The ongoing conversations surrounding the unexpected shifts in the automotive industry are not

likely to slow down anytime soon. As Q3 comes to a close, we take a closer look at the trends

we saw this past year, what they mean for dealers and consumers, and what can be predicted

for Q4 – as well as the months to come.

It is important for dealers to be aware of the influential topics up for discussion in the industry

while navigating through the ongoing pandemic, which happened to lead to supply-chain issues

that further caused a microchip shortage for dealerships across the globe.

This, along with other important factors surrounding vehicle types, prices, etc. are what dealers

should gain expert insight into. By analyzing how the automotive industry has evolved,

dealership managers can better train their sales team and, in turn, produce upward trending

sales for the future.

In this blog post, we’ll explore the state of automotive retail industry headed into the final quarter

of the year, including:

• The economic conditions and key indicators dealers need to know
• Key consumer buying behaviors and trends in 2022
• How Mastermind helps dealers navigate current and future conditions
• Forecasted auto sales opportunities in 2023

Current Economic Conditions Heading into Q4 2022

Over the past year, dealers have faced an increasing number of challenges. While in Q1,

dealers saw the best industry-wide sales performance in years, by Q2, sales had cooled as

inventory challenges continued.

Q3 continued to see much of the same, as lack of inventory stemming from industry disruptions

prevented sales from rebounding more aggressively and drove prices up.

According to S&P Global Mobility, August’s new light vehicle sales were predicted at an

estimated 1.123 million units, equivalent to a 13.1 million at the seasonally adjusted annual rate.

At the same time, S&P Global Mobility has noted increasing economic uncertainty is absolutely

crimping fourth-quarter consumer demand.

While profit margins incentives have reached historic highs, recent double-digit increases in

new-vehicle prices are changing consumer buying behaviors. Brand loyalty among U.S.

consumers for new vehicles dropped to an eight-year low in June, according to S&P Global

Mobility.

The correlation between days supply and brand loyalty demonstrates buyer’s willingness to

shop around and defect to purchase the vehicle they want, posing numerous challenges for

dealers. As inventory challenges continue into Q4 2022 and 2023, it’s critical dealers

understand the value of proactively promoting customer loyalty and stay in continued

communication with their customer base.

Forecasted Trends in Q4 2022 into 2023

Current forecasts from S&P Global Mobility show some good news on the horizon, noting US

light vehicle sales in August marked the first YOY gain in a year. While high profits and

sustained consumer demand may prompt some dealers to pump the brakes on their dealership

marketing, recent trends and forecasted challenges ahead emphasize why it's so critical for

dealers to take a proactive approach to customer communication.

Despite August’s performance, S&P Global Mobility recently further downgraded their forecast

on US auto sales to be limited to a 14.1 million unit total for the year, a downgrade from the

2022 14.6 million unit calendar-year forecast published in July.

While customer demand is already being masked by the inventory shortages, dealers should

expect to see higher interest rates and corresponding monthly payments likely continue to curb

retail demand for the foreseeable future. Rate hikes by the Federal Reserve have led to the

average interest rate on a new vehicle loan rising to 4.8% in May 2022 – its highest rate since

pre-pandemic in March 2020.

From an OEMs perspective, S&P Global Mobility notes many brands are increasing their efforts

to search for ‘Lost Souls’ or ‘Orphan Owners’ – also known as the second or third

owners/sellers of a vehicle. On the retail level, dealerships are using responsive messaging and

targeting strategies that best match audience segments with inventory, adjusting monthly to

align with available vehicles, explains S&P Global Mobility.

By taking a proactive approach to identifying customers before they return to market, dealers

can gain a competitive edge when it comes to conquesting new customers – as well as

defending their customer base from competitors’ marketing attempts.

CONCLUSION

How can dealers ensure success while keeping their employees, as well as customers,

informed about the relevant automotive industry changes?

To ensure their team can continually adapt to inventory challenges to achieve sustainable

success, it’s critical dealers keep their finger on the pulse of the automotive industry. By

understanding the economic trends shaping the automotive retail landscape, dealers can

proactively plan ahead by:

• Adapting to financing challenges by creating a buying experience that speaks to

customers’ concerns, including marketing F&I products like extended warranties and

wrap coverage, or even assistance in raising their credit score.

• Leveraging pre-orders and reserved orders or even retail vehicles in transit to their

dealership to meet evolving customer demands.

• Utilizing dealership marketing technology to analyze data from their DMS and CRM to

identify sales opportunities to proactively pave the path for customers to purchase their

next vehicle at your dealership.

As car prices and financial conditions throughout the economy continue to waver, dealers

should be concerned with maintaining inventory and continuing to provide the best options for

their customers. This topic is wildly popular at the moment and, due to its continuous change,

will likely not stop anytime soon.

The composition of dealership teams around the U.S. is changing – and getting younger. And despite what you may have heard about their work ethic, Deloitte’s 2022 Gen Z and Millennial Survey found that nearly half of Gen Z workers have taken on either a part- or full-time job in addition to their primary job. So how is your dealership preparing its next wave of leaders to overcome new obstacles in the auto industry?

Effective car dealership leaders know if they need to give up-and-coming team members the opportunity to move into leadership roles. If dealers do not take action one of two things will likely happen: Either they’ll go to a company that will give them growth opportunities, or they’ll become discouraged and lose the passion that made them so valuable.

In this blog, we share ways to help you prepare the next generation of car dealership leaders:

1. Help employees become effective coaches
2. Emphasize good communication
3. Encourage employees to connect with other up-and-coming leaders
4. Help employees become cultural leaders
5. Expand employees’ expertise beyond their current roles

Automotive Dealer Coaching

Research finds leadership coaching offers real benefits, both to the recipient and organization. From the individual side: 

• 80% of people who received coaching report increased self-confidence 
• more than 70% said they benefit from improved work performance, relationships & more effective communication skills.

