If you were to assign a grade to your dealership’s performance this year, what would it be? If I were to ask you to grade your individual operating departments’ performances, what would they be?
If you didn’t assign all As to the dealership and individual departments, why not?
Going through this marking exercise helps identify opportunities for 2013.
I recently was speaking with a former dealer who asked about the primary challenges dealers face today. I didn’t take long to answer.
In almost every meeting I attend, dealers are talking about low new-vehicle grosses. This pressure on profits likely will continue, considering the amount of information available to consumers on the Internet and dealers in the market trying to offer the lowest prices online.
The only area where dealers seem to make respectable grosses today is in finance and insurance and selling accessories.
Used-vehicle inventory shortage pressures should begin to ease as new-vehicle sales increase, which will generate more trades.
Vehicle retail grosses are under pricing pressure because of the amount of pricing and inventory information on the Internet. As we all know, our best used vehicles and highest grosses come from vehicle trades.
The area where I have the most concern is in the amount of service work and the parts sales that accompany labor charges. Mileage intervals for general maintenance have increased, decreasing customer visits.
Warranty repairs have decrease for all dealers unless there happens to be a manufacturer recall. Traditional service traffic is down. Many dealers have added quick oil-change and express-service facilities next to their dealerships. This increases our service traffic and repair orders, but has it helped increase total gross? Hopefully this is an area you are monitoring taking appropriate actions when necessary.
So, what do all of the items have in common? The answer is pretty easy if you think about it.
No, I don’t have an answer about Internet pricing and thoughts about how to prevent competitors from advertising prices under invoice in order to sell cars. I certainly don’t have an answer as it relates to the “big picture” used-vehicle market. And I can’t control the fewer service-department visits. But I do have a few thoughts.
Our highest total grosses from new-vehicle retail sales come from repeat customers. These customers also have the most desirable and valuable trades.
In the past, it was easier to maintain a relationship with these customers due to the frequency of their service visits, which typically created a relationship between them and service advisers. This has often been our lifeblood. The challenge now is to come up with a process that allows the personal relation between the customer and your dealership to flourish. This is critical.
In recent years, it’s been rumored that auto makers would stop grading dealers on customer satisfaction, and instead measure customer retention. Customer-satisfaction index scoring has been a longstanding point of contention.
Good CSI is something that has been a must with every dealer I’ve ever met. The unfortunate challenge with this measurement has been in getting our happy customers to return surveys and then having the scoring verify our commitments to the customer. It is survey management.
Customer retention and close customer-dealer relationships are nothing new. They are areas dealers always have worked on. Regardless of the auto maker’s program, return business will continue to be critical to our growth of both sales and gross.
In closing, I want to thank you for your continued support and wish each of you a safe, happy and successful holiday season.
Good selling!
Tony Noland of Tony Noland & Associates is a veteran dealership consultant. He can be reached at tonynolandandassociates.com
