How to Avoid These Six Common Dealer Pitfalls

Even well-run dealerships are subject to brutal market forces. Threats are not always easy to identify and avoid. Analytics provide insights to bring the marketplace and your position within it into perspective. 

Below are some common traps dealers fall into and how you can avoid them with a robust dealership marketing strategy. 

1. Slowly Declining Sales 

A dealer in Texas saw an extended loss in sales they attributed to slowing demand for all dealers. They did not realize their competitors were doing much better and taking sales from them. Despite a good reputation, their sizable inventory sat on the lot longer. This pointed to a problem with their dealership’s marketing. 

Trace your sales history back several years to get a true picture of overall trends. Look at sales by model or segment as well. If it’s lower, determine whether you’ve lost out to competing dealers or if the brand lost share in the market.  Putting a sales decrease in context will help identify the underlying problem and point to a solution.   

2. Losing Market Share 

A California dealer was enjoying steady growth in sales and was happy with their marketing strategy. Overlooked was an incremental loss in market share, a fraction of a percent each month over a year. They were growing but not as fast as the market around them. Competitors were building larger customer bases at their expense. 

Keep track of manufacturer or dealer association data to assess market share versus competitors over time.  If you fall behind the market, look closely at operations, inventory, and marketing.  You may need to make a change in one of those areas. Here again, analytics can help identify opportunities for improvement. 

3. Ignoring Your Backyard 

A dealer in Florida attempted to gain sales by advertising in communities well outside their assigned zip codes. This marketing strategy did bring in new business but at great expense and with deep discounting.  Worse, it left the dealer’s backyard vulnerable to competitors eager to get their ads in front of nearby buyers.   

If your manufacturer doesn’t supply sales data for your assigned zip codes, map it from your CRM system to see how well you do in the area surrounding your dealership. Pay attention as well to your top competitors and their penetration of your backyard. Local customers are your most profitable so be prepared to play defense as well as offense with your dealership marketing. 

4. Overspending on Reach 

An Arizona dealer pushed their radio spending to ultimately grab 6% share of voice among non-luxury dealers. But their significant investment netted them only a 1% share of vehicle sales. While they tried to conquer the market, competitors poached their backyard with targeted advertising to lower-funnel shoppers.   

Leverage registration and your own CRM data to understand where your highest-value customers live. TV and radio can be a cost-effective way to reach a broad audience but also price-sensitive shoppers unlikely to ever return. Look for dealership marketing solutions that deliver key geographies and buyers at the best effective cost. 

5. Focusing on the Wrong Competitor 

A dealer in Louisiana identified a competitor across the border in Texas as their biggest drain on sales. Considerable resources had been put toward combatting the threat, but it was not money well spent. The Texas dealer turned out to be only one of 92 competitors taking buyers from the Louisiana dealer’s backyard. 

Without the right data, it’s hard to tell and hard to know where to focus your marketing efforts. Compare your sales in your own backyard to other dealers’ sales in those same zip codes. Once you know, you can efficiently target the battleground areas where you compete head-to-head.   

6. Understocking Key Models 

A New York dealer shifted away from midsize sedans and toward compact SUVs in response to rapidly-changing consumer preferences. However, consumers continued to buy midsize sedans – from the 42 other dealers selling the same model into his backyard. Without vehicles on the lot to sell, local car shoppers went elsewhere. 

Look at registrations rather than sales to build an inventory that appeals to consumers in your backyard first. Then add higher-profit models you can reliably sell farther afield. At the same time, be aware of what your competitors have on their lots. You may need a larger number of some models in a market where key players compete on selection.   

Regional analysis and insight can only help your dealership run better. LOCALiQ AUTOMOTIVE provides the tools and expertise to make the most effective and efficient use of your dealership marketing budget. Contact us for your free Dealer Scorecard Rooftop Analysis today. 

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