An auto dealer’s guide to long-term profitability in a world of declining front-end margins.
Chicago, IL – Affinitiv, the retail auto industry’s leading marketing technology provider, has released a free eBook for auto dealers. Industry Disruptors: The Razor and Razor Blade Model provides guidance for sustaining long-term profitability in an era when new vehicle profit margins have shrunk to 2.5% and revenue growth is threatened by increasing price transparency and a flattening Seasonally Adjusted Annual Rate (SAAR).
“The news is full of stories about industry disruptors such as ride sharing, electric vehicles and autonomous vehicles, but the reality is these disruptors are several years away from impacting auto dealer operations,” said Scot Eisenfelder, CEO of Affinitiv. “This eBook addresses the more immediate impact of a trend that’s affecting auto dealers today.”
The Razor and Razor Blade business model utilizes a strategy where a product is sold on the front end with little to no profit margin, and all the profit is made on the back end. To survive in coming years, auto dealers must maximize service retention.
Growing service revenue in a razor blade environment requires three strategies:
- Maximize value from vehicles sold
- Target vehicle owners based on sales and fleet data
- Shift from sales conquest to service conquest
“Most dealers rely on OEM base owner retention programs (ORPs) to cover all their service marketing needs, but this level of marketing is table stakes,” said Eisenfelder. “Thriving in challenging times requires a broader reach in terms of customers, channels and services offered.”
The eBook offers recommendations on how to target and retain current and new customers, particularly second owners in the lucrative and growing 4- to 6- year old vehicle market. Dealers will also learn the value of omnichannel marketing and how the latest technology can help provide more complete vehicle care to their customers.