Coaching isn’t just more than managing, it’s also more than telling someone what to do or how to do it. Ensure your dealership’s leadership training program includes opportunities for future dealership leaders to practice their coaching skills. The more effective they become as coaches, the more they’ll have success as leaders.

Set Dealership Leadership Program Goals

Make sure you’re setting clear targets for your dealership leadership coaching programs. Goals should be made both for the program as a whole and individually with personal targets for participants. Ask if the goals you set for your team are SMART: Specific, Measurable, Actionable, Realistic and Timely, and ensure you have the proper tools in place to track progress.

Your expectations should mirror those of your customers. Ensure your team is thinking of evolving buying behaviors and focus on building a team culture based on delivering a great customer experience. These metrics won’t always be sales numbers, per say. Look at the behaviors that empower your team to deliver that exceptional customer experience.

Learn How to Identify Strong Coaches

In a dealership your best leadership coaches may not be the top sellers, but rather the people who had to learn how to overcome challenges.

When you’re looking for the first cohort of coaches, start with the people who had to work the hardest to get where they are today. This tenacity is a critical trait during times of market volatility. Seek out those who look for creative solutions to challenges or limitations, as they’ll be more likely to provide effective coaching and mentoring leadership themselves.

Emphasize Dealership Communication

As dealership strategies, systems and structures change, teams can easily become disconnected. This opens the door for inefficient, ineffective sales processes and poor CSI scores. To overcome emerging challenges and take advantage of new opportunities, keeping dealership teams well-connected through effective, two-way communication is critical.

Active Listening

Effective listening – to team members, customers and others – is a learned and practiced skill. Being an effective and active listener builds trust and strong relationships.Being a poor listener puts relationships between dealership leaders and their teams at serious risk of failure.

The best way to make active listening part of your dealership leadership training is simply to model it yourself. Actively check yourself for these best practices:

– Avoid “talking to” people, rather than having conversations with them.

– Wait to start preparing your response until they’ve finished delivering their message.

– Listen not just to what they’re saying, but how they’re saying it. This includes body language, emotional tone and more.

– Give the conversation your whole attention. Don’t multitask – and especially put down your phone.

The benefits aren’t just in team management. Active listening is most important when interacting with customers as a tool for ensuring you understand their wants and needs and that you understand and value them.

Getting to Know Other Departments

While it may seem basic, introducing your team to other parts of the dealership is an easy and important step towards creating better dealership communication.

Sales consultants may not always make the best mechanics – and vice versa – but getting everyone one-on-one face time with the people they call coworkers can completely change their understanding of how each process fits together in the big picture. With greater insight into other departments, this sort of communication fosters: 

• greater empathy 
• Better collaboration between teams  

Focus on Building Your Dealership Network

Once you’ve identified a future car dealership leader, support them in their professional growth. You can do this by giving them encouragement to build personal and professional relationships outside the walls of your dealership. These connections will be part of their growth for years to come.

Part of being a strong car dealership leader is having a robust personal and professional network outside the walls of your dealership. Support your future leaders by regularly reminding your team why it’s so important they build their networks and empowering them with the personal and professional references they need to succeed.

Encourage and incentivize your team to attend networking events or join professional networks to help build their network. This could take the form of participation in automotive industry organizations like NADA, service organizations such as Rotary or Kiwanis, volunteer work in the community, etc.

Promote Cultural Leadership Focusing On Customer Experience

We frequently discuss dealership culture, and for good reason. Our experience working with dealership partners of all types and sizes across the country makes it clear that the most important auto dealership best practice is to foster a dealership culture driven by customer experience (CX).

It’s very difficult in the modern era to be an effective car dealership leader without a strong commitment to customer experience In fact, a recent industry study found 1 in 3 dealership leaders aren’t investing in employee training opportunities beyond what the OEM provides. This poses a massive opportunity for dealers to both cement future success while potentially giving them a leg up on the competition by bringing their entire team up to speed.

Dealer leadership training empowers up-and-coming leaders to more effectively model these behaviors by: 

• giving them a firmer grounding in the importance of CX culture  
• engaging them to find ways to grow that culture across the dealership 

Finally, ensure your team understands what it’s like to be on the opposite side of the table as a customer. If they haven’t personally gone through the sales process or it’s been many years since they shopped last, task them to politely shop around at a couple of competitor locations to see how the overall experience goes. By simply inquiring about a few vehicles on the lot, they will get a great view of the customer experience at competing rooftops, informing an optimized approach at your dealership.

Expand Dealership Employee’s Expertise

As you work with the next generation of car dealership leaders, one of the most critical things you can do is find ways to grow professionally outside the bounds of their existing experiences.

The higher up you go in auto leadership, the more you need to know about things outside your initial area of expertise. Salespeople need to understand more about fixed ops. Finance professionals need to learn more about the intricacies of a product. Service experts need to become familiar with marketing.

This is especially important for the car dealership leaders of tomorrow, given the way the traditional walls between new and used sales, marketing, digital, fixed ops and finance have been coming down in dealerships.

Make sure you’re fostering inter-departmental communication by ensuring your databases (CRM, DRM and sales platform) easily integrate and employee-facing technology is easily accessible to every member of your sales team, service department and F&I staff. 

By Ian Grace

With new and used vehicle transaction prices plateaued at historic highs and OEM incentives limited, some auto dealers are considering pumping the brakes on their marketing efforts in 2022.

