Earlier today I commented on Rick Segal’s post about setting expectations in customer service, adding that just being honest is one very effective way to win over customers.
This afternoon I had an experience that drove home that point. I bought some new tires and wheels for my car (because I have to mod everything it seems) and I was asking the guy at the shop how he could sell the parts at a price point below what I could find on the Web. He said that basically it came down to the fact that his customers pretty much knew what the best prices were on the parts, especially in tech saavy Silicon Valley, and he made a calculation that giving his customers parts for his cost rather than making money on them was a way to win repeat customers and still make money on the labor. Over time the repeat business would accrue and ultimately even out what he was giving up on the parts markup.
Quite honestly, I’m not sure I would have endorsed this strategy myself because even though I knew what the best price on the web was I really didn’t expect to beat it so in effect he was leaving money on the table. Having said that, I also know that the next time I want something for my car I will be going to his shop without playing the field.
This is similar to the strategy that Progressive Insurance takes with their marketing strategy, putting competitors prices next to their own. This sends a powerful message to their prospective customers that says they are confident their rates are competitive and understand that their customers are smart enough to shop around for the best rate. By treating their customers with respect and having confidence in their own rates they position themselves on the same side of the table as their customers.