The wild ride for the automotive industry continues as vehicle production slows down and dealer inventory continues to shrink. The demand had already been rising, pushing new vehicle prices to their highest average sale price in months, finally exceeding $40,000 in April and used vehicle prices rising to a staggering 10%—the largest one-month increase since the series began in 1953.

The timing couldn’t be worse. Shoppers with savings and stimulus checks are ready to buy and returning to the lot.  Dealers need to ensure they have a plan to continuously source inventory, as outlined in my previous blog, but beyond the front-end, we’re seeing regular maintenance continue to recover as more drivers are returning to the road. To get through this volatile period, dealers must refocus their marketing efforts on Fixed Ops to boost revenue with a goal of a high or full 100% absorption rate.

Market your Service Department similarly (or better!) than inventory sales

Today’s unique challenges need to be met with fresh ideas. Typically, dealerships allocate most of their budget to push vehicle inventory. But with low inventory and recent projections estimating that this chip shortage will last through 2022, possibly into 2023, it’s time to change course. With fewer opportunities to sell comes more opportunities for service, as those who don’t want to purchase at a higher price wait out this period with their current vehicles.

Start with consistently communicating your dealership’s unique selling proposition (USP). Consumers need to understand why they should work with you and not the competing dealership, independent repair facility, or tire center down the street.  Research offerings from the competition and make sure to differentiate yours—not just cost and coupons.  Refocus messaging and start promoting your unique offerings, such as pickup or delivery options, flexible payment options, easy recall repairs, and more.

Affinitiv clients have successfully leveraged unique and targeted communications that have been proven to drive service lane business, customer satisfaction, and retention.  One of the most effective solutions is Affinitiv’s dynamic, digital communication, which creates a monthly, consumer-centric experience. By engaging the consumer with targeted 1:1 messaging, including service history, current incentives, and even equity positions, this solution has been proven to add an average of $7,000 in additional dealership revenue. OEMs, dealer groups, and dealers alike have seen success leveraging this solution to help grow their business. 

Execute an exceptional customer experience so memorable, it creates rave reviews

It’s no secret: word of mouth is its own form of currency in today’s world, creating or dissuading new and retained business. NADA research shows that with a 70% customer retention level, dealers can expect a 90% or better fixed absorption rate.  Dealers must work to retain the customers they have and work to win back lost customers. Ensure you provide a service lane experience that’s so good, consumers are moved to tell their friends, family, and colleagues about it. As Walmart Founder, Sam Walton, once said, “There is only one boss: the customer.” 

Another way to delight and retain today’s critical consumer is to create a frictionless experience.  Communication is key, and with today’s technology, most communications can be sent digitally to keep all parties informed and happy. Take advantage of services that streamline the overall workflow, like online service scheduling, service reception, communications throughout maintenance, and more.

Once the service visit is complete, encourage consumers to post about their outstanding experience on social platforms and start to cash in on this social currency.

Increase fixed operations revenue

When it comes to inspections, make them worth your while. MPI, Affinitiv’s Multi-Point Inspection tool, provides users with comprehensive inspection reporting including at-a-glance stats for each advisor and technician, monitoring all current MPI statuses at any given time, and filters options by workflow events. Aiding a frictionless, digital experience, MPI offers real-time RO status updates via the app, SMS, and/or email to generate fast approvals for your team and provide a world-class customer experience.

While some may think recalls create a disadvantage, dealers can actually earn more trust with their customers by alerting them to updates that will lengthen the life of their vehicle or create a better ownership experience. Use a service like Open Recalls to stay armed with the latest recall data, so your service advisors can increase ROs and create higher customer satisfaction.

Lastly, by prioritizing efficiency, dealers can operationalize opportunities for revenue. Ensure totally optimized service bays by establishing new KPIs to understand productivity and uncover what needs to improve.  If this method isn’t already in place, connect appropriately skilled technicians with work that matches their skillset. This will totally transform service department operations and ensure customers receive the best experiences, creating more opportunities for return business.

While we can’t totally predict the future, all signs point to a bumpy road ahead. To weather the storm, it is critical for dealers to focus on the areas that will drive revenue now, and do so before the competition does. With the supply levels dropping and a volatile market nearly here, Fixed Operations has the power to keep revenue flowing by driving consumer loyalty and repeat business.

No, you’re not experiencing déjà vu. The microchip shortage the world saw in the second quarter of 2020 has resurfaced to wreak repeat havoc on the automotive industry due to overly conservative demand estimates made early last year. Up against rising demands for phones and gadgets due to Americans’ ongoing social-distancing needs, automakers have been ranked low in the line to receive chips and have been left waiting for supplies.  

While there have been strong signs of recovery on the horizon, including U.S. President Joe Biden recently announcing new plans to help mitigate the shortage, looming new car sales quotas at car dealerships remain. And to add to that, Affinitiv’s March 2021 Industry Trends Guide reported that consumers are increasingly citing a lack of inventory as a reason for not purchasing a vehicle—a 3.2% jump year-over-year. With a long road ahead—and fewer vehicles currently in production—dealers must be laser-focused on strategies to keep up sales momentum while driving long-term service customers.

Start Sourcing the Right Pre-owned Vehicle Inventory  

In early 2020, at the onset of the COVID-19 pandemic, new vehicle production was temporarily paused due to lockdowns and ended up driving more shoppers into the used market. With new vehicle inventory supply levels dropping, pre-owned cars are once again in high demand—and that means rising prices. March 2021 was an incredible month for pre-owned car sales, reaching record-breaking numbers.  

