The automotive retail industry is getting more competitive every year. There’s no doubt that as we move deeper into 2018, dealerships will continue to face pressure from all sides. However, 2018 has also seen strong overall economic growth and the industry is filled with opportunity for dealerships that embrace change and keep working aggressively to improve.
It is critical for dealers to understand that change is coming to the industry, whether they like it or not. It’s not 1998 anymore and it’s time to stop selling cars like it! For dealerships committed to optimizing for a 2018 reality, below are 10 strategies for modern automotive success.
#1) Embrace Digital Retail. We’re living in the age of Amazon. All retail, including automotive retail, is moving online fast. Though car dealers may have resisted this change more than other industries, make no mistake the car sales are moving online, maybe faster than you think. To capitalize on this trend and meet consumer expectations, dealers must offer a strong online retail experience. Allow your customers to view your inventory online and complete as much of the sale as possible from the comfort of their home computer or mobile device.
2) Display and Sell F&I Products Online. Some dealerships continue to treat their F&I products as a secret – this is a big mistake! Research indicates that 83% of car buyers want to research F&I products online and 63% would purchase these products. Dealerships need to use their websites to effectively explain and promote F&I products, using modern digital strategies like explainer videos, charts, graphs, and references to help consumers understand and accept the value offered by modern F&I products.
3) Offer Home Delivery. Consumers expect things to be delivered! Just look at the rise of online delivery services for everything from food to shopping to laundry and more. Dealerships should offer both home and office delivery to customers within a nearby area, and work to expand their delivery area over time. Consumers appreciate this service, it helps to project a modern and customer-focused approach, and really it is simple to execute.
4) Reduce Employee Turnover by Increasing Base Salary. According to NADA, sales consultant turnover is around 70%! Dealership management must realize that it is a smart tradeoff to pay a higher base salary to sales people in order to reduce the costs of losing and hiring employees. Having a more consistent team improves customer experience, reduces time and cost of hiring, and allows you to implement real training and employee growth programs that foster a strong overall team. Paying a stronger base allows you to keep sales people during slow periods and ultimately build a stronger sales organization over time.
5) Instill a Culture of Compliance. Unfortunately, car dealers today often have a poor reputation amongst consumers. This is a weakness which is allowing startups and online players to position themselves as disruptors and potentially deeply change the industry. To combat the industry’s poor reputation, and to avoid potentially damaging fines and penalties, compliance is key. Implementing a comprehensive compliance program across all departments is your best solution to reputation, trust, and overall customer perception.
6) Extend Service Department Hours. Many dealerships are not optimizing their service department to the extent that it deserves! Service departments are a key path to increased profit and competitive advantage in 2018. One simple and effective change is to extend your department’s hours to times that are convenient to your customers. Being open until midnight or even 24 hours a day is a great improvement to customer service and will increase customer satisfaction, repair order count, and ultimately profits.
7) Sell Parts Online. The best way to master digital retail is by selling parts online. Create an online parts store and market it in order to compete with aftermarket parts stores. This practice will force you and your organization to learn much more about digital development and marketing, both necessary elements to dealer success in the coming years. An online parts store is also an effective generator of incremental profit that can make money from your existing customer base and new customers online, 24 hours a day and all year round.
8) Increase Service Retention. Offer dealer-owned pre-paid maintenance and lifetime engine warranties to increase service retention. Not only do these services help generate more profit per sale, they will keep customers coming back to your service department, where you can offer them upsells in additional products and services. If your service department is managed well and treats customers well, people will keep coming back and will be much more likely to buy their next car from your dealership.
9) Maximize F&I Opportunities. Most dealerships operating today are nowhere near true F&I optimization. This is a huge wasted opportunity as F&I sales today are one of the best ways for dealerships to make profit, satisfy consumer needs, and generate competitive advantage. Do your research, check out our top 10 F&I best practices and top 10 F&I products guides, and develop a robust F&I strategy including dealer-branded products, an effective menu, a reinsurance program, and more.
10) Follow up with Customers who Turned Down F&I Products on Delivery. Most dealerships today simply stop selling additional products once the customer has the car. This is a mistake! Customers are likely to reconsider F&I products that they initially declined once they actually own the car and experience pride of ownership. Outside the dealership, customers are in a non-threatening environment and often won’t have any problem in rethinking their F&I product selection. Develop an effective process to reach out and stay in touch after the sale to improve product penetration and profit per sale.
Following these 10 strategies will help your dealership compete and win in a modern landscape.