With the arrival of the Internet, dealerships had quite reasonably expected to reduce costs by utilising the services made available over the Internet. Unfortunately this is blatantly not the case.
Back in the early 1990’s a dealer would spend between $40 to $100 on a classified advertisement in the major daily newspapers. Today we are paying $40 + per lead.
Based on known industry stats, the conversion rates from leads to sales – from the average marketing campaign, both traditional and online – is 10%. However, I am confident that the reality is much close to 5% or 1 in 20. This means that dealers are now paying around $800 or more per vehicle sold.
My question is why do we focus on ‘scatter gun-style marketing’ rather than target existing clients? Your existing clients have already experienced your customer service and as such will be far easier and quicker to close.
Again, using know industry statistics, repeat customers are 93% more profitable than a new conquest client and approximately 50% more profitable than a referral. In addition, the stats also show that a customer who purchased a vehicle from a dealer and utilised their finance facilities, is 53% likely to repurchase another vehicle from the same dealer.
However, another stat provided by Deloitte, is that dealers enjoy only a 25% metropolitan and 30% rural, rate of repeat sales to an existing customers.
I will, however, disagree with the Deloitte figure as I have measured the rate of repeat customers with the reporting and analysis tools available at my business, and the very best that I have seen is markedly less than 20% with the bulk of volume dealers coming in around 12 to 14%.
Even more interesting, is that when you differentiate between customers who had previously purchased a vehicle compared to service or transient customers, you find that 50% of your repeat customers are in fact transients.
Question: ‘What do you do to target market your customers, especially your F&I customers?’ In fact, do you electronically capture your F&I customers so that you, and not your finance company, can follow up or target these customers at the appropriate time?
We have run a number of campaigns for our motor dealer customers where we utilise a defined algorithm to identify those existing customers who may be approaching the time to buy another vehicle. We have consistently achieved results of 30 to 40% conversion from a suspect to a prospect and a 10% conversion from a prospect to a sale. This gives you an average cost per sale of $150 to $175. This compares to the existing scatter gun approach which has an average cost per vehicle sold of up to, or over, $800.
The costs of running the modern car dealership are high and getting higher – the challenges are becoming more intense and the manufacturers more challenging.
Why then do we consistently allow third-party companies to come in and reap huge benefits, with minimal risks, while the dealer is trading on a return of approximately 2 to 3% on turnover?
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