At the same time, diminished customer loyalty and extended path to purchase due to production delays and inventory shortages are emphasizing why it’s so important for dealers to stay in consistent communication with customers. Looking past the next 30 days, it quickly becomes clear why dealers need to continue consistently engaging their audience to maintain their competitive edge.

In this blog post, we’ll explore three key reasons why dealers need to continue communicating with their customers in 2022 including:

1. To promote customer loyalty even as consumer sentiment diminishes
2. To support your service and fixed ops departments amid inflation
3. To achieve sustainable success throughout 2022 – and beyond

1. Consumer Sentiment is low.

As new and used vehicle prices remain high and dealerships’ inventories remain low, consumer sentiment has taken a steady decline.

From March until April 2022, the Consumer Sentiment from the University of Michigan declined 9.4%. And by May, consumers’ views of buying conditions for vehicles declined to the lowest reading this year, according to Manheim reports. Customer loyalty has also taken a dip in recent months, with brand loyalty among U.S. auto buyers dropping to a six-year low in 2021. 

According to IHS Markit, a part of S&P Global Mobility, inventory shortages are having a profound impact on customer loyalty, finding a strong correlation between days’ supply and make loyalty, demonstrating consumers eagerness to switch dealerships and even brands to find the vehicle they want.

How to Promote Customer Loyalty as Consumer Sentiment Diminishes

To proactively prevent customer defection and protect your customer base from competitor’s conquest attempts, engaging customers well before they return to market is key. As inventory shortages extend the path to purchase, dealers need to engage customers earlier than they would in the past, up to 12 months before a customer returns-to-market.

By engaging prospects early with personalized messages that build buyer trust, dealers are empowered to set realistic expectations with customers early on, setting the stage for an excellent customer experience when buyers do return-to-market.

2. Fixed ops pricing is on the rise

While retail prices of new and used vehicles have made headlines in recent months, prices of automotive parts including tires and services such as those covered under F&I products like vehicle service contracts, are also increasing. In some cases, the costs for these services are growing faster than the national average.

Knowing the end result of inflation will be passing some of these cost increases onto customers, getting ahead of customer communication is key. This is especially important as some customers may already believe they’re being price gouged in the service lane.

How to Approach Buyers as Service Costs Increase

Building trust with buyers is critical here, too. If prices are increasing due to increases in parts or service costs, communicate that to your customers. Instead of being afraid to compete on cost, messaging should focus on your service department’s advanced knowledge and abilities as compared to the more generalized service shop down the road. Just like with your sales messaging, look for opportunities to engage customers in the method they prefer with clear and personalized messaging. Each customer communication should build on the last customer touchpoint, with consistent messaging carried across every platform. 

3. To achieve sustainable success through 2022 – regardless of what lies ahead

While many dealers started out the year on a high-note, what remains for the rest of 2022 is yet to be seen. According to S&P Global Mobility, production in the second half of 2022 is expected to result in SAAR rates that average 14.69 million units amid continued semiconductor challenges and ongoing supply chain, logistics and worker related issues.

While the underlying demand is currently stronger than US sales results to date, pent-up demand remains under threat from inflation and other macroeconomic pressures, according to S&P Global Mobility. 

In Q1, U.S. auto sales began to cool considerably. According to NADA, March 2022’s SAAR totaled 13.3 million units, down from 14 million units in February and 24.4% from last March’s SAAR of 17.6 million. While sales increased slightly in April, NADA noted, “the industry is still unable to produce enough vehicles to meet current demand, let alone restock dealer lots” amid ongoing production challenges.

As a result of unstable global markets, S&P Global Mobility further downgraded its 2022 and 2023 global light vehicle production forecast in May by 2.6 million units, down to 81.6 million for 2022 and 88.5 million units for 2023.

How Dealers Can Achieve Sustainable Success in 2022  

With retail prices likely to remain high for some time, now is the time for dealers to recognize the value of an excellent customer experience. Customers rank trust as important as purchasing price when deciding which dealership to purchase from.

To help offset any sticker shock, look for opportunities to provide customers a whiteglove customer experience that meets and exceeds their expectations. To achieve sustainable success regardless of what lies ahead, build value into your dealership’s processes at every step. This starts with with proactive, personalized outreach that supports a personalized sales or service experience and long-term customer loyalty.

While historic profits have some dealers considering if they should pump the brakes on their marketing efforts, declining consumer sentiment, diminished customer loyalty and ongoing inventory shortages are emphasizing why dealers can’t afford to lose communication with their audience. To achieve sustainable success in 2022 and continue breaking records in the years ahead, dealers need to maintain consistent, personalized engagement with their customers.

automotiveMastermind (aM), part of S&P Global Mobility and a provider of predictive analytics and marketing automation solutions for dealerships, has announced three new enhancements to its service-to-sales offerings through its flagship automated sales and marketing platform, Mastermind. 

The Mastermind enhancements support the entire dealership service-to-sales ecosystem – including bringing new customers into the door, activating service-to-sales opportunities and maintaining customer loyalty. 

The enhancements include the following: 

Service-to-Sales Generator 

Building on the platform’s ability to automatically identify and activate service-to-sales leads within a dealer’s existing customer portfolio, Mastermind’s new Service-to-Sales Generator fuels these efforts by reaching new customers and marketing to them. By targeting and engaging in-market conquest prospects that are also high-intent service customers, the expansion enables dealers to grow loyalty within their marketing area by nurturing immediate and future service-to-sales opportunities. 

