MAXDigital Brings Its Expertise to NADA 2016: Value vs. PriceMarch 14th, 2016 by MAXdigital
The National Automobile Dealers Association (NADA) will host another incredible convention in Las Vegas, Nevada, from March 31st until April 3rd. Throughout the course of the event, you can find us at Booth 1923C to discover how our expert solutions can help you increase gross margin profits. In addition to hosting many great dealer representative from across the nation at our booth, Patrick McMullen, Senior Vice President of Customer Success, will lead one of the many great educational sessions you’ll have the opportunity to watch:
The Art and Science of Selling on Value vs. Price
- Friday, April 1st, 2016
- 10:30 am - 11:45 am
How can dealerships manage the informed consumer?Previous to the Internet revolution, consumers would visit approximately 5-6 dealerships and come to a decision based on the information, including prices, they learned. This is not the case anymore. The modern consumer conducts all research and shopping online, then visits only 1 or 2 dealerships. This means they’re yours to lose. Equipped with a ton of information acquired from months of research and viewing hundreds of cars, these shoppers come to your showroom more informed than ever before. So, that begs the initial question: how do you manage them? It’s vital that your brand specialists have access to immediate resources and information that make them instant experts for every single car. One of the most effective ways to accomplish this is by maintaining a comprehensive digital showroom that displays all high-value equipment, packages, and all other information that makes the specific car unique. “Why is this car better than the others?” This is one of the primary questions consumers now ask. A digital showroom will help you build quality and value in the vehicle, as well as demonstrate transparency in its listed price. Did you know that 92% of consumers don’t trust car salespeople? It’s true. The vast majority of shoppers walk onto your lot without trusting you or your brand specialists. These consumers show up with their smartphones in hand and shop. If you do not provide sufficient information online, they’ll go elsewhere because they discovered more transparency with a different dealer … while standing on your lot.
What other mobile trends are on the horizon?There will come a time, at some point in the future, when consumers order and shop for cars purely online with options like Carvana. One of the main catalysts for this shift in behavior is that many dealership lack a proper product that enables them to share information the customer needs and wants. Consumers will have trusted sites they turn to, so it’s important that brick-and-mortar dealerships become the authority—so shoppers don’t fall into the confined funnel of where Google sends them. Instead, they come directly to you.
What is the coming “tsunami” of used cars?The evidence is everywhere. CarMax has warned of lower prices across the board because of a rise in supply. Other resources are coming to data-driven conclusions that the industry will hit a bubble, so it’s paramount that dealers know what used cars to acquire and how to price them for their specific market. Take a moment to digest this: prior to 2008, there were 83-84 million units between the ages of 0-5 years old that were potentially available to dealers for sale. With the economic downturn, the fictional “Used Car Factory” was shut down because of limited new car sales and leases. But with some general economic recovery, dealerships started selling new cars again— all credible research indicates that a huge influx of used cars coming off leases will be entering the market in 2016, which will create further pressure on used car sales and margins. We have already seen early signs of this happening from 2013-2015, when margins were stagnant. As used cars inundate the market this year, indicators (and frankly, common sense) suggest used car margins will suffer and trend down to 2008 levels. Here’s further information to substantiate this, according to NADA:
- In 2008, used car front end gross profits were just $1,619.
- In 2015, used car front end gross profits hit $2,372.
What can dealers do to combat this potential loss in gross profits?How does this dynamic play out in the numbers? It’s not even close. 79% of consumers want value and quality at a fair price. Only 21% of consumers buy primarily on price. So the ultimate question is, how do you want to build your business? If you want build your business on the 21% of the market buying on price alone, we wish you luck. If, instead, you are looking to build your business around the 79% of consumers who want value and quality at a fair price, our experience in the industry has shown that there are two specific areas in which your dealership must excel:
- Addressing the key issues on the mind of today’s consumers.
- Building trust throughout the entire marketing and selling process.
- Online presence is built from ad descriptions and other tools on the website that help with conversions. There should be a ton of information that gives customers the feeling that you’re an authority as well as comfort that you’re offering it at a fair price.
- In-store presence is built from what consumers see on the lot, the price the brand specialist refers to for the vehicle, and how the general interaction develops while the consumer is on your lot.
What are some methods and tools that can help prevent double discounting?So, let’s first establish what a double discount is … With the massive amount of information that is available online, today’s consumers are better armed than ever before, and they come to the dealership differently than in the past. Clearly (to use a few terms from the past) because of “market pricing,” consumers have already gotten the “first pencil” before they even stepped foot on a dealer’s lot. Yet, once they get to the lot, today’s consumers still expect to “do battle” and “fight” for a second “pencil.” It’s that second pencil, that second bite at the apple, that is especially dangerous for dealers. MAXDigital has put a name on this nasty, margin destroying dynamic: the “double discount.” Think about it. Just 10 year ago, dealers would price cars artificially high because of the lack of transparency in pricing. To be blunt, consumers didn’t know any better. Since the price was artificially high, dealers would offer a discount on the lot—and consumers thought they were getting a good deal. Times have changed. Market-pricing is ubiquitous. Dealers have adapted the way they price. But there’s a problem … Dealers have not adapted the way they sell. So they don’t give themselves a fighting chance to communicate value and keep gross margins high. The good news is that there is a better way. MAXDigital has studied all of this in detail and has unique insights to help dealers understand how to make sense of this. The key to solving the “double discount” is really understanding consumers and the way they gather and process information during their searching and buying processes. The fact is that today’s car buyers are very different than they were 10 years ago.
What are the primary behaviors of a successful dealership?For 2016 and beyond, successful dealers do two things up front: (1) close deals without discounting; (2) minimize the discount if one has to be be given to close it. How? With three primary behaviors:
- Proactively build value in every single car.
- Proactively build trust in the process.
- Proactively build value in the price.
Learn Modern Selling Techniques at NADA 2016 in Las Vegas, NevadaThe sudden pervasiveness of information as a result of the digital age has placed today’s car shopper in the driver’s seat. They are armed with information that appears at the tips of their fingers, allowing them to become more meticulous and surgical during the buying process. This tectonic shift coerces brand specialists at many dealerships to discount the price of a vehicle on the lot that had been discounted online in the first place. When this is done, you get LOWER GROSS PROFITS. Couple that with the coming tsunami of used cars onto the market to forge a disastrous formula. Patrick McMullen, at NADA 2016, will teach you how to keep your sales teams equipped and trained to stay on top of their game and win consumers. During his educational session, you’ll:
- Study the insights from proprietary consumer behavior research
- Explore the consumer buying psyche
- Discuss/workshop the strategies and tactics to win the sale and retain gross profit.
- Build quality, value, and transparency from the moment consumers see your content.
- Answer pivotal consumer questions.
- Why this make and model?
- Why this dealership?
- Why this specific car?