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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.
The Value of Portfolio Thinking.
You can tell a true sales professional by the number of repeat and referral customers they sell each month. It’s one thing to sell a customer one car, but to follow up regularly and earn repeat purchases, that takes portfolio thinking.
Portfolio thinking looks beyond today’s potential commission, and instead looks at the potential of the customer and their referrals over multiple purchases.
The Value of Process – the systems and steps that we take each day to intentionally create appointment success.
In the past, success in the retail car business was often a result of the showroom skills and the personalities of the sales team. Today, that’s not enough to create success, as most customers want help before they visit the dealer’s showroom.
Showroom skills and personality are most effective when they are added to great appointment making skills and to effective selling processes.