Utilizing a custom, dual in-market audience, Mastermind will target consumers within a dealer’s Area of Influence who are: 

• Current owners of the dealer’s brand 
• In-market for a new vehicle 
• Have a Behavior Prediction Score® of 50-100 
• Are a net-new customer to the dealership 

Dealertrack DMS Integration 

aM is now part of the Dealertrack DMS integration partner program to bring real-time service arrival notifications into Mastermind, centralizing the dealership workflow by providing insight into which customers are visiting the service drive so they can meet customers in the drive with speed, strengthen relationships and increase service-to-sales opportunities. 

The Dealertrack DMS integration will allow Mastermind to serve as a “one-stop shop” for customer information by removing disconnected workflows from a dealership’s sales team. In addition to notifying salespeople at the store when there are upcoming appointments, Mastermind will inform users whenever a loyalty customer enters their service drive through real-time in-platform and email notifications. 

Expansion of Recall Data 

Dealers can now use Mastermind to see which customers within their loyalty portfolio may have open recalls. With these insights, dealers are empowered to build relationships with existing customers to drive a key touchpoint that fuels immediate and future sales opportunities and promotes customer retention.  

“These new service-to-sales enhancements showcase automotiveMastermind’s continued commitment to helping dealers navigate ongoing inventory shortages by maximizing revenue opportunities in the service drive,” said automotiveMastermind Vice President of Product Aaron Baldwin. “We recognize the service drive’s growing value to generating revenue and future sales. With these enhancements, we will continue supporting our dealers’ service marketing efforts at every step of the customer journey, generating critical revenue, supporting immediate and future sales and helping promote customer loyalty.”

Effective dealership marketing in today’s increasingly competitive and rapidly evolving market means more than putting your name on a billboard or blanketing your market with spray-and-pray offers. To stay ahead of both local competitors and online-only retailers in the consumer-first era, dealers need to leverage a data-driven approach to engage prospective sales leads. 

However, many dealerships overly spend on broad or ineffective marketing strategies rather than spending time leveraging and optimizing their greatest asset: their own dealership data. 

Instead of sending mass emails to every name in their CRM, forward-thinking dealerships are taking a data-driven approach, reaching prospective customers who are actually interested in hearing from them with messaging that reflects their exact needs. 

In this blog post, we outline the principles of data-driven dealership marketing process, including the three P’s of high performing dealership marketing:

- Permission

- Proactivity 

- Personalization

•  

•  

• #1 Permission

First and foremost, effective dealership marketing begins with ensuring you’re reaching prospective customers who want to hear from you – and you have permission to contact them. Amid new data privacy laws and the growing threat of cybercrimes, protecting your dealership and customers from potential loss needs to be every dealership’s number one priority when handling any sort of customer data. 

Outside of ensuring your dealership is meeting federal or state regulations, ensure your team is following best practices when it comes to handling and maintaining your first-party data, such as the information in your dealership CRM and DMS. 

While it may seem tedious, this starts with ensuring everyone in your dealership has a clear understanding of your dealership’s privacy policy. Every member of your team who handles customer data needs to have a clear understanding of the types of data they’re collecting, as well as how the data is stored and protected.  

This commitment to security and privacy needs to extend to any of your dealership’s outside partners, as well. When vetting software vendors or third-party data providers and technology, only look for partners who demonstrate a clear commitment to data privacy and maintain strict security standards.

#2 Proactivity

The best way to capture sales before your competition is to reorganize your team into a proactive sales powerhouse capable of identifying and engaging customers before they return to market. 

To analyze the full spectrum of factors influencing a prospect’s decision to buy, dealers need to look beyond standalone equity mining tools in exchange for comprehensive dealership data mining technology. These tools layer the data saved in your dealership’s CRM and DMS with additional insights like financial records and household demographic information to paint a clearer picture of your audience and potential sales opportunities. 

When powered by predictive analytics, these tools go one step further, automatically sifting through your dealership’s databases to identify your best possible sales leads and the unique factors driving their decision. This empowers your dealership’s sales team to maximize the efficiency and efficacy of their efforts – and stay a step ahead of the competition – by automatically scoring and prioritizing your best prospects preparing to return to market.   

#3 Personalization

Finally, after identifying which sales prospects to nurture and when to engage them, the last principle of dealership marketing dealers must follow is ensuring their marketing messages inspire prospects to act by tailoring and personalizing their approach. 

Ultimately, this data-driven approach to dealership marketing benefits both your staff and your customers by empowering your team to confidently speak to the needs of your audience. According to a recent study, brands who offered a personalized customer experience increased customer satisfaction rates by 20%, sales conversion rates by 10-15% and employee engagement by 20-30%.  

However, true personalization means more than pasting their first and last name at the top of your email templates. High-performing dealership marketing campaigns typically include targeted, actionable offers and strong F&I components that account for household financial data, estimate trade values and more.  

This focus on personalization needs to extend beyond that first customer touchpoint. Ensure each marketing message builds on the last, meeting prospective customers where they are in their buyer journey and keeping them engaged throughout the entire purchasing process. Finally, build trust with buyers. In a recent industry study, 91% of car buyers said “trust” was important to them when deciding which dealership to purchase from. Look for opportunities to build trust with buyers based on their needs, such as marketing F&I products like extended warranties and wrap coverage, or even assistance raising their credit score 

Faced with fewer opportunities to engage prospective buyers, increased competition from both local and online-only retailers and diminished customer loyalty, it’s critical dealers engage the right prospects with the right messaging. This comes down to maintaining three key principles. ensuring every marketing message is permissible, proactive and personalized.

Amid countless external factors driving ongoing automotive chip shortages, which the shortages forecasted to impact new vehicle supply into 2022, dealers are forced to adapt to evolving inventory challenges to secure both their immediate and future success.

