The Race to Zero Is Over
It's enough to make anyone who was installing in the 1990s sick – you can get a blister-pack head unit at a mega-retailer or auto parts chain for $49.99. The head unit, dammit, our old bread-and-butter. It's the centerpiece of the install and the brains behind the whole operation.
The junky unit is sealed in plastic almost impervious to our Snap-On dykes because god forbid someone try and remove the packaging for a five-finger discount. Why bother even keeping it in a stockroom? That would mean someone would actually have to help the customer on the sales floor. Like that's gonna happen in Wally World? Our head unit even touts more features than we could ever dream of back then too. But is it quality? Not really. Surprisingly, they do fire up, have a display, and if you are lucky sometimes the volume buttons don't feel like they are damped in peanut butter. And even though there are some features crammed in, how many SD cards or flash drives do you see on a day-to-day basis being used in the car? Not too many – mostly iPod or smartphone. So these loss leaders have essentially the same functionality as an AUX input. Now along comes the customer and you have the difficult job explaining to them the unit they need is triple the price. But they need it. The customer came to you as a specialist to steer them in the right direction and make their experience better. They also have no idea how to get the piece of electronics in the dashboard and wired up – at least we have that in our favor. It is a difficult job but we can do it. Especially if we want to actually earn a living. But no way that's going to happen with a $50 deck and a $50 install. At which point the customer starts balking, 'How come hooking it up costs more than the radio?' This race to zero has to stop. We can't stop ghetto manufacturers from dropping the price from $60 to $50 to $40. I'll even argue that there is a place for it too – every shop has at least one guy with a scraggly-looking ponytail and multiple rubberbands come in an 87' Chevy Corsica looking for a replacement radio. But we CAN start selling a BETTER experience and CHARGING for it, NOT try to join the enemy in the Race to Zero. To quote Rage Against the Machine, "What better place than here? What better time than NOW?" Industry stalwart and the VP of Mobile for Kenwood Keith Lehmann decided to be among the first manufacturers to lead the charge against the race to zero. He has even gone so far to create an advertising campaign aimed at retailers that takes a look at low selling price vs. store traffic. When you do the math, just a $20 reduction in the price of a $160 head unit means you need 25% more store traffic. Moreover, only selling decks at $100 a pop is a surefire way to dwindle your resources until you have to shut the doors. Forget 'eating soup with a fork'– you work really hard and might as well pour the soup down the toilet bowl. "I tell Kenwood dealers it is time to take a stand on Advertised Selling Price (ASP). A lot of your customers and the ones who walk through the door are early adopters. They are the ones with smartphones with data plans." These same customers are not the ones who walked into the cell phone store and demanded the free phone with no features – they probably reached for the iPhone or the Blackberry. Lehmann notes, "The guys who want the best are willing to pay for performance. While it is true that the entry-level head units of today have features we could only dream about ten years ago, these same customers would not go into the Chevy dealership and demand the Chevy Aveo. They would take a look at the Corvette and drool and then settle on a Cruze with a decent option package." In other words, our industry was founded with the top-down selling experience. Here is the best, you as the customer like the price of the 'worst,' but lets settle somewhere in the middle. Unfortunately, the Internet provides customers with a lot of cheap deals and they get brainwashed before they even step foot inside your store. But the customer does not know what they want. It is our job to show them the experience. They need a good demo. "A good head unit is only the first step in the chain to an awesome experience." But how can we convince customers? "You have to let them know they are buying a different class of product than what is available at mass merchants or online. Additionally, as a manufacturer we are really taking a stand on Internet enforcement so our products do not show up below ASP. But forgetting about price or even sound quality for a second, how about things that can frustrate the end user, such as the speed of the Bluetooth phonebook download? Plus, the installation is key. There will be a big difference between a $50 installation vs. a $500 installation." And we all know in the industry that a $50 install leads to even more headaches - it probably will come back. Moreover, some piece of plastic will be damaged so the dashboard never really sits right or has bigger gaps than the space between Anna Paquin's front teeth. The customer gets so frustrated and put off, they vow never to go the aftermarket route again. We ALL suffer. Frank Pierce, National Sales Manager for Clarion takes a look at the Race to Zero as an opportunity for the specialist retailer. "We have the unique opportunity to step up customers who were previously only looking for a head unit online to speakers, amps, and accessories. We can actually assist a customer by listening to their vehicle and giving a hands-on assessment. Something the other guys can't do." Pierce also notes that Clarion has drawn a line in the sand when it comes to the race to zero. "We heard some of our competitors were going down to the $89 threshold. Instead of trying to compete, we just did not react. We can manufacture a head unit for that price, but do you really want to start getting cheezy and use chassis-mounted RCA inputs instead of nice pigtails? Our head unit pricing is justified." Two of Clarion's hot sellers with good margins are the NX501 Double DIN unit that is packed with features for the money, and the single DIN CZ501 that includes Bluetooth for $179. Over at Alpine, assistant VP of Sales Mike Anderson notes "Typically, customers who are not knowledgeable in a category or a hobbyist in a particular category will seek the lowest cost alternative when buying these products. But those retailers who do a thorough qualification of the customer's needs will likely uncover their desire to own something other than 'the cheapest thing you've got.' Once you discover the customer's 'hot buttons,' it is easier to steer them into step up goods that satisfy their needs." Getting the price up in the race to zero is just a matter of showing the customer what is possible. "Do not assume they want the least expensive item in your store. Give them a full experience of what the product can do for them. Once you've established trust with the customer, suggest other products and accessories that can be added on, either that day or as a recommendation for another time in the near future. If they don't buy the suggested add-on products, make a note of what was recommended and reach out to the customer in a week or so to see if they want to come back in." Fantastic advice most of us are not following through with. But what about the people who buy online and then you are greeted with a hatchback full of cardboard boxes with the customer saying, 'How much to put all this crap in my car?' Anderson notes, "There are a couple different opportunities for dealing with customers who purchase online. First, many retailers have two installation rates - one for merchandise that was purchased from the retailer, and another, more expensive rate for merchandise that was bought elsewhere. Once you have the customer's keys in your hand, that is the time to turn them into YOUR customer for life by bowling them over with service." Additionally, you can tell them next time shop me first and I will work with you on pricing you find on the Internet by packaging the hardware and install together into something you can afford. Some of Alpine's hot sellers combating the race to zero is the premium INA-W910 that offers all four types of radio source units (SiriusXM, Pandora, HD Radio, traditional). Also Anderson says the X-Power series of mid-priced all digital amps have been selling very well with strong margins. "These amps use a lot of technology from our popular PDX amps, but at a fraction of the cost." The top-tier manufacturers are all well aware of the race to zero and are all trying to combat it. After all, they want to see your doors stay open so they can remain a viable business. Sometimes it is just as simple as showing a pigheaded customer who is concerned about price what is available over what is cheapest. The cheapest head units can make sound come out of speakers, but the best will give you an experience. Let's start selling the experience! l