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Entries in Auto Sales (13)


Social Selling > Part 1

Think about how fragmented the showroom process has become. If 20 years ago we knew that eventually the showroom would be disintermediated, the knowledge base would gravitate to the Internet. 

How come its so fragmented? Could it be that everyone is focusing on a specific aspect since they have expertise or technology in the "specific aspect" and in some way obfuscating the big picture. Agreed the picture by now is immense, and fraught with peril...or is it?

The astute dealer...

Lets not go back 20 years, or even 10 year, lets focus on the emergence of "social media" going mainstream in late 2009 and early 2010...lets say 4 years ago.

Imagine that this dealer 4 years ago committed to acquire an advantage in cyberspace, through the Internet, and social media. The dealer made an enduring  commitment to finally have a digital dealership comparable to his brick and mortar business. 

This same astute dealer did not buy a web site from one suppliers, SEO from another supplier, BDC/CRM from again another supplier, and so on. Put aside the technology fatigue, and the rampant digital immaturity. This dealer went out and did it himself, with his people, and acquired "pieces" he needed to control his execution.

Now in 2013 this astute dealer has a compelling digital presence, is proficient in social media, is proficient in generating content for his customer base, is socially involved with his customers and prospect at his brick and mortar dealership, and at his digital dealership. The dealer paid more attention to actually building an enduring digital dealership, than trying to measure ROI on social media, conversation rates on leads. Stopped complaining that it costs too much, feeling nickle and dimed at every turn, needing a ton of suppliers to presumably achieve an online presence. 

This dealer controls his destiny, and makes his luck.

This same dealer endured a bunch of his peers telling him he was crazy, that he should buy a piece here, a fragment there, that he should wait another 15 years to see how it will develop, just in case.

That this dealer tells his peers how its done, and what they should do, in the meantime he has a 4 year head start, his content makes him the darling of search engines, is engaged with his customers and prospects.

This dealer "fooled around" with the Internet for 15 years, tried a bunch of stuff, endured a myriad of vendors and suppliers, improved his knowledge base, and finally made a commitment after 15 years to finally build his digital dealership from the foundation up.

Imagine for a moment the dealer that made a comitment 10 years ago...

In a group meeting he tells his peers "Guys I finally started building my digital dealership, I have a digital lot boy, I have a digital editor/content generator, I have a digital receptionist/greeter"....his peers look at him and question his sanity.

Someone in the back of the room comments "If I undestand this, you went against the flow, stopped talking about it, have a well executed digital dealership, and are well positioned for the future" 

We will continue...

PS: The first Social Selling




Risk Shifting

The other day we were reading an opinion from an auto pundit on the length of auto loans, and were taken aback by the naivete of several statements. It seems that some folks in the competitive atmosphere that is the auto business prefer to have a brief and narrow focus.

If you are in the auto business at some point the thought of how long will these low interest long term loans keep on going, and how much deficiency can we roll over on many deals; must have surely crossed your mind.

Almost 6 years ago, agreed its an eternity in this business we wrote "Wash Out" our white paper on washing out of trades, leasing, and residual values. Those were the days when the Canadian dollar was finally climbing out of the basement, and suddenly prices of vehicles in Canada were high. 

If you remember leasing at the time was extremely popular in Canada with a penetration of over 40%, obvious that lowering prices would impact and heighten the residual risk carried by the various manufacturers. Manufacturers were concerned, dealers were muzzled, consumers were incensed.

About a year later a couple of manufacturers were tethering on the brink of disaster, were bailed out, and what a great excuse for a lot of manufacturers to get out of leasing, and further shift the value risk to the customer.

It was a brilliant move, lets lengthen the terms of the loans (to make vehicles affordable) and lets shift the value risk to the customer. At the outset it was simple enough, lets go from 60 to 72 months, lets go from 72 to 84 months (to compensate for the what would have been a value risk to now a deficiency). Finally lets step on the gas and go from 84 to 96 months to try and get every deal with any and every deficiency.

Its a successful formula...vehicle sales are on the rise. At the same time lets go from 96 to 108 does not make sense, everyone knows that the ceiling is at 96, and 0 percent...which was reached some time ago.

During the turmoil in the market, some manufacturers elected to continue leasing and assume the residual risk, remarket the lease returns, strengthen their nascent CPO efforts of the time, and literally continue to have an excellent flow of used vehicles. While making money twice on most vehicles, which remains an appealing aspect of leasing.

We all know that financial services are an intrinsic part of "moving iron", and balancing the risk is the fine art of the financial services offered...a few months ago we published Money for the Deal depicting the fine art and evolution of financial services.

What is the current reality?

