Current Industry Challenges Drive Need for New Strategies and Solutions for Dealers

Industry Challenges Drive Need for New Strategies, Solutions

Off-lease customers are a valuable target for dealers to source inventory for the used car department and sell newer models.

By Angelica Jefferys, visionary sales leader and automotive financial service executive for Equifax, and Scott Fletcher, co-founder and partner of Team Velocity.

Given supply chain issues and limited inventory, dealerships are looking for new ways to raise the bar and sell more cars — while also trying to figure out how to source the right inventory. Data can be the key to meeting and capitalizing on many of the issues dealers are facing such as optimizing sales, sourcing limited inventory and, most importantly, meeting customer needs. 

Traditionally, dealers have invested a large portion of their marketing efforts on retaining customers by spending millions on lead generation tools to help drive showroom traffic. This method of targeting from their own CRM or DMS can often lead to overlooked opportunities to conquest beyond their brand or prospect in-market customers to a new pool of customers that might be interested in their offers. 

Industry Challenges & Opportunities

To mitigate the lingering effects of the pandemic, ongoing supply chain issues and a lean inventory environment require new and innovative strategies. Dealers need new ways to find, win and retain customers and acquire inventory. Dealers are looking to drive demand, while keeping gross margins and turn rates high to increase market share. The ability to accurately target consumers with the highest statistical probability of transacting, such as off-lease consumers, while also feeding the used car department with late-model, low-mileage used cars is essential.

Dealers’ Current Dilemma & Planning Ahead 

Dealers continue to relax their marketing spend and plans because of inventory supply issues. As marketing budgets have decreased since the onset of the pandemic, the investments they do make are vitally important to maintain the dealer’s presence and branding. Effective brand advertising to the right audience can increase a dealer’s share of voice in the marketplace, generate more interest in the brand and ultimately help local dealers find the best customers to match with vehicles as soon as inventory becomes available.

Even with this dilemma, they are realizing significant per-vehicle profits on every sale. According to the National Automobile Dealers Association (NADA), the U.S. retail gross profit per new vehicle was averaging around $3,928 for 2021, whereas used vehicles were averaging at a very close $3,651 per unit. To continue selling vehicles and realizing these profit levels, sourcing the right inventory is a central strategy for success.

A New Approach to Targeting 

While dealing with market pressures and challenges, dealers must find ways to evolve their marketing strategies, such as working with partners that leverage new approaches to using anonymized differentiated data assets and proprietary propensity scores to identify and target “perfect-time” shoppers — individuals who are credit-qualified and most likely to buy a vehicle now. 

Off-lease customers are a valuable target for dealers to source inventory for their used car department and at the same time sell newer models. Recently, dealers have been testing a new campaign approach to capitalize on off-lease audiences through coordinated communication, blending mail and digital targeting served as early as 12 months before lease-end. Results from this type of campaign suggest that 50% of consumers who lease vehicles will re-lease with the same brand/dealer, leaving the other 50% off-lease customer pool as the perfect target audience for conquesting efforts.

Through this approach, dealers in coordination with partners have created new audience models to identify high probability customers with the highest statistical probability of upgrading to a new car. Dealers can further enhance their “perfect-time” strategy by prioritizing consumers with a higher likelihood for loyalty and greater overall lifetime value to their dealership. This can ensure dealers have the most refined list of qualified customers to target, providing a new strategy to conquest different brands when vehicles are coming off-lease.

Equally important to the right audience is the right messaging as consumers look to brands for reliability during uncertain times and reward those who meet their needs. For these reasons, dealers have shifted messaging to emphasize customer service, leveraging consumers’ desire for support from trusted brands. To achieve this, dealers and their partners are tapping into advanced expertise in expanded data assets to improve personalization and engagement in the right channels with their preferred audience. They are also matching offline data to target consumers online through prominent touchpoints like over-the-top, social and display, allowing for a more holistic marketing approach and reinforcing consumer loyalty.

With these new strategies in place, dealers and their partners will be well positioned to thrive in today’s challenging environment, while being well prepared for the return of more normal inventories in the future.

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