The automobile dealership industry has undergone a transformation in recent years with the availability of online used car values. Armed with this information, your customers are driving harder bargains and that translates into smaller profit margins for your dealership on both new and pre-owned sales transactions.
Combine this with the fact that many dealerships are finding that their service departments are more profitable than their showroom floors. Seeking ways to increase profitability, many dealers are offering accessories, extended warranties, financing and even insurance to help boost bottom line results. While these may help in the short-term, over the long-term the decrease in the volume of new customers may eventually slow the feed of business to the service department.
So, what can dealers do to survive — and thrive — given the current marketplace conditions? In addition to finding new customers, you need to help ensure that your current customers keep coming back. Not only does it take fewer resources to keep current customers than secure new ones, but satisfied customers come back and often refer business. A great place to begin is by examining some of the processes that have been established to serve your customers. One such process, commonly referred to as the appraisal process, has been known on many occasions to breed dissatisfaction. Have you taken a close look at your dealership’s appraisal process lately?
Dealer vs. Customer: Meeting of the Minds
When you get down to the heart of the matter, there are two key questions that your dealership generally must answer to close a deal on the sale of a new or preowned car. These include:
1. What is the customer willing and prepared to pay for a vehicle?
2. What is the dealership willing to pay for the trade-in vehicle?
While these seem to be fairly straight-forward, the answer to the second question typically has a direct impact on the answer to the first question. No longer a clandestine process, prospective customers have a wealth of trade-in value information available at their fingertips, and it is this information that gives them power. Unfortunately, their research does not always account for all relevant factors as they formulate their own answer to question #2. As dealers know, the answer to the second question usually lies in the marketability and profitability of the vehicle given the overall condition, both mechanical and cosmetic.
To make a sale — a sale that ensures profits for your dealership and satisfies your customers — there must be a meeting of the minds between you and the prospective customer when it comes to the value of the trade-in. Some would even suggest that the process of making these two numbers one in the same has a greater impact on closing rates and customer satisfaction than any other part of the sales process. With this in mind, dealers like you must learn how to both present, and sell, a realistic trade-in amount to the customer while maintaining the integrity of the dealership’s brand. To achieve this, your sales team must make the appraisal process transparent by demonstrating marketability and not just your dealership’s opinion of value.
Transparent Appraisals: Using Information Technology to Your Advantage
To achieve transparency, both independent and franchised dealers have turned to automated systems to pull credible, third-party data for their geographic area or even nationally, in some cases. AutoTrader, for example, gives information regarding dealer asking prices whereas J.D. Power provides selling price data. Providers of wholesale price data may include Manheim or ADESA. AutoCheck and CARFAX offer detailed vehicle history reports. Still yet, other sources such as vAuto provide extremely valuable information regarding supply and demand as well as the average number of days a vehicle sits in inventory. Even the most price sensitive dealers can access the information they need at a nominal monthly fee. In fact, online options are available that pool data from these and other familiar sources.
While prospective customers may have access to some of these sources, it is up to you to present this relevant, third-party data in its proper context. By sharing specific reports from credible sources, you can even up the playing field by using this information as the foundation for the appraisal of your customer’s trade-in. Adjustments can then be made for mechanical issues, body damage, interior wear and tear, etc. Likewise, adjustments can be made for features and benefits such as an automatic transmission, a sunroof, heated leather seats, or even an iPod jack. Using this method to generate a final appraisal value — a method where customers can see exactly how the trade-in value was derived — will likely satisfy even the most skeptical customer.
Concluding Thoughts: Successfully managing customer satisfaction is essential for the long-term growth of your dealership — from increasing current customer loyalty to securing new customers. Employing automated systems for the purpose of sharing credible, third-party information related to vehicle trade-in values can help. This data not only makes the appraisal process transparent, but improves customer satisfaction and ultimately serves to protect your dealership’s brand. Remember, dissatisfied customers can and will broadcast their displeasure — and they can use technology again in the form of online blogs and social networking websites.