During consultancy visits I am often asked by our customers, “Where does the next growth in used car sales volume come from?” Now the answer to this question is difficult to discuss in finite terms in a blog post; why? Well it depends entirely on where the business concerned is in its growth cycle and to add to the complexities, the answer to this question will change for the business involved, year on year, as growth is achieved and the focus for further growth changes and evolves.
So as you can already see, the answer to this question is not a “One Size Fits All” solution for every business, or indeed for the same answer for the business concerned, on a year by year basis.
However, one constant for all the used car operations we are working with is the need to generate more enquiries but in truth, many make the mistake of assuming that, in order to grow used car sales volumes, more and more money needs to be found on a continual basis, for ever more advertising and marketing initiatives, (if they are to increase sales volumes), and this is not always the case.
Now there is no doubt that effective marketing and advertising campaigns are paramount to the successful used car sales operation, but the reality for every business I have either run myself, or delivered business development consultancy programmes for is that, most of the time, the next years’ growth in used car sales is already within the four walls of the business, you just need to understand where to find it and how to maximise the opportunities you are already generating.
I say to all our clients, look at the process of growing your used car sales volumes as being like walking; one leg is labelled “Generating Opportunities To Do Business” and the other leg is labelled “Maximising Opportunities To Do Business”.
You are only walking and moving forward when you are putting one leg in front of the other; if you are doing the same thing again and again, whether it be relying solely on increased advertising/marketing initiatives or continuing to solely focus on closing ratios and maximising opportunities to do business; well think of the walking analogy again and your legs.
If you are trying to grow and move forward using just one leg? Well that’s not walking, that’s hopping, and as much as you can move forward for a while by hopping, it is exhausting and eventually the process collapses. So my question to every business owner is thus; “If you have two perfectly good legs available to you, why would you not use them both?”
Now I know this sounds simple and in reality of course, the complexities of any business, especially a used car operation, mean that finding the answers and implementing them can often be the challenge. But once the correct procedures and measurement processes are in place, combined with an understanding of when it is the right time to change the focus, growing your used car sales volumes year on year becomes second nature, just like walking!
Let’s look at the 2 legs and why it is critical to understand which leg to use, in order to keep forward momentum and thus used car sales volumes growing. Let’s look at the leg labelled Maximising Opportunities To Do Business because this is the best place to start. Think of your closing ratio to enquiries received and what you think is acceptable?
If you think that a 25% closing ratio is acceptable, (and I won’t comment either way in this article), that means you will sleep soundly at night, happy in the knowledge that for every 100 customers you attract to your business, 75 of them will be lost!
So think first about the closing ratio that you are happy with and decide how you can get an accurate measurement of this? Without this you will be unable to act effectively and shift your growth focus to the other leg, (Generating Opportunities To Do Business), at the right time.
This accurate measurement of enquiries and closing ratios in your used car operation is of paramount importance in building the foundations of both effective sales enquiry management and operational processes. If you are not achieving your desired closing ratio, let’s say at 25% of enquiries, why would invest more money into advertising and marketing at this stage, only to generate more enquiries that you continue to close at a ratio that you are not happy with?
With accurate measurement of enquiry levels and closing ratios, you will the able to assess when you reach your desired closing ratio; and until you do, continue to focus your attention on the operational procedures required within your business, in order to achieve your desired closing ratio, not on investing more and more funds into marketing and advertising.
However, this is not to dismiss the importance of advertising and marketing to the successful used car business. Once you have achieved your desired closing ratio and implemented the management controls required within the business to maintain this closing ratio for 3 months, you have to look at the other leg, Generating Opportunities To Do Business, because if you don’t, you are in danger of hopping once again!
This is when your focus on growth must shift back to advertising and marketing, the generation of opportunities to do business. What you have done so far and the initiatives you have in place have got you where you are, so don’t rush to change this. Look at what is required to build on what has been achieved; if some initiatives have not worked, divert that money elsewhere and into new initiatives.
