The automotive news feed is completely saturated with fear mongering about what might happen for the rest of 2024.
Negative equity from rapidly rising vehicle prices over the past few years has made upgrading or obtaining new auto loans more difficult for many consumers. The transition from years of tight inventory to finally improving vehicle supplies is bringing pricing and merchandising challenges for dealers. Higher interest rates are causing lenders to tighten loan approval criteria, while continued high inflation cuts into buyers’ disposable income.
There are worries that an economic slowdown could lead to rising auto loan defaults and repossessions that disrupt used vehicle supplies. As manufacturers reset MSRPs to more competitive levels after years of pricing over sticker, dealerships must adjust customer value messaging. There are so many things to be nervous about!
Four Pivots to Consider
Although it helps with click bait, causing panic is not very helpful for running a business. Take a deep breath and let’s review some basics. Pricing Discipline, Operational Efficiency, Sales Optimization, and Digital Marketing Prioritization are the four critical pivots automobile dealers can make to meet this challenging year head on and stay profitable as the market changes in the coming months of 2024.
Average transaction prices are predicted to be down 3.6 percent and incentive spending up 66.6 percent. Smart dealers will need to frequently assess pricing strategies based on market conditions, inventory levels, and competition. Protect liquidity by optimizing working capital, inventory turns and funding sources. Leverage OEM tools, analytics and demand forecasting to maintain an optimal new vehicle inventory mix as supply is expected to normalize to around 3 million units.
Dealers can implement tiered pricing, and flexible negotiation strategies that focus on value. Transparency through clear price advertising and a streamlined sales process will build trust with customers. Strategically targeted incentives and salespeople that are focused on value communication will further enhance profitability.
Leaning on Vendors
Higher sales volumes but tighter margins mean that dealers need to maximize operational efficiencies to stay in the game. Identify areas to reduce costs through process optimization, workforce productivity improvements, and leveraging technology/automation.
Vendors can be a force multiplier in this effort. You are paying them to support your business, so treat them as an extension of your team. Lean into those vendor relationships, conduct audits to evaluate returns, and seek their counsel on optimizing your spend.
Prioritize the vendors that can provide clear solutions. You don’t need to pit them against each other in a gladiator style competition, but prioritize collaborative partnerships and really evaluate your return to see if you can trim any fat. Ask them how they can help you be more efficient and prioritize the ones that can answer you.
Revamping Sales Strategies
With inventory levels normalizing after supply chain issues, dealers can no longer rely on product scarcity to drive sales. Revamp your sales strategies to focus on conquest marketing, competitive differentiation, and exceptional customer experiences.
Having a well-trained sales force adept at selling the value proposition will be key. Utilize OEM training whenever possible. Can your staff support customers in another language? Brainstorm overcoming objections and pain points as a team in your daily standup. Consider a spiff for moving those aged units. Prioritize tech efficiency, high RO averages in your service department, and don’t let F&I leave money on the table. Used retailers especially should consider developing EV expertise to get ahead of this rapidly growing segment.
Improve your dealership’s digital presence by capitalizing on the tools you already have, and consider investing in new ones that can amplify your return.
Where to Invest
Electronic titling software can significantly reduce the time it takes to process paperwork, and makes for a better customer experience. Enhance your online retail capabilities with omnichannel shopping experiences that leverage data and personalization to cater to virtual shoppers.
Are you using Conversions API yet? Utilize OEM coop programs if you can. Optimize your website with video walkarounds, robust inventory merchandising tools using detailed descriptions, high-quality images, and real-time inventory updates. Your first instinct might be to slash marketing budgets to reduce your overhead, but now is the time to invest in paid search, social media advertising, and continuous optimization of your digital marketing efforts to stay competitive.
Leaders who can master this will dominate this year.
Consumer Outreach
Simultaneously, focus on building customer trust and engagement. Actively monitor review platforms and respond promptly to feedback.
Implement CRM hygiene to effectively manage leads and ongoing customer communication. Launch a referral program to generate more sales from your happiest customers. Host community events to strengthen your dealership’s brand reputation. Improve your search engine optimization. Utilize email/SMS marketing along with a loyalty program to keep your brand top-of-mind. Boosting your “Why Buy Here” message will be more critical than ever as competition tightens.
Managing Dealerships: 101
This article could easily have been titled “Managing Dealerships: 101.” Other than the increased difficulties in some areas, the solution is the same in 2024 as it has been in years past.
Focus on continuously improving operations through strategies like carefully listening to customer feedback and exceeding expectations, hiring and retaining quality employees through effective culture and leadership, regularly attending networking events and industry conferences to stay sharp on trends, actively observing and implementing new marketing and digital initiatives, and prioritizing the service drive to maximize customer retention and profitability.
Put in the work, be lean, take care of your customers, and fasten your seatbelt.