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Old 02-27-2014, 06:34 AM   #1
steve_biegler
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Default A new study by McKinsey

Another study with a firm grasp of the obvious! http://www.autonews.com/article/2014...ckinsey-study#
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Old 03-19-2014, 01:51 PM   #2
XDCX
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I finally had a chance to read the report in Automotive News and found it had almost zero substance. The study apparently concludes that a dealer can increase his/her net profit margin from the NADA Average of 2.2% to 5.0% by upgrading the skills of their employees and using new sales techniques.

While I'm no genius when it comes to automotive retail - I call B.S.

I think you can survey customers and find all sorts of things they'd like their dealer to do to improve their sales/service experience but at the end of the day the customer is still going to shop for the lowest price.

It's like Chrysler's Five Star initiative in the old days - I remember one dealer telling me "The customers love all of the perks from Five Star - they're just not willing to pay for them." His point was a customer would prefer a new facility and a well-trained salesperson but they'd still drive across town to save $100 and buy their car from a dealer with an old facility and a substandard sales staff. What a customer likes and what they're willing to pay for are often two different things.

I do agree that training your employees can benefit the bottom line but I'm not convinced a dealer could double his/her profits in the way the McKinsey study suggests.
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Old 03-30-2014, 07:53 PM   #3
mryan55
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There's something to be said about providing a service that is above and beyond the dealership in the next town over -- but the problem is that the customer will still shop for the absolute lowest price possible... so unless your store is reliant on walk-in customers and you close a huge percentage of those on the first visit, the fancy-pants building really means nothing.

I think we are entering a time where the small market, old building, low overhead stores may have a competitive advantage -- as long as us small market guys take advantage of the opportunity. Yes, it requires selling on price and price alone, delivering cars and signing up deals at places other than the dealership, and for me it has created a huge reliance on my VGP money to show a net profit... but the opportunity is there, even in a small market -- since our prospects are from the Pacific coast to the Atlantic coast.
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Old 03-31-2014, 11:35 AM   #4
XDCX
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Originally Posted by mryan55 View Post
I think we are entering a time where the small market, old building, low overhead stores may have a competitive advantage -- as long as us small market guys take advantage of the opportunity. Yes, it requires selling on price and price alone, delivering cars and signing up deals at places other than the dealership, and for me it has created a huge reliance on my VGP money to show a net profit... but the opportunity is there, even in a small market -- since our prospects are from the Pacific coast to the Atlantic coast.
I totally agree.

As a West Coast guy I saw Dave Smith CJDR use the "small dealer/low overhead" business model to build his empire. For several years the dealership in Kellogg, ID was Chrysler's largest retail dealer. Kellogg, ID has a population of just over 2,100 people.

I also think that new car margins have declined so much that variables like sales tax differentials will influence where people buy their cars. In both Washington and Arizona (the two markets I'm most familiar with) the sales tax rate is calculated on where the car is purchased - not where the customer lives. It's not uncommon for some dealers to have a sales tax rate that is 2% or higher than other dealers in the state.

Two percent on a $30,000 car is $600 bucks and in the eyes of the retail buyer sales tax is like buying a worthless option on a car that experiences 100% depreciation as soon as the car drives off the lot.
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Old 04-03-2014, 05:12 PM   #5
Flybrian
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Default Its all about the $$$$

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I think you can survey customers and find all sorts of things they'd like their dealer to do to improve their sales/service experience but at the end of the day the customer is still going to shop for the lowest price.
How many of you know a guy who has received a letter like this...

"Dear Joe. My wife and I would really like to thank you for your hospitality and professionalism during our visit to Capital Buick. You advised us on our financing options, our trade-in value, and gave us the opportunity to test drive several models back-to-back beyond your working hours and even after your store actually closed! We really appreciate how gracious and diligent you were in answering out questions and were quite impressed about your product knowledge of Buicks! In fact, that's why we're writing you this 'thank you' letter. We took your advise to heart that the LaCrosse was probably the better choice for us over the Regal and - because of the pricing knowledge you shared - we were able to negotiate a great deal on one from Downtown Buick! Thank you again!"
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Old 04-07-2014, 12:41 PM   #6
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How many of you know a guy who has received a letter like this...

"Dear Joe. My wife and I would really like to thank you for your hospitality and professionalism during our visit to Capital Buick. You advised us on our financing options, our trade-in value, and gave us the opportunity to test drive several models back-to-back beyond your working hours and even after your store actually closed! We really appreciate how gracious and diligent you were in answering out questions and were quite impressed about your product knowledge of Buicks! In fact, that's why we're writing you this 'thank you' letter. We took your advise to heart that the LaCrosse was probably the better choice for us over the Regal and - because of the pricing knowledge you shared - we were able to negotiate a great deal on one from Downtown Buick! Thank you again!"
I had a very similar experience when I first started in the car business.

I remember spending a lot of time with a young couple who were looking for their first new car and showing them all of the reasons why the Dodge sedan would better fit their needs than the Ford sedan they were initially planning on purchasing.

When I called to follow-up with my customers I was informed that they bought a Dodge largely based on what they had learned during our test-drive - they just bought their Dodge from another store because they thought they were getting a lower price.

Back to my Dave Smith CJDR story, I think one of the secondary reasons their store became so popular is because they created an aura that smart people made the trip to Kellogg, ID to buy a car. If a person in the Pacific Northwest bought a car at Dave Smith none of their friends/neighbors/family would question the intelligence of that decision - that's important to some customers who don't want to have to defend their decision on where they bought their car.
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