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For most dealers, the last six weeks of each calendar year are all about reviewing financial statements and setting forecasts and budgets for the new year. Every line item in the current budget is carefully evaluated based on dollars spent, replacement cost, and ROI. Sales targets are negotiated with the distributor or OEM. Contracts with suppliers are reviewed before they are renewed, and dealership pay plans are often adjusted based on the potential of the next year’s sales performance and profit.
If the pandemic has taught us one thing, it’s to be very careful making predictions!
Yet as leaders, we must “look ahead” of our people to help them prepare for the future. We earn the authority to lead and fortify that leadership first with our vision, our ability to “see ahead” and “think ahead” of our people, and second with our courage, our willingness to take educated risks and shift our organization in a new direction.
This month, I’d like to use an age-old selling principle to develop a back-to-basics approach to delivering a high-value Customer Experience to the customer of today and tomorrow.
Did 2020 mark the beginning of a decade of disruption for the retail auto industry?
Last year, the global pandemic began with waves of dealership lockdowns and factory shutdowns, disrupting virtually every aspect of automotive retail.
A recent study of over 30,000 retail transactions at several hundred Canadian dealerships confirms the existence of this opportunity gap. On average, 49 per cent of a dealer’s entire portfolio consists of these service-only customers (who previously purchased from a competitor). Yet the conversion rate of these service customers is so low that in any given month they represent less than eight per cent of a dealer’s total sales volume.
The solution isn’t a new program or another marketing campaign; it’s a different mindset. It’s about shifting from transactional to portfolio thinking. Portfolio thinkers look at each customer and each vehicle’s future sales potential, with the goal of selling each customer three vehicles, and selling each vehicle three times.
Every new car dealer knows intuitively that their customer database is their best source of used cars. Trade-ins command higher prices on the used car lot, generate internal reconditioning revenue, and grow retention by renewing customers into another new or used vehicle.
A “two-car deal” happens every time a dealer takes a trade, and the second deal—the sale of the trade—is often the more profitable of the two.
Here’s why: First, the dealer can usually buy the trade for a favourable price. Unlike when dealers compete with each other to buy cars at auctions, dealers only have to justify a price to the consumer when acquiring a trade. Second, they create the opportunity of additional high-margin service revenue when they recondition the vehicle in-house to be sold on the used-car lot. Third, a used car taken on trade with a story (about the previous owner, the service history, etc.) typically sells faster and at a greater profit than a used car secured from an auction or a third party.
Before the pandemic, most dealers would define an appointment as a planned showroom visit customers made to view a specific product with a sales professional they had already met, either in the showroom, over the phone, or digitally.
Traditionally, sales teams have engaged their customers with a service promise, giving them just enough information to entice them into making an appointment at the showroom.