We had an interesting conversation recently with a manufacturer and it was interesting to get their perspective on how to grow used car retailing within their franchise dealer network; their opinion was that everything would be fine, they had just been recognised as offering one of the best approved used car warranty programmes in the industry, and their opinion was that all was now well with the world and used car retailing was going to now go on and break all records; so Job Done?
Sadly we think not, but this conversation does highlight one of the major problems facing manufacturers and their franchise partners when they are planning strategies for used car business development and it was only when exploring this argument in more detail that further flaws in their thinking came to light. But before we explore these issues let’s justify the statement in the title for this article and explore why approved used car warranty programmes aren’t the answer, in terms of growing used car retail sales volumes; because, and although it won’t be true of everyone, in many ways this is most damaging when you as the franchise holder also believe this.
Now of course approved used car warranty programmes are important because it is what the customer expects, but leading with an “Industry Leading” warranty and approved used car programme is not a used car market place USP capable of growing your used car retail sales volumes, especially when it is nothing more than what the customer expects! If you are still unconvinced just ponder this fact; for the majority of you reading this article the most successful retailers of your product in the used car market are probably independent specialists, those businesses that don’t have access to your “Industry Leading” all important approved used car warranty programme, but no one asks how can they can then be so successful?
Well, with brevity in mind, the simple answer is that they are dealing with only used car customers on a daily basis and as a consequence will have an in-depth understanding of what the customer wants and of the used car sales process. Unfortunately both you and the personnel based at the manufacturer you represent are not dealing with only used car customers and/or just involved in the used car sales process on a daily basis, and this lack of experience at the “Coal Face” creates the perennial problem for manufacturer based personnel, who are then having to make strategic used car retailing decisions with little or no “Hands On” used car market experience.
Factor in the fact that very few manufacturers organisations, (or the majority of franchise dealer networks for that matter), employ genuinely successful used car professionals, therefore being able to draw on the experience of professionals who have run successful used car operations; the inevitable result ends up being that you are then trying to target the purchasing drivers of an audience you do not know and this is a highly flawed approach, unlikely to succeed.
If those responsible for strategic used car thinking and decision making within manufacturers had grown and run successful used car operations, manufacturers would then be able to appreciate that customers are driven by desire and emotion; no one wakes up in the morning and thinks, I just can’t wait to get my hands on that approved used car warranty programme, that is really lighting my fire! They just don’t and besides, in most cases the new approved used car warranty programme and benefits are irrelevant, because the used car will more than likely be sold with the balance of the new car warranty that still remains on the vehicle.
As much as this strategy perplexes us, so does the stance taken by some of the big PLC’s owning vast chunks of franchise dealer networks. For example, in our last article Will Your New Car Franchise Model Be The First To Fail we highlighted a specialist used car business with over 2,000 used cars in stock, all of which are premium brand German cars; so let’s look at this business in greater detail because we have no doubt that this business will be the most successful retailer of used cars in the area, in terms of the brands it stocks. Now if you do the maths, it probably has in excess of £25 Million worth of used car stock, (an average SIV of £12,500 X 2,000), and this money will not be made available to a used car stock holding if it is not generating a serious return.
Yet unlike your franchised dealership, this business has none of the advantages of the shiny approved used car warranty programmes for the associated manufacturers; yet no one asks how this business is still so successful? Has anyone at the manufacturer, the parent company running the associated franchise dealerships, or from the local franchise dealerships in direct competition with this business, ever visited this business and purchased a used car, to see why this business can come from nowhere and be the most successful retailer of your used car product, when it has none of the advantages of being a franchise holder? Probably not!
Now we don’t understand this state of mind, it is almost as if the manufacturer and their franchised dealer networks are trying to change the used car market, whereas the specialist used car entrepreneur knows that they can’t so they adapt to what the market wants. These are two completely different approaches and we can promise you all now, if you think the answer to increasing used car retailing lies in your approved used car warranty programmes and the associated benefits, well you need to think again and quickly. We are sorry if this news comes as a crushing blow, but it is the truth.
So what is the answer? Well in simple terms never forget that people deal with people and trained used car sales professionals sell used cars from businesses set up to sell to customers wanting to buy used cars! It really is as simple as that, but within that simple statement is an awful lot of work and a business that is completely different to your new car business, but one that is essential, in terms of supporting your new car trading model and the financial resilience of your franchise dealership.
It is a fact that over the last 10 years technology has changed the new car business model and many of you have “Systemised” the new car business; as a consequence though many of you are now employing sales professionals with a completely different skill-set to that required to build successful used car businesses and sell used cars. To compound matters many of the manufacturers you represent and your parent holding companies don’t employ senior and successful used car entrepreneurs in their organisation, let alone on their senior management team, thus ensuring that used car performance is being driven.
At franchise dealer level, 85% of the businesses we work with do not have dedicated used car professionals at the time of our first visit, and the vast majority have no access to used car personnel training programmes from either the manufacturer they represent or the PLC that owns their business! So we ask you all; how are things going to change? As used car business development and change consultants we, along with anyone else you choose to partner with, will ask you one rather long winded question. If you accept that used car retailing is of paramount importance to both the manufacturer you represent and the survival of your franchise dealer business, then how are things going to change when there are no programmes of education and development?
Used car professionals do not grow on trees and growing successful used car businesses is a highly complex and specific skill-set, so where do you expect these people to come from, those capable of delivering the results you require? Now we appreciate that finding genuinely successful used car professionals is very difficult for both manufacturers and their franchised dealer networks; we discussed this very same operational problem in our article below;
Do Successful Used Car Professionals Exist For Franchised Dealers?
So something has got to change; as the franchise holder and as the manufacturer you must make a decision, do we want to secure your long term new car success and ensure that you enjoy a financially resilient franchised business, the one that will be required to support the new car warranty programme and service the vehicle park? Because if you do, then this will only be achieved via successful used car retailing and luckily help is at hand.
If this post has resonated with you and you would like to know more about our used car business development consultancy programmes, because you would like to partner with an organisation of professionals who have faced the challenges of fast paced evolutionary markets and know how to develop a successful and profitable used car operation on your behalf, (in order to keep your new car and total business objectives growing and on track), then we would very much like to hear from you.
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. For an exploratory conversation regarding our services and how we can develop bespoke used car business development and consultancy programmes on your behalf, please do not hesitate to contact one of our Used Car Business Development Directors in the strictest of confidence; Andrew Banning at ajb@autoformance.com or Malcolm Thomas at mgt@autoformance.com
Alternatively please feel free to call me on 07796 260261.
For more information about our services please visit our website at www.autoformance.com
Andrew Banning.
Used Car Business Development Director.
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