Just Because You've Lowered Rebates Doesn't Mean You've Solved the Problem - AutoSuccessOnline
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Just Because You’ve Lowered Rebates Doesn’t Mean You’ve Solved the Problem

Manufacturers can determine what incentives and rebates are needed to achieve the most competitive position based on market data. And retailers can take advantage of the modern retailing solutions available, which provide consumers consistent and all-inclusive payment quotes.

Rusty West is President of Market Scan Information Systems and has more than three decades worth of experience developing leading data and technology-based solutions for the automotive industry. For more information, visit www.marketscan.com.

For everyone in the automotive industry, 2021 continues to be a year where the only constant is change. We all know the story by now — consumer demand is high, inventory is low.  

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But there are other stories happening, such as the rising  average prices on vehicles, decreasing level of rebates and the consumer’s frustration with being quoted different prices in store and online. 

Factually, average prices are going up. According to Kelley Blue Book, the average transaction price through July 2021 reached a never-before-seen high of $42,736, marking an 8.2% increase over July 20201.

Manufacturers Have Pulled Back Rebates 

Due to reduced inventories, manufacturers have pulled back on rebates and incentives. In fact, rebate offers for most segments have declined over the last few months. Actual program offerings or sub-vented lease programs have remained completely flat across all segments. We’re witnessing the dynamics of supply and demand amplified by consumers’ growing savings since the start of the pandemic.  

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Consumer savings in the U.S. exceeded a staggering $2.4 trillion in 2020. Even though the personal savings rate has since dropped and amounted to 8.9% at the end of September 2021, it still means that American households have excess savings, potentially causing a surge in consumer spending.

Outdated Business Practices 

Another notable trend is the fact that the process manufacturers apply to determine their rebates and incentives remains largely manual. Additionally, the reduction of rebates doesn’t solve the problem manufacturers, lenders and dealers have: In order to create an improved modern retailing environment and consumer experience, they must provide customers with the same quotes online and at the store. 

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Outdated business practices don’t have to prevail, and consumers should not have to endure a disconnected shopping experience if they dont have to. Solutions to this problem have been created by combining science, technology and data. Manufacturers can precisely determine what incentives and rebates are needed to achieve a competitive position based on live competitor and market data. Retailers can take advantage of the modern retailing solutions available, which provide consumers payment quotes — irrespective of where they shop — connecting the consumer experience online with the showroom experience. 

Injecting Science into More Accurate Rebates 

Manufacturers spend $40+ billion each year on incentives to influence consumer buying behavior. Traditionally, the car makers go through a labor-intensive process to analyze the data related to the effectiveness of the programs they are offering. This is done to determine how to position themselves competitively — and to determine how much must be spent to earn a desired market share.   

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The process is time consuming, mechanical and unsophisticated. Decisions are often made based on instinct.

Not only is this very expensive (and often inaccurate), it is also ill-timed and creates space for competitors to win market share. 

Almost every dealer in the U.S. has had issues collecting rebate or incentive monies from their manufacturer due to misapplication or improper combination of rebates. When this happens there are two options: rewrite the contract, which may upset the customer, or take the difference out of the gross. 

The technology platforms needed to overcome this are available and will enhance the consumer experience. Manufacturers, lenders and dealers can now be tied together in a system that offers a portal containing all data necessary to build, offer and transact. This technology includes a solution that mines, analyzes and manages the billions of combinations of all lender and manufacturer programs available in the marketplace. 

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Helping Dealers Remain Profitable 

This process also helps dealers remain profitable, since it considers each dealer’s specific terms and conditions. The process includes every factor that influences a transaction — and all terms and conditions that are uniquely set by the dealer, including quoting rules for every vehicle in the inventory. By leveraging all the data, dealers can provide consumers with all-inclusive, transactable and defendable payments for every vehicle and every consumer scenario online and in the showroom.  

We all know this story — strong consumer demand, low inventory and high prices. With the right data, technology and payment offers, everyone in automotive wins by leveraging the right modern retailing process, where the consumer enjoys a frictionless and much improved, consistent experience online and in the showroom.

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