3 Emerging Dealership Challenges & How Dealers are Overcoming Them

July 15, 2021 John Kehm

As if 2020 didn’t throw enough car dealership challenges at dealers, 2021 has offered more than its fair share of industry challenges. Aside from inventory shortages impacting a vast majority of brands, dealerships from coast to coast are strategizing on to overcome new and ongoing challenges alike.  

From navigating evolving consumer demands to maximizing their pre-owned acquisition process, proactive dealers are continuously thinking ahead to come up with new ways to achieve sustainable success despite ongoing obstacles. 

In this blog post, we’ll cover three key, emerging challenges for dealerships in 2021 – and how dealers are overcoming them – including: 

  • Diminished loyalty 
  • Pre-owned acquisitions
  • Increased competition 

Challenge #1: Dealer loyalty has diminished 

Brand, manufacturer and dealer loyalty rates have historically followed the same trajectory, but this trend has increasingly diminished. In the last 5 years, manufacturer and brand loyalty dipped .2% while dealer loyalty has fallen 1.6%, according to IHS Markit.  At the same time, ongoing inventory shortages and expanded online retailing options increasingly tempt vehicle buyers to shop around, further threatening buyer loyalty. 

With loyalty customers typically representing the highest ROI sales and trades, keeping a buyer engaged beyond their initial sale and first or second service appointment is critical to dealer success. 

Amid inventory shortages and aggressive conquest efforts by competitors, proactive dealers are taking a data-driven approach to engaging and retaining their audience. For example, by identifying and engaging loyal customers before they enter the sales cycle, dealerships like  Lexus of San Diego are proactively retaining customers before they’ve had a chance to defect. 

By connecting with customers at the appropriate time with personalized messaging like appealing upgrades or trade-in offers, General Manager Frank Pierce explains how his team achieved an impressive 19.5% increase in loyalty in just a few months.
  

Challenge #2: Pre-owned acquisitions

The combination of ongoing inventory shortages and increased consumer demand as the economy recovers has resulted in historically high new and pre-owned prices, with the Manheim Used Vehicle Value Index for June 2021 up 34.3% year-over-year. As auction values rise alongside transaction prices, dealers are challenged to find new ways to profitably acquire in-demand pre-owned models. 

With vehicle values at an all-time high, some dealers are leveraging dealership marketing tools that integrate with their CRM, DMS and service data to pass that value onto their customer base, supporting both acquisition and retention efforts. 

Using these insights and tapping into the factors motivating each prospect’s purchasing decisions, dealers are empowered to identify trade and buy-back opportunities that mutually benefit their customers. For example, amid inventory shortages, Fred Haas Toyota leveraged Mastermind to identify customers with negative equity or a higher-than-ideal interest rate on in-demand models. 

Combined with aggressive OEM incentives and personalized offers, Jim Wilkinson, Sales Director at Fred Haas Toyota, and his team proactively built goodwill with their customers –  while simultaneously building their homegrown certified pre-owned inventory. 


Challenge #3: Increased competition

Despite shutdowns and numerous other problems facing car dealers, consumer retail sales declined by only 9% year-over year in 2020, according to NADA. In turn, many dealers entered 2021 on a relatively high note with strong sales felt through the end of Q2. 

But amid softening sales headed into the second half of the year and new online-only retailers challenging traditional brick-and-mortar dealers, the competition to engage and retain customers is fiercer than ever.   

With many dealers still struggling to “do more with less,” finding an efficient way to stay ahead of customers and the competition often starts in the service drive. In fact, Mastermind data finds customers who serviced with a dealer are 2.5x more likely to purchase their subsequent vehicle from the same retailer.  

Maximizing this opportunity, some proactive dealers have appointed dedicated service-to-sales liaisons or small teams within their BDC to mine their upcoming service appointments for prospective sales leads. 

Leveraging marketing tools that integrate with a dealer’s CRM and DMS, these liaisons can identify and engage service customers preparing to re-enter their buying journey, rather than waiting and hoping that same customer comes to the dealership for their purchase after their regular service appointments.

Dealers like Suburban Cadillac of Troy took a similar approach to capitalizing on their strong service drive to conquest customers who purchased elsewhere. Using Mastermind and generating a large amount of ROs every month, the dealership fueled their sales team with strong service leads primed to be engaged with personalized marketing campaigns. As a result, the dealership achieved 12 months of year-over-year record sales after partnering with Mastermind. 

While 2021 has presented a mixed bag of challenges and opportunities for dealerships, ranging from diminished loyalty and inventory shortages to new and increased competition, future success isn’t out of a dealer’s control. By taking a data-driven approach to sales, marketing and acquisition efforts, dealers are empowered to overcome emerging challenges and succeed no matter what lies ahead. 
 

 

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