Fortunately, despite these external factors, there are numerous inventory opportunities well within auto dealers’ grasps – if they know where to look. 

In this blog post, we’ll outline 3 emerging opportunities for auto dealers amid chip shortages including: 

• - Historic demand for new vehicles

•  

• - High pre-owned vehicle prices

- Better overall margins

High Customer Demand For New Vehicles

As chip shortages drive down new vehicle inventories, the U.S. economy is entering a state of recovery, with customers returning to market and ready to buy. According to IHS Markit, U.S. new retail light vehicle registrations reached a 10-year high of 1.64 million in March 2021.    

This increase in demand has been further intensified by mounting concerns over vehicle availability, ultimately driving high new vehicle prices even higher. According to industry reports, new vehicle prices in April 2021 increased by 2.2% year-over-year, or $864, bringing the estimated average transaction price to more than $40,000. For dealers facing tight new vehicle inventories or otherwise unable to stock in-demand or desirable units, capitalizing on customer demand requires a strategic approach. 

For example, if you can stock some new vehicles, but not necessarily popular units, you may need to be more aggressive with trade-in values or pricing on less desirable models. Look for inventory opportunities to upgrade previous pre-owned buyers into new models, starting with customers driving in-demand pre-owned models. By acquiring these in-demand trades for a future pre-owned sale, dealers are better positioned to price their new vehicle inventory to sell. 

Higher Pre-Owned Prices

Chip shortages haven’t solely impacted new vehicle prices. Scarce new vehicle availability has prompted some previous new buyers to consider pre-owned options, pushing already high pre-owned prices even higher. 

Auction prices have followed suit. By mid-May, a 4.5% month-over-month increase of wholesale used vehicle prices translated to a 48% year-over-year increase in used vehicle values according to Manheim. This pre-owned inventory trend has spurred some dealers to hold and merchandise older trade-ins instead of sending them to auction, as well as to take a proactive approach to acquiring in-demand trades. 

For many dealers, the service drive serves as a critical role in the dealership inventory acquisition process, serving as a sustainable source of potential pre-owned acquisitions driven by customers you already know. Leveraging dealership marketing tools that integrate with a dealership’s CRM, DMS and service data, some dealers are taking a proactive approach to mining their upcoming service appointments for profitable pre-owned vehicle acquisitions. 

When identifying prospective trade opportunities, look for key indicators such as customers who are out of warranty, over their lease mileage or could benefit from a new product design or a payment decrease to engage prospects before they re-enter the market – and start shopping around. 

Higher Profit Margins

Despite both new and pre-owned vehicle prices climbing, equally high customer demand means fewer shoppers haggling inside the showroom. A recent industry study found 40% of buyers would be willing to pay up to $5,000 above sticker price for a new vehicle. 

For dealers who can meet these customer demands, profitability is soaring. Of course, the first step to engaging these buyers is ensuring you have the vehicle on-hand they’re interested in. Instead of struggling to find the right match for a customer on the lot, proactive dealers are taking the opposite approach, mapping their available inventory to prospective buyers predicted to be interested in them. 

This not only empowers dealers to maximize their available inventory, quicken their turn and maximize their ROI through hypertargeting marketing efforts. Dealers who have taken a similar approach using Market EyeQ report a cost-per-sale of $115 on average – significantly lower than the industry average of $624. 

While 2021 chip shortages have challenged dealers to adapt to ongoing changes driven by forces outside of their control, numerous opportunities are still available – and well within a dealer’s grasp. But to turn these inventory challenges into opportunities, dealers need to stay a step ahead, starting with taking a data-driven approach. 

While loyalty customers have long been critical to dealership success, the segment has grown in importance in 2021. 

According to a recent IHS Markit report, “During the past several years loyalty has emerged as one of the most watched metrics in the US new vehicle industry, along with market share and profitability.” 

Now amid inventory shortages and historically high vehicle prices, nurturing and protecting dealership loyalty customers against competitor’s conquest attempts has become key – critical to both immediate and long-term success.    

In this blog post, we’ll explore three key reasons why dealers need to focus on their loyalty audience in 2021 including: 

• - Securing success in the short term

- Building even more customer loyalty 

• - Supporting future dealership loyalty sales efforts 

Supporting Short-Term Success 

While ongoing inventory challenges spurred by global chip shortages may make stocking your dealership with the right vehicles seem like an impossible task, mapping the vehicles already available in your inventory to the buyers predicted to be interested in them has never been easier. 

According to a recent report from IHS Markit covering automotive customer retention statistics a third of all US new vehicle registrations in 2020 were for loyalty households. Focusing your immediate efforts on tapping into your most loyal customers is a fantastic way to start leveraging loyalty to increase your sales numbers in the short term – and this dealership loyalty strategy isn’t just limited to brand. 

While brand loyalty, the percentage of return-to-market households that acquire the same brand again, is typically the most cited loyalty metric, IHS Markit registration data details loyalty at various other levels ranging from manufacturer loyalty to loyalty for import vs. domestic brands. For example, mainstream compact CUV buyers led in segment loyalty in 2020 at 52%, while SUVs led in body style loyalty at 71%.

By leveraging behavior prediction technology to analyze customer insights from their CRM and DMS, as well as inventory data, dealers can account for the wide variety of factors beyond brand loyalty influencing a buyer’s purchasing decisions to map their available inventory to the best prospective buyers.   

This loyalty sales process empowers dealers to meet their short-term sales goals by maximizing their available inventory – all while protecting against competitor’s conquest efforts by reaching buyers before they start shopping around. 

