This is a guest post from Brian Finkelmeyer, Senior Director of Business Development of vAuto. He'll be speaking at the 2018 DrivingSales Executive Summit on Winning the Zero Sum Game in New Cars.
Today’s retail new car business is beginning to look more like a game of poker than the actual car business.
In 2016, Automotive News reported that the collective annual sales objectives for every manufacture in the US was 21M, but the actual SAAR was only 17.5M. I once heard the annual sales objective-setting process referred to as “smoking the drapes” inside the corporate office.
I don’t entirely blame the car companies; their job is to impress shareholders by growing market share. They accomplish this by enticing their Dealer body to stretch for higher and higher sales volumes.
The problem is, often these objectives are calculated in a financial fantasy world and not based on the realities of the marketplace.
Over the last five years, New Car Dealers have become increasingly reliant upon manufactures for their financial success. According to NADA this year, 90 percent of the income captured in the Net Adds account on a Dealer’s financial statement is factory bonus money. To win this pot of gold, Dealers have no choice but to literally “go for broke” to achieve their aggressive monthly sales targets.
Polk data highlights that on average, approximately 40 percent of a Dealer’s monthly sales comes from their owner base, which means the other 60 percent is generated with conquest sales.
In my workshop at the DrivingSales Executive Summit, Dealers will learn key conquesting tactics for attracting customers from outside their local market area. A Dealer’s ability to effectively conquest will have a very strong correlation to the number of “Pots and Size of the Pots” they win. This will remain true, as long as the new car game is being played out like the World Series of Poker.