“The way we’ve always done it” is a sentiment that keeps some dealerships from growing; in a few years that statement will be carved on their tombstone.
There’s a lot of information out there about the rise of digital retailing along with the importance of online representation, outreach and marketing. “Social media” is a buzzword that seems to be everywhere but can be hard to count on for ROI. And, for those dealers and GMs resistant to new ways of doing business, there’s evidence that the old ways are still working.
While much has been made of Millennials and the way their shopping behaviors are changing industry after industry, for example, older generations still make up the bulk of the car-buying consumers. According to NADA, the average new car buyer is 51.7 years old and earns around $80,000 a year. Many of these buyers might still be comfortable with “old-school” ways of buying a vehicle, so where is the pressure coming from to make huge changes in the “tried and true” sales methods that have worked for decades?
Here is what’s undeniable: Millennials might not be in the driver’s seat of auto sales just yet, but they are the future, and that’s not going to change. And the generation coming up behind them will demand changes of their own.
What’s more, a growing number of older customers are finding that things Millennials “demand” in the consumer transaction — transparency, personalized service and convenience, for example — make the experience better for them, as well. Once they have a taste for the “modern” sales experience, there’s no going back.
The market is getting disrupted by technology, consumer demands and economic fluctuations, and no one knows what will disrupt it tomorrow. Those dealers content to “do it the way we’ve always done it” won’t be doing it for very much longer.
So, the question becomes, “If the way we’ve done it isn’t going to work much longer, how should we start doing it?”
Aiming Toward a Future Target Today
It can be a difficult question to answer because there’s no such thing as an “average” customer; every person coming through your door has his or her own wants, needs and financial situation. Even generalizing “Millennials” is challenging. The Class of 2003 (who are currently 36) makes an average starting salary of $40,818 while the Class of 2016 (who are currently 23) starts at $52,569. These numbers can be misleading, however, because of student loan debt and other factors. The net worth of the Class of 2003 averages at $20,236; the net worth of the Class of 2016 is -$39,984.
Providing customer service is one of the few tools dealers have left to battle the bane of the automotive sales industry: margin compression. This factor — the gradual decrease of the difference between cost and profit — has haunted the industry since its beginnings, and it’s only getting worse. In 2018, dealers are expected to retain just 0.4 percent of revenue earned on new car sales. There’s no room for mistakes — and disregarding the growing customer demand to be treated as they want to be treated is a huge mistake.
And, as margin compression strengthens, dealerships need to be aware of other methods of adding to their bottom line profits. F&I, for example, accounted for 39.6 percent of gross profit for new and used vehicle departments combined in 2017, according to NADA studies. This is up from 38.8 percent in 2016. This type of upsell is vital to a dealership’s future, but again needs to be catered toward present and future consumer behavior.
More and more, customers are starting their car-buying journey online, and this is a tremendous opportunity for dealerships — or at least those willing to toss out yesterday’s playbook. Studies show that, when shoppers have the opportunity to educate themselves about their F&I choices while doing their online research, they are more likely to purchase the product. F&I is key for dealerships seeking profitability in an increasingly digital retailing marketplace; processes might be evolving, but you don’t have to sacrifice margin if you present the consumer with clear choices and benefits.
Instead of being the victim of the whims of the market, the most successful dealers will use this new information to change the pattern and disrupt the market themselves. Being proactive is a dealership’s best defense and those willing to research the market, try new sales methods and listen to their customers — both older and younger — will be the ones who will not only survive but thrive into the future.
A Family’s Dealership
One question to ask is “What do Millennials want?” Some answers to this might be:
• Information on how the vehicle, service or technology will benefit them
• Convenience and speed
• Engagement in technology
• Personalized salesmanship with personalized choices
• Accuracy and transparency
Keep in mind that older customers might not know they want some of these things, but will once they see it in action.
By 2019, some studies predict that 10 percent of vehicle purchases will be made online. This is an area where proactive dealers have the opportunity to get ahead of the curve. Part of this transaction will include items beyond the sales department, such as F&I products. By working now to make transactions personal, accurate, transparent and convenient, dealerships that are focused on future growth have an opportunity to pull ahead of the competition. They have the opportunity to become a family’s dealership.
Contact me at the address above with “disrupt” in the subject line for “Ways to Disrupt Your Market.”