Consumer confidence levels are down significantly from where levels peaked in 2019 and 2021. However, they are still higher than levels were at the pandemic lows, according to recent surveys by The Conference Board. What does this mean for auto dealers?
With a possible recession looming, consumers plan to spend less on discretionary categories while they plan to spend the same or more on non-discretionary items. This likely means that service departments stay busy for auto dealers while sales activity declines in the second half of the year.
In the face of waning consumer confidence, dealers can implement the following strategies to stay competitive in a slowing market.
Focus on Things You Can Control
While you can’t control interest rates or the economy, you can control dealership processes. Prioritize consistency in approach and refine your processes to meet the needs and desires of active car shoppers.
Many consumers still don’t have a lot of trust in auto dealers, especially after what they perceive as “price gouging” by some dealers in the last few years. According to a recent Marchex survey, 91% of consumers say “trust” is important to them when deciding which dealership to purchase from. For this reason, it’s more important than ever to establish your dealership as being trustworthy. Refine your processes to reflect this value.
Differentiate Your Brand
Another trait that car shoppers value during the car-buying process is transparency. Quite simply, consumers want information so they can make the right purchase decision.
Dealerships that provide consumers with a transparent, convenient shopping experience will win the long game. The old “call for pricing” mentality no longer works, as your competition is happy to give out pricing on their site, over the phone or via email. When consumers have a choice, they will choose to do business with a dealership that offers transparency.
To provide transparency, merchandise vehicles with as much data as possible. For every vehicle on your vehicle details pages (VDPs), include links to a digital portfolio that features videos, CarFax reports, window sticker data, as well as the reputation and reviews of the dealership. For used vehicles, include service history.
Dealers also need to differentiate themselves to attract and retain talent. For the last several years, salespeople have become used to a market where demand exceeds supply. As demand falls, so will their paychecks, which may lead to unwanted turnover. It’s up to management to provide salespeople with the necessary tools to stay successful in a down market.
According to a recent survey by Zebra Insurance, only 7% of car shoppers want help from a salesperson, and 46% prefer to shop for cars alone. Salespeople have more success with a low-pressure approach, acting as a facilitator or provider of helpful information rather than pressuring customers into making a decision.
Train salespeople how to use window sticker data to value-sell a vehicle. Additionally, make sure that window sticker data is integrated with your inventory management software and CRM so that salespeople have instant access to it.
The ability to access service reconditioning records can also help salespeople inform customers. When salespeople have visibility into the work being done to a vehicle that will be lot-ready in a few days, they can reach out to interested car shoppers and set appointments ahead of time. Additionally, when a customer asks, “How does this vehicle compare to the one at your competition?” having access to window sticker and reconditioning data means that salespeople will be able to provide detailed price justifications.
As we enter a period of increased competition, focus on things you can control and differentiate your brand from other dealerships. Refine your processes to reflect consumer values, and provide a transparent shopping experience. The more data you share, the more engaged your customers become, and they will appreciate getting the information they need to feel confident in their purchase decision.