The world of advertising and marketing is changing at an incredible rate; the days of branded golf umbrellas and relying on adverts in local papers are well and truly over. Some of you with successful franchised dealer operations, will benefit from the desire created by manufacturer based advertising campaigns, some won’t. I’m sure the average BMW, Jaguar, Mercedes Benz or Audi dealership doesn’t have to work as hard as the local Peugeot dealership, in order to drive customers through the showroom doors and to the waiting sales department.
But eventually you will need to look at your own advertising and marketing initiatives to generate the increase in opportunities to do business required in order to grow used car sales volumes. This will lead to many questions;
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What are our platforms of engagement?
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How are we utilising social media?
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What are our targeted contact customer acquisition initiatives?
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Are we running any successful lead generation initiatives?
- Is our existing customer follow up structure effective and generating the results required?
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Are we blogging?
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What are our content marketing initiatives?
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What are our direct marketing initiatives?
- Are the current initiatives relevant and in-line with the cyclical demands of the business?
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And most importantly, are we delivering The Right Message, To The Right Person, At The Right Time?
In order to grow your used car operation on a continual basis you are going to have to find the answers to the questions above, and many more.
If this post has resonated with you and you would like to know more about used car business development and growth strategies, rest assured there is help available? The owners of Autoformance have owned and run successful used car operations and been at the forefront of the development of approved used car programmes for a host of manufacturers.
We construct and deliver used car business development programmes for dealer networks, independents and manufacturers. If you would like to know more about our used car business development programmes, then please do not hesitate to contact either Andrew Banning or Malcolm Thomas at ajb@autoformance.com or mgt@autoformance.com
Alternatively please do not hesitate to call us on 0345 057 3177, when it will be our pleasure to help.
For more information about our services please visit our website at www.autoformance.com.
Andrew Banning
Director
A strange statement at first glance I know, but let me explain where this statement is heading and let me reassure everyone that this is a post about managing our used car stock holding and stock disposal policies. Now this is a tremendously in-depth subject and one, once again, that is impossible to cover in one post, so I will be returning to specific issues on this subject in future posts.
But for now we have to start somewhere with this subject, so let’s start with the statement above. It was said to me when I was first making a career for myself in the used car sector and during this time I spent as much time as I could with successful used car entrepreneurs, soaking up as much knowledge and experience as I could.
In many ways it was one of the best pieces of advice I was ever given, in terms of the harsh commercial realities of running a successful used car operation and in how we manage our used car stock holding, and I still hold true to this opinion today. Although I can now be more substantive about the statements I now make, the essence of the advice was always true for all professionals buying and selling any product for a profit.
At the heart of this statement is the inconvenient truth that all professionals within the Automotive Sector must avoid becoming emotionally involved with, and attached to, their used car stock holding. Now going back to the headline statement of this post, imagine that you ran a newsagents, not a dealership; if you were advertising that you were selling Mars Bars for 50p and the newsagents across the road was advertising that they were selling them for 45p, what would you do?
Well, if you wanted to continue to sell Mars Bars you would probably make a decision to become more price competitive. But then we come to the next pressing issue; Mars Bars, like all food products, have a “Sell By Date” at which point it is no longer the product that the manufacturer wishes it to be, so as you get nearer the “Sell By Date” you as the owner of the newsagents have a stark choice, you either drastically reduce the price before this date or are faced with disposing of all the stock at a loss.
Now, if you were the newsagent you wouldn’t give any of this a second thought and you would make the decision to dispose of all the Mars Bars as profitably as you could, before having to throw them away when the “Sell By Date” was reached, and if we hold this thought moving forward through this post, why is your used car stock holding any different?
This maybe the point where, depending on your position or role at either the manufacturer or the dealership, your opinion might change depending on what you are trying to achieve, but I ask you to bear with me and to allow me to slay a few “Sacrificial Cows.” If you will indulge me, I will also put “Politics” aside for the remainder of the post, because the whole purpose of my posts and my blog, is to discuss best used car practice.