Loyalty Builds Loyalty

Not only will tapping into your loyal customer base support your immediate sales goals, focusing on this already critical segment only increases its value. To put it simply, loyalty builds loyalty. 

According to IHS Markit, a loyal household becomes more loyal with its next acquisition, and the growth continues after that. For example, in 2020, older super loyalists, or those who acquired their three most recent acquisitions from the same make, generated an incredibly high loyalty rate of 90%, while young nomad buyers generated a 73% loyalty rate. 

Understanding these subsets is critical to dealers identifying which of their loyalty customers present the greatest sales opportunities and which are most at risk to be conquested by a competitor. This becomes increasingly important as lack of available inventory pushes some customers to begin shopping elsewhere. 

With tools powered by behavior prediction technology, dealers can reach loyalty customers at key relationship building touchpoints, like with conveniently timed and personalized service notifications.  

By further leveraging their unique access to information on their customers’ existing vehicles and buying behaviors, proactive dealers can take this one step further and identify when customers are preparing to re-enter the market to engage buyers before they’ve had the chance to defect with messaging designed to retain their business, such as extended lease offers.

By taking a similar approach using Market EyeQ’s intelligent behavior prediction modeling, our dealer partners increase retention sales up to 15%.

Loyalty Customers Supply Future Sales

Finally, dealership loyalty customers represent a critical source of future sales regardless of what lies ahead. 

Long before the pandemic, total new vehicle registrations declined year-over-year in both 2019 and 2020. At the same time, rapid digitalization has only increased competition between dealers. To succeed despite growing and evolving challenges, its critical dealers take a proactive approach to dealership customer retention

Remember: Loyalty customers increase in value and commitment over time. Just as it’s critical to think ahead and protect this segment against the competition through consistent communication, dealers need to ensure they’re not jeopardizing a long-term customer relationship with a short-sighted approach. 

Loyalty customers are an invaluable supply of high ROI sales, less likely to negotiate and more likely to generate service and other fixed-ops revenues, as well as contribute to referral business. Among inventory shortages and other uncertainties, focusing on dealership customer loyalty equates to a steady supply of highly profitable sales now – and in the future. 

As disruptions ranging from rapid digitalization to widespread inventory shortages shake the automotive industry, success for auto dealers continues to be defined by how well teams can adapt and embrace change. 

It’s not just how consumers are researching and buying vehicles that’s evolving – they’re increasingly opting for remote and digital purchasing options. What consumers are shopping for is also changing, fueled by factors including changes to consumer finances, government regulations and shifting product mixes from OEMs.  

To navigate today’s changing automotive retail landscape and adapt to changing car buying behaviors, proactive dealers are turning to data to look ahead and plan their next steps to understand what influences car buying decisions. 

In this blog post, we identify three current market trends affecting car buying behavior in 2021 that are critical for dealers to consider while planning ahead, including:  

• - Increased demand for mid-size vehicles

- Growing interest in EVs 

• - Benefits of captive loan penetration 

•  

• Increased Demand for Mid-size Vehicle Models

While sedan sales in the U.S. have been slowing for a number of years, American’s shift to mid-size vehicles reached a new milestone in 2021. For the first time in recent years, mid-size vehicles captured more share of registrations in January than compact vehicles, according to research from IHS Markit.  

This movement away from sedans and compact vehicles is in part fueled by an ongoing shift in consumer preferences toward sport utility vehicles. In the same report, IHS Markit noted that in January 2021, mid-size utility vehicles were 60% of mid-size vehicle registrations, up from 56% a year earlier. 

This consumer car buying trend  is even more evident in the luxury space, where SUVs represent 64% of the total segment according to earlier research from IHS Markit. Combined with sedans, with a share of 27%, these two styles account for 91% of all new luxury vehicle deliveries. 

With consumer demand high and new vehicle inventories still strained, it’s critical dealers take a data-driven approach to inventory management. By leveraging predictive marketing technology, dealers can identify localized car buying trends and areas of demand to both turn their new inventory faster and acquire in-demand pre-owned models in the process. This includes identifying which makes and models have consistently sold well in the past, as well as which customers in your portfolio are most likely interested in the vehicles you currently have on your lot. 

New Interest in EVs

Like SUVs, growing consumer interest in electric vehicles spurred by seemingly endless factors has been well documented in recent years. However, IHS Markit reported consumer adoption reaching new heights in 2020 as EV loyalty climbed to 55%, increasing from only 34% five years ago.

This growth is expected to continue, with U.S. sales of EVs expected to exceed a 3.5% overall market share in 2021 and climb to a more than 10% share in 2025, according to IHS Markit. On a global scale, IHS Markit forecasts EV sales to grow by 70% in 2021.

From sales to service work, dealerships will be critical to electrification on a mass scale, explains NADA President and CEO Mike Stanton. “There’s 17,000 franchised dealers waiting to sell electric vehicles, excited to sell electric vehicles,” says Stanton in a recent video dispelling the myths surrounding dealerships and EV sales. 

In an earlier blog post, Stanton notes dealers’ attitudes toward selling and servicing EVs has changed considerably in recent years, using Cadillac as a real-world example of dealerships embracing change. Dealerships will be critical to widespread electrification explains Stanton, offering “a large, expansive network of retailers and service providers who are experts at marketing locally, and who are invested in the future sales and service opportunities that these products promise.”

Greater Captive Loan Penetration Offers New Opportunities

As the industry continues to recover, many OEMs and dealers remain focused on maintaining customer loyalty as buyers return to market. Loyalty is playing a larger role at the brand-level, explains IHS Markit. And despite the pandemic, loyalty rates remained relatively high in 2020. 

