Five Challenges Faced by Car Dealers
In order to make some profit in the current environment of the automatic industry, most auto dealers are choosing to focus on growing the revenue of the service department. While this may be an achievable goal, it represents a number of challenges. For instance:
2020 Update: The NADA conference identified these issues: 1. Protecting and retaining employees during Covid-19. 2: Struggling to find the right used car inventory mix. 3. Off-site delivery processes. 4. Building a “add to cart” culture that removes salespeople from the sales process.
1. Decrease in Number of New Vehicle Sales
According to NADA, in 2018 the sales of new vehicles was 16.7 million units. This figure saw a stark decline compared to new vehicle sale of 2017 by 2.7%. The decline is not that huge, but the point of concern in this regard is the fact that a typical consumer now prefers off-lease and used vehicles as opposed to new ones, which makes the competition between the two rather stiff. Additionally, lesser new car sales equal less warranty work.
2. Higher Quality Automobiles
Having higher quality vehicles on the ground is a good thing. But, at the same time, this high-quality vehicle lengthens the service period of a regular car. Additionally, it also shifts the focus from repairing the broken car parts to replacing them. This means that a regular car dealer can no longer rely on seeing regular warranty work being done, with an in-warranty customer being the most steady source of income for them.
3. High Competition
Currently, independent after market chains are facing a recession. The reason for this recession is the recent increase in the sale of new automobiles on the road, with consumer refusing to use a car that is more than seven years old in make and model.
According to an estimate, this decline in sales will reportedly continue into 2020, which will certainly expand the services being offered and give rise to fierce marketing campaigns. Their usual target is a customer that has been using the same car for four to six years since he is the person they often like to target.
Given the present environment, a car dealer cannot afford to lose even half of their market to independent chains. Thus, they need to work on acquiring a greater percentage of their service potential from the market.
4. Transparency in Dealings
In the present age, where a typical consumer is more aware of the know-how of a particular system, it is essential that automobile dealers are transparent in their dealing and provide them with convenience driven experience. The problem here is the fact that the orthodox system in place with car dealerships is rather unequipped to deliver on such a consumer experience.
When we think about it, it certainly makes sense, given the fact that an individual can keep track of their pizza and how long it will take for it to be delivered to them. But, they have to get in touch with their car dealership several times to get an update on the status of their car, among other things.
5. No Growth Strategy in Place
Increasing service revenue, no matter what you choose to do, isn’t something that happens overnight. It requires dedication, the creation of a strategic plan, its execution and later its long-term management. Most automobile dealers and completely uninformed on the fact that they actually do need to have a working strategic plan in place to give their business a chance to grow. The plan doesn’t have to be elaborate. They just need to have one in order to grow and improve.
Have you ever heard of someone trying to do the same thing again and again, but instead of expecting the same result, they wanted to get a different one every time?
Well, there is a piece of good news right here. The automotive industry is finally letting go of unprecedented setbacks it had to go through in the past decade and is making its way to more opportunities to grow and improve.
According to an estimate, the highest units-in-operation (UIO)ratio, the largest in history, has been created courtesy of the combination of 13 percent reduction in a number of used cars sold and new vehicle sales.
In order to take advantage of the various opportunities this change presents, there are two things that you have to do;
- Use your current customers i.e. UIO to increase service yield
- Increase your percentage of market share
Next, you need to know what your revenue per UIO is if you aren’t aware of the fact already and how to increase your market share.
The first thing you need to do is get rid of your service absorption metric. It is an outdated metric system for modern times and letting go of it is only in your best interests. The primary behind this fact is you can have 100 percent service absorption under the metric system and you may still end up losing plenty of your market share. Since is in unmeasurable as well, trying to manage something that you can’t measure has even bigger consequences.
By choosing to use Revenue peer UIO, you can not only measure your market share and service yield but also give yourself a baseline which makes measuring the growth of your dealership easier.
Ways to Increase Service Yield
Of all the automobiles that enter their service lanes, auto dealerships are only able to secure almost half the work. To increase this level, you should focus on providing your customer with complete automobile care.
In order to do this, you should not only be able to identify your customer’s needs, but also communicate them effectively and capture all service needs. Although this may require changes to multiple aspects of your write-up, you MPI i.e. the multi-point inspection and the process of service recommendation.
Technology can also play a major role by helping you update your system. You can use anything that can help, such as mobile tablets and login information regarding a certain customer and their automobile. Additionally, this can also help bring all your techs and advisors on the same page so that every customer is paid their due attention.
When a customer shows up at the service lane of your dealership, the advisor dealing with them needs to ask the following things;
- Is there an open recall?
- Were some services declined to the client the last time?
- What sort of repairs do you recommend on a particular vehicle?
Among the aforementioned questions, the last one is the most crucial, since it is a deciding factor whether or not would you be able to capture more service business for your dealership. Also, do not forgive to give your customers a general idea of how they should look after their far for the next 10,000 miles or so.
Ways to Increase Market Share?
It is common practice at most car dealerships to have their marketing department inform their present clientele about season campaigns and if they aren’t available at a particular period in time. The reason to do so mostly stems at trying to bring in new customers, with the incentive of ‘free’ oil change. While this system is effective, it just isn’t effective enough and often performs below its actual potential. Thus, a better, more integrated marketing approach would certainly play a better part.
You could start by using omnichannel marketing and launch highly relevant effective offers to your customers on different platforms. This includes;
- Direct Mail
- Facebook/ Instagram
- Google/SEO
- Service PPC
- Display Ads
- IP-based retargeting
Digital Advertising Consulting will setup and run your pay per click and social media advertising.
With every customer interaction, data is collected and used to create a message or offer that drives the customer to the next stage. The customer is guided through needs notification to scheduling, to the appointment, to in-service notifications and post-service follow up.
This strategy is primarily based on building a long-term relationship, instead of one-time service experience. Thus, create such processes and marketing programs that focus on building a trustworthy relationship between your customers and potential customers and allows you to grow.