I will add the caveat though that should you decide, as the owner of the business or the senior representative of a manufacturer, to ignore this, then that is fine, it is your business not mine; but let’s agree that it is best practice and to be aware of the financial and business ramifications of your future decisions.
So let’s return to the analogy with the Mars Bars and their “Sell By Dates” because your used car stock holding has the same pressing issue. At Autoformance we have a programme that can accurately present the total cost of stocking a used car versus the future profit margin, and this programme can focus the mind! Now I will explore this in greater detail in a specific post on this subject later in the year, but for now, let me assure you that at no point will you be making a profit on your used car stock holding after 60 days in stock; and that is in stock, not in the used car display!
All the time the used car is in stock the clock of cost associated ownership is ticking, thus why we have 60 day liquidation policies. Now like all of you reading this post, I have heard all the excuses from used car managers or buyers as to why we should not be liquidating, (invariably at a loss), after 60 days! My favourites are;
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“I had to work really hard to buy that car!”
- “I can’t buy it again at that money!”
- “They’re just not out there in that specification!”
Now this may seem overly harsh, but my answer to all the above would be as follows; “I understand, but why would you want to work so hard to purchase a car again that you have proven definitively can’t be sold in this trading window, at this price?” My advice would be to put that money into a profile of used car stock that you have proven can be sold profitably within a 60 day stocking window, not go off chasing stock you have proven can’t be retailed profitably at the price you have paid.
Let’s move on to the politically sensitive issue of ex-demonstration cars because in reality all they are is a different profile of used car stock and should not be, in our opinion, treated as a special case. I know this is, perhaps, a “Thorny” issue for some senior manufacturer representatives and business owners reading this post and that sometimes there are, of course, “Cost of Franchise” and/or operational issues to be taken account of; but for now let’s deal with what are the facts because if we accept that, we can at least make decisions knowing the full cost of those decisions!
I’m sure we would all agree that every used car should enter the used car stock holding at its true disposable market value, at that moment. You would not expect those responsible for purchasing your used car stock holding to be sentimental and paying more for a piece of used car stock than it is worth, so why should ex-demonstration cars be any different? The day they enter your used car stock holding at a price that is higher than it’s true market value, you are inhibiting the chances you have of retailing any of this stock; and let me dispel a myth right now; the price an ex-demonstrator owes the business is not representative of its true value or what it is worth in the open market!
Again, the management and pricing of ex-demonstration and nearly new cars is a huge issue which will be covered in isolation in a future post, because it is the natural competitor to the new car market and much thought must be given to how both markets operate and survive alongside each other. But the reality is that whilst you are advertising this profile of used car stock at prices higher than the true market value, you are only helping competitors acquiring this profile of stock from other sources, at the correct market value, to sell their stock!
In finishing for today let me promise you one thing, the overpriced and overage ex-demonstrator invariably becomes the over-priced and overage used car, and thus my statement that Mars Bars and cars aren’t that different; of course they are in some ways, one is a snack and the other is a piece of engineering, but in the ways we handle, stock, advertise and dispose of them? Well they are identical!
If this post has resonated with you and you would like to know more about used car business development and growth strategies, rest assured there is help available? The owners of Autoformance have owned and run successful used car operations and been at the forefront of the development of approved used car programmes for a host of manufacturers.
We construct and deliver used car business development programmes for dealer networks, independents and manufacturers. If you would like to know more about our used car business development programmes, then please do not hesitate to contact either Andrew Banning or Malcolm Thomas at ajb@autoformance.com or mgt@autoformance.com
Alternatively please do not hesitate to call us on 0345 057 3177, when it will be our pleasure to help.
For more information about our services please visit our website at www.autoformance.com
Andrew Banning
Used Car Business Development Director
