• Customer loyalty increases with new customer transition to and retention at service
• Data-mining appointment, show and close rates exceed those of traditional sales channels
• Used vehicle sales cycles shorter, more profitable • Confirmation processes improve show rates
• Sales originating through digital channels are drastically less costly, provide better margins

DealerSocket, the automotive retail industry’s leading fully integrated technology platform, released today its Dealership Action Report (DAR) to the more than 700 attendees at the company’s annual User Summit in San Diego. Rooted in data from more than 6,500 dealerships, the largest market share in the industry, the insights of the inaugural DAR underscore the importance of formal, technology-driven processes to thrive and increase profitability during periods of slowed sales growth*.

“The insights highlighted in the DAR will guide dealers to better ways of selling, servicing and retaining customers during periods of heightened competition as year-over-year unit sales growth wanes,” said Marylou Hastert, director of product marketing, DealerSocket. “With the same number of dealers fighting for fewer sales, it’s critical that dealerships focus on high-impact, data-driven processes to improve their margins.”

DAR-informed approaches for effectively responding to these market realities, according to DealerSocket, include using technology to develop current customers into loyal, profitable service customers; engage new customers before competitors have the chance to; align operational focus on remarketing as a profit center; confirm appointments; and better nurture digital leads. The DAR defines the following steps to guide dealerships to improved processes and profit margins.

Develop loyal, profitable service customers

The ideal customer lifecycle at a dealership includes the new car purchase, providing maintenance on that vehicle at the service drive and, finally, a vehicle trade-in. According to the DealerSocket DAR, converting new car sales customers into loyal service customers should be an area of focus as the average duration of ownership continues to increase due to longer vehicle lifecycles and warranty terms, and better parts. Despite the report showing 53 percent of the average dealership’s gross profit being generated from the service department, only 30 percent of sold customers bring their car in for service within the first year of ownership; that number plummets to 13 percent after three years and to two percent after five years.

“Dealers must establish the value of their store’s service department early to protect their customers from the endless competitive options available to them,” said Hastert. “Third-party repair shops own about 75 percent of the market and are crushing dealerships in the service game.

According to DealerSocket, introducing customers to the service manager and scheduling a first oil change before a customer drives off the lot are effective ways to build a long-lasting, profitable relationship; some top performers offer cash-back bonuses on service purchases that can be applied to the purchase of future vehicles to improve the likelihood of future purchases.

Data shows that integrating the sales process within the service drive at these dealerships nearly doubles the customer loyalty and retention rate – achieving 44 percent, compared to the 20 percent of a dealer’s business usually attributed to repeat customers

Engage customers before competitors have a chance to

Before a dealership can develop a loyal, profitable service customer, however, it must first close the sale. To engage customers before competitors have a chance to, top-performing dealerships use data-mining software to scan customer data and identify early the potential customers in a favorable position to spend money at their stores

Analysis of dealerships using DealerSocket’s RevenueRadar data-mining platform shows that leads identified through this technology are converted to sales nearly 90 percent of the time, and on average, data mining generates 21 additional new vehicle sales per month and more than $424,000 in gross profits per dealership, per year. Additionally, 84 percent of calls made to leads generated through RevenueRadar resulted in an appointment set compared to an average of 25 percent for other lead sources

“Data-mining software is a gem that is really underutilized despite leading dealerships in the industry proving its value,” said Hastert. “Only half of dealerships analyzed for the DAR use data-mining technology and, according to our research, only 17 percent of data-mining leads are contacted. Implementing this type of technology, understanding how to optimize its benefits, and investing resources into educating sellers about how to use it as a fourth lead source will give dealers an edge against the competition.”

Focus on remarketing as a profit center

Also edging out the competition will be those dealers poised to take advantage of anticipated used car inventory for faster selling cycles and larger profits. DealerSocket underscores the importance of aligning now an operational focus on used vehicle acquisition and sales to drive profitability as new-vehicle sales growth declines.

“With more than 100 new or redesigned products hitting the market in 2015, product anticipation will diminish in 2016,“ said Hastert. “The 800,000 lease maturities expected to come back to the market in 2016 will prove a fruitful revenue stream.”

The DAR report shows that the average total gross profit for used cars ($3,091) is 14 percent greater than for new cars ($2,717) across all lead sources. Additionally, data shows that used-car leads take fewer days to close – 44 days for used cars; 56 days for new cars – and generally deliver an ROI between 500 and 700 percent compared to an average ROI for new cars of between 95 and 148 percent.

Confirm Appointments

The DAR also reports that dealerships with appointment-scheduling and confirmation processes improved appointment confirmation show rates by as much as 15 percent over the average dealership; some top performers achieve an appointment show rate as high as 80 percent just by emailing a “boarding pass” to confirm date, time and location – and customers even arrive with the printed pass in hand.

Nurture digital leads

Finally, whether it is a used or new vehicle that ultimately delivers the return when customers enter the shop, dealerships must always keep an eye on getting them in the door — and digital continues to be an impactful lead source. According to the DAR, digital leads generate an additional $812 in average total profit compared to leads acquired through traditional sources. In addition, the report shows that when comparing a dealership’s cost per lead sold, the digital leads cost ten times less than traditional leads – with the cost per digital lead sold $150 compared to the cost of $1,581 per traditional lead sold.

To request a copy of the DealerSocket Dealership Action Report, call (844) 753-8148

About the Dealership Action Report

Representative of DealerSocket’s 6,500 dealership customers and 189,000 users, the Dealership Action Report (DAR) is a resource developed to guide automotive dealership and dealer group professionals to improved, data-driven processes that drive customer retention and profitability. It is composed of key performance data and survey results, and analyzes industry trends, performance benchmarks and metrics, top performing dealers and consumer online shopping behaviors.

About DealerSocket

DealerSocket is a leading automotive technology platform that helps dealerships in the United States, Canada and Australia improve profitability through a fully integrated suite of marketing, sales, service, customer experience DMS and data mining solutions. Headquartered in San Clemente, Calif., DealerSocket employs more than 650 people and serves more than 6,500 dealerships in the United States, Canada and Australia. DealerSocket’s advanced technology provides benchmarking data that paces the industry, and its insightful experts identify trends and develop strategic roadmaps that help dealers optimize processes and operate more profitably. Visit DealerSocket.com for more information.

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