In the mid-eighties, I thought things were moving along pretty well for my business. One of my competitors was a former employee. He was a low-price provider. He bought cheap cars from individuals and sold parts for very low prices. I bought cars at auctions where I had to pay more for them in most cases. This competitor seemed to be doing a lot of volume, but I couldn’t tell whether he was making a profit.
After awhile, I began to get irritated at the number of customers coming in who’d been over to my competitor. They whined when they came to my business, saying such things as, “Over there, we got it for this amount,” or “I can get it for such and such at that other store.” Not willing to drop my prices and start a price war, I decided I would not offer the same products as my competitor. I shifted to selling parts for luxury cars such as Mercedes and BMWs. At the same time, I began a nationwide marketing campaign.
Within just a year or two, 60% of my sales came from outside the state of Texas. Another 20% were well outside the Dallas/Fort Worth area. Instead of competing for the same local customers on price, I shifted my focus so that 80% of my buyers were coming to me from an area beyond the reach of this price-cutting competitor.
How did I do it? First, I identified a core customer for parts that was not a general population customer. I was looking for a customer that was less price sensitive and wanted excellent service. I targeted buyers of parts for Mercedes and BMWs and found there was a big market for that if I expanded my thinking to include all of the shops in the United States.
At that time, I entered the German luxury car parts market, I had virtually no competition. To find buyers, I went to garages and body shops nationwide, tracking as much information as I could. Later, when Lexus and Infiniti became popular luxury makes, they were natural additions to my product offerings.
I was able to make this transition so profitably because of how carefully I tracked where my advertising dollars went and which ads resulted in sales. Not far into my new strategy, and I knew which zip codes I could profitably advertise in and which zip codes did not produce good ROI.
From there, I could refine my strategy based on sound data. Tracking ad spending is easier now thanks to advances in telecommunications and computing, but the techniques we developed were sufficiently noteworthy to warrant an article in Inc. Magazine in June of 2004. Lots has changed in the parts business, but it is as important now as it was then to be able to track how your advertising dollars translate into transactions.
Remember, only you can make BUSINESS GREAT!
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AutoSalvageconsultant.com was formed in 2001 to help recyclers improve their businesses. With over fifty years of experience in three staff members, the group is THE definitive source for recyclers’ management and training needs. The founder, Ron Sturgeon, is past owner of AAA Small Car World. You can review his resume, with skills and experience, at our website. In 2002, his book How to Salvage Millions From Your Small Business was published to help small business owners achieve significant success. It was recently reprinted in the U.S. and published in China, Korea and the Czech Republic. You can learn more about how to help your business at www.autosalvageconsultant.com. You can reach us at 5940 Eden, Haltom City, TX 76117.