How to Maximize Dealership Profitability With a Homegrown Inventory

October 2, 2020 John Kehm


Faced with tightening margins, low vehicle inventories and a narrowing opportunity to rebound in 2020, auto dealers are looking for additional ways to maximize dealership profitability at every step.

This begs the questions: How many times can you make a profit off a single vehicle in its lifecycle? With excellent dealer inventory management strategies and strong coordination between new and used sales, service, finance and marketing, the same car can generate profits for your dealership repeatedly.

In this post, we share how to maximize dealership profitability by focusing on cultivating your dealership’s homegrown inventory and best practices for generating additional profits at every rase, including:  

  • Original new vehicle sale
  • Vehicle service
  • Acquire the vehicle as trade-in to enable the next new sale
  • Certified pre-owned (CPO) sales and service

Homegrown Profits Start at the First Sale

Dealership profitability through homegrown dealership inventory starts with maximizing ROI on the initial new vehicle sale. With little flexibility to raise prices, this means minimizing costs, with many dealers looking to improve both the efficiency and efficacy of their marketing to make an impact.  Mastermind’s dealer partners set the bar for this, achieving the lowest cost-per-sale in the industry at $115, versus the $624 industry average.

They do this in part by maximizing lead quality through our Behavior Prediction Score®, which empowers dealers to identify prospective buyers before they enter the buying process. From here, our dealer partners are empowered to engage prospects with effective predictive marketing solutions that build off each other to convert high-potential new and pre-owned car buyers faster. The result is 15x ROI over traditional models. 

Service: Maximize Customer Experience, Loyalty and Profitability

The sales cycle doesn’t end after a buyer converts, and neither do opportunities to maximize your dealership’s profitability, especially with your dealership’s inventory strategy. The service drive is a key component of the customer relationship – and excellent service interactions benefit your bottom line beyond solely service revenue. Industry research finds 74% of buyers who have their car serviced by the dealership of purchase are likely to return for their next purchase, versus only 35% of those who have their cars serviced elsewhere.

Delivering an exceptional customer experience in the service drive is critical to defending against competitor’s conquest efforts, as well. Gartner research found truly helpful customer service interactions create an 82% chance a customer will stay with a company when a competitor attempts to conquest them.  

Even if you didn’t sell the car to your service customers, service-not-sold conquest is also an important contributor to homegrown dealership inventory management. For this reason, service notifications are critical, as is informing service customers of changes to their vehicle’s trade-in value and updating them on any attractive trade offers available at their time of service.  

Market EyeQ’s Service Conquest capabilities help automate this process by identifying high-value sales prospects in your service drive and mapping them to relevant offers and available vehicles in your inventory, tailored to their unique wants and needs. As a result, our dealer partners report converting service customers to new car buyers at a 4x higher activation rate than our competitors due to Market EyeQ’s 99.8% VIN match rate.

Acquire as Trade-in and Sell New (or Pre-Owned) Vehicle

More than leads are acquired in the service drive. According to NADA, roughly two-thirds of car dealership inventory on the used vehicle lot comes from trade-ins, with 43% from new car purchases and 22% used. That’s a very clear reminder of the importance of trade-ins to supply a dealer’s pre-owned car inventory, but also their critical role in powering new car sales.

To make the most of both opportunities, your fixed ops and variable sales teams need to work in tandem, working toward collective goals and allowing for a more seamless customer handoff. For this reason, many dealers are unifying their new and used sales teams on a single sales platform as a best practice, improving visibility, coordination and dealership inventory management. 

This approach allows auto dealers to ensure their service drive successfully acquires in-demand trade-in makes, models and trim packages to make your car dealership inventory more profitable. Dealers who leverage Market EyeQ can take this approach even further by automating the process and prioritizing prospects with in-demand and potentially highly profitable trade-ins.

Don’t Sink Your Auto Reconditioning Profits

According to NADA, the average dealer’s reconditioning costs more than doubled between 2009 and 2017, from $288,479 to $635,453. How much of that was a good investment in dealership inventory, and how much of it was chasing sunk costs?

Auto reconditioning decisions in a dealership are critical to profitability. By utilizing the same data-driven tools and processes used to identify profitable service-to-sales leads to analyze insights like a customer’s maintenance and overall vehicle history, dealers can more effectively predict reconditioning costs and prioritize their more valuable opportunities. 

Keep Dealership Profitability High With CPO ROI

Once reconditioned, dealers are tasked with flipping that pre-owned vehicle before it spends too many days on the lot. This is where predictive marketing tools, such as Market EyeQ with its pre-owned functionality, empower dealers to maximize the profitability of their used vehicle sales by identifying the best pre-owned prospects and automatically mapping them to vehicles on your lot. 

This make-model-trim level approach revolutionizes dealership inventory management and allows you to optimize car dealership inventory turnover ratio. 


Want to learn more about how Mastermind can help you maximize your dealership’s profitability by empowering you to cultivate your homegrown inventory process? Contact us for a free demo.


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