Strategy for Strong Auto Sales When Inventory is Low
Hint: Open the back door
Strange times are fueling strange trends. It’s no secret that microchip production issues and ongoing supply chain delays are causing unprecedented shortages in vehicle inventories. As a result, some dealers are having to do the unthinkable: turn away buyers because they don’t have enough cars, trucks, and SUVs on their lots.
However, this is no time to idle your marketing efforts. In fact, it’s just the opposite. Today—amid an ongoing pandemic, in the middle of a global supply chain crisis—is the ideal moment to pivot your marketing strategy and grow your profitability by opening the right door to a new audience of “right” buyers. Here’s how.
Rethink your front door.
When thinking of your marketing strategy, the first thought is vehicle sales. You want to get new car buyers on your lot, walking through your front door, or the online equivalent—browsing and engaging with your website.
This was certainly the case for the first half of 2021 as auto sales and per-unit profitability soared to historic levels. Yet now, in the face of a mounting product shortage, it’s time to pivot your marketing efforts to other revenue streams. Think: your service and parts department.
According to the 2020 National Automobile Dealers Association (NADA) annual report on franchised new-car dealerships, service and parts departments brought in $111.2 billion in sales in 2020. This represents 12% of dealerships total sales dollars. However, the gross profit of service and parts sales was 46.8%, representing nearly one-third, 29.1%, of total dealership net profit.1 To reiterate, one-third of dealership profitability in a blowout year of new car sales profitability came from service and parts divisions.
What’s more, the Vehicle Miles Traveled (VMT)—a key industry stat that can highlight the pending need for new vehicles, parts, and service—has steadily increased to 3.03 trillion miles in July after dipping to 2.77 trillion miles in February 2021.2 Translation: people are using their cars more,increasing the wear and tear on their vehicles, which can theoretically drive increased demand for more service appointments and new vehicles.
Clearly, the front door of your dealership isn’t your only path to profitability. It’s time to open the back door—through your service department—to new future sales opportunities.
Fill up your service bays, and your sales pipeline.
Few things are more certain in the automotive industry than the eventual need for service and parts. Knowing this, why not capitalize on the opportunity by marketing your service department? This approach accomplishes two critical objectives in one effort.
First, it boosts sales in a known profit center—your service department. Increasing traffic through your service and parts department can potentially increase overall dealership profitability at a time when sales are artificially depressed due to inventory problems.
Second, while customers are in your service bays, start a sales dialogue and stay engaged with them until inventory returns to normal. Here are a few ideas to consider.
- Ask candid questions about what they’re interested in, what they’re looking for in their next vehicle and make notes about their preferences.
- Inquire about their purchase timeline.
- Expose them to new vehicles on your lot and showroom, through new vehicles used as service cars and through new vehicle brochures placed in service waiting areas.
- Make sure their profiles are always up to date by confirming contact information during each service appointment.
- Reframe the mindset of service department employees. Instead of fulfilling one-off transactions, motivate them to build relationships with customers.
Each month, use this and other service data within your CRM to enrich your sales pipeline and rank-order your vehicle waitlists based on known customer needs. Given the pent-up demand for new and used vehicles, most customers will likely appreciate your efforts, reward you with their business, and likely, their continued loyalty.
Pinpoint the right customers.
When marketing your service department, it’s important to target the right customers. More specifically, if you want to backdoor into future new vehicle sales, target audiences who have the interest and ability to purchase a vehicle.
At Equifax, we help automotive marketers pinpoint potential buyers based on:
- Real-time income and employment data
- Financial capacity to afford a new vehicle
- Estimates of credit availability, household income, and discretionary spending
- Propensity to buy a new vehicle
By focusing your marketing dollars on service department prospects who are more likely to mature into high-quality sales prospects, you can grow your service sales and vehicle sales at the same time.
At Equifax, we are so much more than a credit bureau. Explore how our premium automotive data and analytics can deliver the next-generation insights you need to grow your business during this remarkable period of automotive sales. Visit us at Automotive Dealers | Business | Equifax.
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