Manufacturers offer finance terms up to 96 months at 0 percent interest simply to be in a position to actually do business, since the customer in many instances is in a deficiency position with the trade in. At this point its become a vicious circle. The customer know that he is deficient and seeks out the best terms and monthy payments to actually do a deal. The lenght of the term is somewhat irrelevant, its the monthly payment that is important.

If you actually believe that the terms are longer, because vehicles are more reliable...its your choice!

The manufacturers that continued to lease during the turmoil, and continued to assume the residual risk are in a different position and ensured a better flow of repeat business and loyalty.

In most instances the customer will trade one vehicle for another for a comparable monthly payment that fits in the budget. Obvious that the customer assumes the value risk of the vehicle, while the manufacturers assist the customer in rolling over the risk from one vehicle to another.

Why is leasing emerging again, its the plan B to compensate for the limit of the 96 month terms.

Its how much for the trade, and how will you shift the risk to the next vehicle, and stay within my budget.





Persuasion in the Showroom - I

Click for larger ImageWe constantly hear about the well informed customer...yes the customer used the Internet, social media, mobile devices to gather information and empowerment.

Lets rewind a few decades...yes a few decades.

Back in the day when a customer was considering a "muscle car" that prospective customer was infinitely well informed on the product through various buff publications of the time...similar to the Internet of the past few decades. 

Often that customer knew more than the sales person about the product, often that customer had a circle of "muscle car" friends that exchanged information (sounds like social media of today) and knowledge. 

Perhaps similar to today some dealers embraced "muscle cars" similar to dealers embracing the internet and social media, and other dealers for whatever reason did not get it, and were not interested in getting it. 

Is it much different today, with dealers embracing the internet and social media, and other dealers lukewarmly participating perhaps to keep the manufacturer content, and have a better allocation of vehicles.

Needless to say that dealers that embraced muscle cars back in the day, had enthusiastic and passionate personnel that was persuasive with a prospective customer...reflect on this for a moment. Enthusiasm, passion, persuasion...its human, not technology.

The other day a dealer received a very special modern muscle car delivered in an enclosed trailer by a specialised carrier...the trailers that are similar to race car carriers. The showroom momentarily emptied of all sales consultants to go look at this car, to take photos, and to comment among themselves. Fascinating in an age of technology, to observe a display human auto passion.

Perhaps its a coincidence that this dealer is the biggest in its market area for the brand. 

Spend a moment reviewing the image of How Millennials Shop for a Car, the press release is here.

Yes...perhaps they are seeking and not finding persuasion in the showroom.




Canadian Sales First Half 2013

Our thoughts on Canadian sales for the first half of 2013...




January 2013 Sales

On a few occasions we have mentioned that increasingly there are more individuals / pundits sharing their thoughts and spreadsheets on Canadian sales. Its a good thing!

By now you know our perspective, when you focus on the numbers, one perhaps gets immersed in the numbers and misses the bigger picture and view of what is truly developing. 

With the myriad of programs that all manufacturers deploy as a monthly tactic to achieve results often monthly comparisons are strategically vague. Its the reason that at Strada we focus on quarterly reviews which provide increased insight and a deeper understanding. 

If you have been in the auto business long enough to see various perspectives, from various levels, while having an opportunity to experience new vehicles from a variety of manufacturers the sales results become fascinating to say the least. 

A few points:

  • January 2012 was very strong, perhaps too strong!
  • During 2012 there was a constant sense of exuberance by folks in the auto business comparing Canada to the US, conveniently forgetting that Canada did not take a sales hit like the US.
  • During the second half of 2012, and especially during the last quarter the message was increasingly blunt that CSM (Citizen Main Street) is over extended. 
  • If homes and mortgages remain the central focus of CSM being over extended, lets not forget that vehicles remain the second most expensive acquisition after a home. 
  • In 2012 we saw the continued escalation of new vehicle loans above 72 months, accompanied by an increase in negative equity of vehicles being traded. Which prompted us to publish our first e-book Money for the Deal.
  • Sales were good in Canada in 2012, and one was left wondering how much sales management was exercised at the end of 2012 by the various manufacturers. Not much...if any compared to the previous year.

January 2013:

  1. Momentum was slowing during the last quarter of 2012 - not a surprise.
  2. The truck segment went through the roof, with Chrysler - Ford - GM being the beneficiaries. 
  3. Confirming that the love affair endures.
  4. It was a challenging month for most manufacturers in Canada.
  5. First time in several years that January generated lower sales than the previous year.
  6. Lets give everyone the benefit of the doubt, that in January they were slowly executing their startegy for 2013, while practicing their tactics.