This may have been, in part, driven by attractive OEM incentives, namely low and no-interest loans with extended terms and payment deferrals offered by many automakers at the peak of the pandemic. As a direct result of these incentives, new vehicle purchases via captive loans spiked. While the captive share of financed new vehicle registrations has continually increased over the past few years, captive loans represented 51% of new vehicle registrations that were financed in 2020, according to IHS Markit. 

With captive loans facilitating about 90% of leases in 2020, these buyers represent numerous opportunities for brands and dealers alike. By facilitating leases, captive customers will naturally return to market faster, with lease terms about half of that of an auto loan. Further, IHS Markit research finds lessees are typically more loyal to brands when they do return to market, providing dealers both continuous sales opportunities, as well as a sustainable source of CPO vehicles from those coming off-lease. 

As many of these OEM programs have faded away, it’s now up to dealers to ensure they can identify and engage customers who are preparing to return to market with attractive financing offers tailored to their unique purchasing situation. This starts with your very first customer touchpoint, underscoring the importance of data-driven dealership marketing technology. 

Ensure your sales and marketing teams can identify which customers in your database will likely return to market soon, as well as detail any financial considerations that may dictate their purchase. Your marketing messaging should speak to these pain points and build on that customer’s brand loyalty, exchanging bait-and-switch deals for personalized and transparent offers including any available OEM CPO programs, automotive financing terms or other special offers.

If 2020 taught us anything, it’s that while we certainly can’t predict the future, planning for your dealership’s success in the future requires you to look at the past. By understanding the car buying trends shaping customer buying behaviors in 2021 and beyond, dealers are empowered to identify areas of opportunity in their market – even in the uncharted territory ahead.   

Dealerships of all kinds and sizes are undoubtedly familiar with metrics and dashboards. Whether it’s your CRM, DMS or sales platform, a good portion of your day is already spent on reviewing dealership performance reports and information. But is the data you’re reviewing relevant to the decisions you’re making every day? Is the right data being tracked in your systems to provide useful and actionable advice, or are you simply checking to see if a deal closed and moving on?  

Marketers across every industry, including OEMs, are increasingly looking at metrics like loyalty rates to drive future success. However, all too often the only figures that dealership leaders and staff use in a dealership performance analysis are auto sales targets and conversion rates.

What if your dashboard didn’t just tell you where you’ve been and where you need to go? What if it helped you understand how to get there and where to start? In this post, we share four tips for taking your dealership reporting to the next level, including: 

• - Understanding your dealership’s sales

- Identifying service drive opportunities

• - Maximizing your dealership’s existing customer portfolio 

• - Improving your staff’s individual performance 

Understanding Your Dealership’s Sales

It’s easy for dealership leaders to get so focused on hitting sales targets that they fail to pay attention to other critical performance metrics that have a real impact on their bottom line. Your dealership is much more than just sales, so for the most comprehensive and useful reporting it’s critical to ensure your reporting dashboards integrate with data from your CRM, DMS and sales platform.

Integrating data from your dealership’s tools (as well as factors like cost accounting, labor cost, inventory, pricing and more) ensures your reporting isn’t artificially siloed into “sales and marketing” and “everything else,” providing more comprehensive insights and critical context when assessing your dealership’s performance. 

Some examples of these comprehensive sales metrics include per-sale profit and marketing ROI, both of which get to the heart of making your dealership’s operations great not just at selling cars, but at doing so profitably. These metrics also demonstrate the value of integrating your DMS into your sales platform, as your dashboard will need data from both to generate these insights.

Identifying Service Drive Opportunities

These kinds of metrics are not just critical for measuring your dealership’s sales performance. As proactive dealerships increasingly look to their service drive to engage potential buyers and acquire in-demand trades, it’s critical dealers track how their service drive is contributing to their bottom line. 

A reliably profitable and high-ROI service-not-sold conquest operation is crucial to running a profitable service drive in today’s automotive marketplace. Insight into those factors helps both sales and service leadership manage their operations accordingly. Ensure your dealership reporting tracks metrics like service-not-sold leads generated in your drive, as well as the profitability of these sales.

When assessing their process for working the service drive, it’s critical dealers analyze broader factors like the average size of repair orders, year-over-year sales and customer loyalty and service conquest marketing ROI to guide their approach with greater context.    

Maximizing Your Dealership’s Existing Customer Portfolio 

Amid evolving inventory challenges, dealerships around the country are increasingly finding value in taking a data-driven approach to maximizing their existing customer portfolio. The expanse of data and the reports generated by the advanced marketing tools allow your team to make countless decisions about keeping or wholesaling vehicles based on the wants and needs of your customers in real-time. 

To build a more profitable pre-owned inventory, ensure your team is tracking localized trends and demands, including the makes and models that have sold consistently well over the last 30-90 days – and which vehicles have sat on your lot the longest.

This approach not only empowers dealers to make more profitable pre-owned acquisitions, it also enables dealers to maximize their most valuable asset: their loyalty customers. Mastermind data finds customers who serviced with a dealer were just over 2.5x more likely to purchase their subsequent vehicle from the same retailer. 

Customers who remain loyal always yield the highest-profit sales, and keeping customers coming back for multiple vehicles and regular service means also ensuring they don’t end up as conquest customers for your rival. Ensure your car dealership’s reporting includes metrics related to retention, gross and net revenues to help identify opportunities to improve loyalty and project what even small improvements could mean to your bottom line. 

Improving Sales Staff Individual Performance

Beyond assessing your team performance, it’s critical dealers report on and review individual salesperson numbers. Are they hitting their sales targets? Are they great at loyalty relationships but have challenges closing new customers? What’s working for them, and what isn’t?

