Climbing above the competition:
Who wants to be the low price leader
Part 3 of 5
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
Within just a year or two, 60 percent of my
sales came from outside the state of Texas.
Another 20 percent 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 percent of my buyers were coming
to me from an area beyond the reach of this
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 return on investment.
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.
A lot has changed in the parts business, but
it is still important to track how your advertising
dollars translate into transactions.
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Ron Sturgeon is past owner
of AAA Small Car World. In 1999, he sold his
six Texas locations, with 140 employees, to
Greenleaf. In 2001, he founded North Texas
Insurance Auction, which he sold to Copart
in 2002. In 2002, his book “Salvaging
Millions” was published to help small
business owners achieve significant success,
and was recently reprinted. In June 2003,
he joined the new ownership and management
team of GreenLeaf. He also manages his real
estate holdings and investments. You can learn
more about him at WWW.autosalvageconsultant.com
He can be reached at 5940 Eden, Haltom City,
or 817-834-3625 ext 6#.