Not only will auto dealers need to start sourcing the right pre-owned vehicle inventory, they’ll also need to ensure they have a pricing plan, reconditioning, transportation, marketing, and disposal in order to turn the most profit. Buying the right cars at the right price without tying up valuable time spent by dealership personnel will be crucial. Trade-in Valet, a powerful appraisal tool that’s coded right into the dealer website, has been proven to generate up to 16x more leads and up to a 4x higher conversion. Backed by guaranteed trade values and a nearly instant valuation by a live appraisal desk, this best-in-class consumer experience helps build trust with the dealer brand while securing more high-demand inventory. Missing trade opportunities can force dealers to source cars at a higher cost, which impacts gross and causes lower income for the staff. By addressing key sourcing issues and with new leads flowing in, the focus can shift back to the consumer.

Implement a Data and Equity Mining Strategy 

Once the inventory becomes available, dealers should start to hyper-focus marketing efforts on the likeliest prospects and in-market shoppers to get the greatest ROI on marketing investments. Beginning with data mining, dealers can leverage their CRM and target owners who are nearing lease expiration, have older model vehicles with costly service bills and are due for an upgrade, and more. Affinitiv XRM offers a superior CRM experience and its streamlined interface makes it easy to locate opportunities while developing a positive relationship with the consumer. From there, the Results-Based Follow-up system ensures consistent contact by engaging customers with automated reminders. Fine-tuning the target audience is key to simultaneously maximize profits and create a better customer experience by eliminating noise and delivering targeted, personalized communications. Dealers need to keep their store top of mind and relevant with consumers more so today than ever before.

To take this to the next level, an equity mining strategy ensures not only finding the prospects at the right time to buy, but the prospects best equipped to make a purchase. Affinitiv Quote has powerful technology dealers can use to locate compelling equity offers based on DMS, Black Book®, Edmunds®, and Affinitiv proprietary data. From there, dealers can launch email quotes to individual customers on demand. These marketing communications with quotes generate a 50-75% increase in response rates—setting dealers up for success without any heavy lifting.

Digitally Advertise Inventory & Tell the Consumer Why They Should Buy from You  

Nearly a year after the COVID-19 pandemic, a Gallup poll revealed that 56% of workers are still working remotely and 23% would prefer to stay remote if given the option. To add to that, a recent study from eMarketer found that the average U.S. adult is spending an average of 3 hours and 43 minutes per day on their mobile devices. With consumers spending more time at home and connected to screens, dealers must prioritize their digital marketing efforts and meet shoppers where they are.

Dynamic Inventory Ads are an easy and effective way to digitally place available inventory right in front of the shoppers who are already looking for it. Using technology that connects the dealer’s inventory feeds right to Facebook and Google, consumers will be shown inventory they’re already looking for alongside similar options. Affinitiv has found that dealers on Facebook’s Automotive Inventory Ads solution see 3x more vehicle sales when a traditional ad budget is reallocated to Inventory Ads. It also helps save dealers time, as there are little to no updates needed to run—these ads automatically pull the latest inventory to ensure advertising is always current and consistent. 

Dealers should also continue to leverage their website—essentially a digital storefront— to tell the consumer who they are, why they should buy here, showcase inventory, and drive dealer loyalty. Website visitors are actively seeking out specific dealerships. Dealers should not disappoint these shoppers and let them leave the site without converting to a lead.  Affinitiv Advertising is not only is a full-service advertising agency with the best breakthrough creative out there, but they also offer technology to identify lost shoppers and give them relevant messaging based on their interests to return to engage with the dealership. 

Make it Easy for the Consumer to Choose Your Dealership 

As the demand for vehicles continues to rise while inventory remains low, the market is going to get competitive. Auto dealers will need to get creative to push compelling and competitive offers. To start, offering competitively low-interest rates would be easy to implement and highly desirable amongst shoppers, as the typical consumer shops by monthly payment. To take this one step further, with stimulus checks and tax refunds in full swing, dealers might consider offering no-fee stimulus or tax refund check cashing as a down payment. Finding a local tax office to partner with may help further build trust and cross-promotional opportunities.

Once offers and promotions are established, proper promotion will be key. In order to be set apart from the competition, implement unique outreach methods that will help your highly competitive messaging be seen by the right shoppers. Handwritten mail—letters with customized offers to the individual consumer—stand out amongst the direct mail postcards as a creative and custom option to put in front of shoppers. Dealers may also consider leveraging a call center for targeted, trackable outreach. Affinitiv has helped dealers drive 2x as many sales appointments as our closest competitors using our Call Center solution, effectively reaching the consumer to deliver these competitive, timely messages.

With so many variables still at play, including plants temporarily shutting down and reducing labor, efficiency at the dealership is going to be one key way to survive this stretch. Streamlining operations and focusing marketing efforts to ensure ad dollars are spent wisely should be a top priority. As the opportunities and outcomes will be different for every dealer, there is one thing that should be consistent across the board—they must continue marketing and keeping a steady cadence of relevant communication to customers and prospects. When the new vehicle inventory replenishes, those consumers will be the first to know.

I would be remiss if I did not mention the importance of driving brand and dealership loyalty. Fixed operations have been instrumental in driving dealer su$$es, during both successful and difficult times. More to come on the importance of owner loyalty and retention in my next blog.