices can obviously be an effective tool, but cutting prices can't fix everything. And sometimes, it makes matters worse. It's hard to know how to mentally adjust your business' supply and demand curves in a recession, and if you predict wrong, you could wind up selling for too low and losing out on profits. The dealerships that have the lowest prices in town usually have to leave town.

Really think about what prices are right for your current pieces of merchandise-not too high, not too low, but just right. Don't fall into the trap of thinking you can price at someone else's lowest today because business will automatically pick up tomorrow. If you have drastically different operating costs, supply chain costs, and other logistics fees, you can't afford to-as a struggling business-arbitrarily adopt someone else's pricing structure and reasonably expect everything will work itself out. To keep away from the casualties of the recession, give the topic of pricing in your business a great deal of thought.Tip #2 for Car Dealerships to Survive the Recession: Differentiate Yourself in the Market

Pricing is one way of differentiating yourself in the car market, but if you don't have the best cost structure among your competitors, you can't win on pricing. And because really lowering prices changes consumers' expectations in the long-run, it's a dangerous tool and should be used with caution.

In order to effectively differentiate yourself in the market, you have to understand what it is that would better serve consumers. Do the other dealerships close too early, not giving customers the experience they're looking for? If the answer's yes, it sounds like you might have a great opportunity to stand out and reach an untapped portion of the market. If staying open later isn't an option, or isn't a real benefit to consumers in your area, look for another way to differentiate yourself from your competitors. What aren't they doing that matters to buyers? Find the answer to that question, resolve the problem, and reap the benefits.

Tip #3 for Car Dealerships to Survive the Recession: Keep Customer Service at its Best

When thinking about the challenges that face car dealerships, I asked my mom her thoughts on the topic--she having, with my dad, a combined total of almost thirty years of experience working in the car business. Her one piece of advice is the reminder that customers who are just looking today might be in the position to buy tomorrow--treat them right.

It's easy to dismiss non-customers, the ones who can't buy and seem to just be wasting your time and loitering on the lot. Always, but especially in times of a recession, the customer is king. And that includes people who visit the dealership that can't necessarily buy a car today. They need to be treated and served just as well as anyone. After all, they might be what are keeping you in business tomorrow.