Beyond just answering these questions, powerful reporting tools help you understand why salespeople are or are not hitting their sales targets and where there are opportunities for improvement and growth. 

For example, one key feature Market EyeQ includes in the salesperson evaluation process is a user-by-user analysis of how each of your salespeople is using the data and analysis tools of Market EyeQ, including how well each is tracking to the Behavior Prediction Score®, whether on their own or compared to the rest of your sales team. 

This enables you to both see how an employee is performing compared to their team, as well as whether they’re effectively using the auto dealer solutions you’ve invested in. When combined with reporting tools that break out Market EyeQ-driven sales and profitability, the result is a comprehensive set of insights that make you a more effective manager of your critical sales functions.

Making data-driven decisions inside the dealership requires more than tracking conversions and noting success in sales. Leveraging comprehensive reporting dashboards fueled by data from across your dealership and informed by best practices can take your dealership performance analysis past simply looking at what has already happened to a forward-looking view of what’s going to happen.

With the automotive industry rapidly recovering while simultaneously evolving to changing consumer buying habits, a once-niche segment has become more top-of-mind for OEMs: electric vehicles

Growing commitment from the federal government to tackle climate change has led to EVs dominating the headlines in recent months. At the same time, electric vehicle sales reached record levels in 2020 according to IHS Markit, more than tripling the segment’s retail share in three years. 

But with electric vehicle registrations only representing about 1.8% market share in 2020, some auto dealerships are still hesitant to embrace an all-electric future, with their hesitance perpetuated by past negative experiences or long-held misconceptions about the future of electric vehicles. 

In this blog post, we’ll examine the facts surrounding future dealership opportunities related to electric vehicle sales to debunk three common myths, including:

• - A fully electric future is far off 

- Electric vehicles aren’t popular enough with consumers

• - Dealerships can’t sell electric vehicles

Myth #1: A Fully Electric Future is Far Off 

While previous forecasts related to future electric vehicle sales failed to meet expectations, improved infrastructure, new government mandates and a continued increase in consumer demand has reaccelerated OEM investment in EVs. According to forecasts from IHS Markit, nearly 25% of all light passenger vehicles produced will be plug-in capable by 2030.

IHS Markit also finds: “The automotive industry is on the verge of a ‘step change’; a personal transportation evolution the likes of which has not been seen since internal combustion engines replaced the horse and buggy.” 

Between now and 2025, more than 100 new EV options are expected to be introduced, coinciding with recent OEM investment in electrification to reach carbon neutrality. 

In January 2021, automotive giant General Motors announced their intention to go all electric by 2035. Volvo unveiled plans to produce and sell only electric vehicles by 2030, following Jaguar’s commitment to go all-electric by 2025. These announcements come as pressure from politicians mounts against President Joe Biden to set a firm date to phase out internal combustion engines by 2035. 

Myth #2: Electric Vehicles Aren’t Popular Enough With Consumers

The success of electric vehicles isn’t purely tied to government mandates – consumer adoption of EVs also reached new heights in 2020. 

But not every dealership saw a surge in electric vehicle sales last year. According to data from IHS Markit, EV adoption in 2020 was largely led by DMAs on the west and northeast coast. San Francisco for example, saw EVs grow to 11% market share in 2020, while Chicago led the Midwest region at 1.5%. 

Overall, U.S. sales of EVs are set to exceed a 3.5% overall market share in 2021 and climb to a more than 10% share in 2025, according to IHS Markit. Globally, IHS Markit forecasts EV sales to grow by 70% in 2021. Repeat buyers will be critical to this growth.  

While historically most industry conversations have focused on market share, OEMs are paying closer attention to automotive loyalty to provide insight on consumer behavior. In 2020, EVs achieved record high loyalty rates, with IHS Markit loyalty data finding more than half of EV households that return to the new vehicle market acquire another. These record high loyalty rates demonstrate both substantial segment growth and increasing consumer acceptance. 

Myth #3: Dealerships Can’t and Won’t Sell Electric Vehicles

There was once a time that electric vehicles were somewhat of a novelty. They were slow to charge, had a ridiculously short range and worst of all, they were nearly impossible to sell – used or new. Since then, a number of major changes have taken place, including expanding EV infrastructure.  

Some complaints still persist from dealers and consumers alike. On the buyer front, research from Daimler finds most negative EV opinions stem from a lack of information. Unsurprisingly, the less people knew about electric cars, the more they disliked them.

Not only can dealerships sell electric vehicles – they want to. In a recent blog post, the President and CEO of NADA, Mike Stanton, challenges the myth that franchised dealers are unwilling to sell EVs, citing Cadillac as a real-world example of changes implemented by automakers to shift dealers’ perception of EV sales.  

In 2020, Cadillac announced new requirements for dealers who plan to sell vehicles beyond 2022, requiring dealerships to go all-in on the brand’s electric future and invest $200,000 on needed equipment, training and tooling – or take a buyout.  

In the end, 80% of Cadillac dealers agreed to work toward selling EVs exclusively, while the 20% who accepted buyouts did so widely due to years of negatively trending sales in their market or other economic considerations – not the electric mandate. 

“And so, in one fell swoop, America’s Cadillac dealers completely debunked the myth that franchised dealers don’t want to sell and service electric vehicles,” writes Stanton. “Because if this myth were even remotely true, virtually every Cadillac dealer out there would have gladly taken the buyout, and done so in a heartbeat.” 

Following years of infrastructure updates, technological advancements and consumer education campaigns by OEMs, car buyers are increasingly embracing the future of electric vehicles, offering invaluable opportunities to dealers who can attract and retain their business long into the future.