Three key strategies to help motor retailers survive 2017

Sewells MSXI, the global consulting and outsourcing company which specialises in the automotive industry, came up with a string of winning strategies for retail motor dealers when it took part in the third National Automotive Dealers Association (NADA) business of the year road show.

001-off-my-wheelsBrian Joss – The presentation by the company chief executive officer, Warren Olsen, highlighted three prime strategies based on the lessons Sewells MSXI learnt.

The three major focus points for 2017 are: new vehicle sales – it’s all about market share, service sales – it’s all about customer retention and parts sales – it’s all about countering the rise of the independents.

The workshop: Service plans are good tools to keep customers happy. Picture: Quickpic
The workshop: Service plans are good tools to keep customers happy. Picture: Quickpic

Olsen explained the benefits of having one of the leading franchises as this is where most of the business is being done. For instance, in the first half of this year there were 49 brands on the vehicle market and five of these brands were responsible for 61% of total dealer sales of 202 000 vehicles, while 32 other OEM brands each had a share of 1% or less.

The Sewells chief said these facts and figures mean that more multi-franchise dealerships are inevitable, especially considering the rising costs of running a profitable automotive dealership in South Africa.

“Multi-franchise setups provide a crucial hedging position for investors in tough and competitive environments. Multi-franchise dealers are then able to actively seek efficiencies that can flow from this type of set-up,” said Olsen.

“However, dealers must realise that certain franchise mixes work better than others and that brand integrity and separation are still very important. On the other hand, the Original Equipment Manufacturers (OEMs) need to lay out clear multi-franchise guidelines.”

The key to the second major focus for dealers is for them to develop and implement effective strategies to retain service customers.

Customer retention has tangible benefits, but it is a challenge that requires proactive thinking. OEM service plans and warranties are good tools to keep dealer customers loyal, with service plans responsible for keeping 68% of customers loyal with warranties having a 45% loyalty factor. However, the problem arises when the vehicle is out of warranty because then only 10% of customers remain loyal to a dealership.

A proactive solution is for dealers to sell “their own” dealer service or labour plans as, according to European studies, this tactic achieves 89% dealer customer loyalty once the OEM plans expire.

The use of predictive analytics plays an important role in encouraging customers to return to the selling dealer for after-sales service. It is also important to look after customers so that they are willing to recommend a dealer’s service to family, friends, and business colleagues, while not neglecting the basics of regular, special-offer service the independents with the backing of an OEM.

Olsen also discussed the increasing role being played by independent service providers in the retail motor industry, with particular focus on tyre, battery and shock absorber fitment as well as selling parts and providing vehicle servicing and undertaking repairs.

“The independents must not be underestimated whether they are offering used vehicles, parts, service or body repairs, but these independent operators are also a wonderful potential market for selling them genuine replacement and service parts,” added Olsen.

Firstly, he said the dealers should investigate ways of providing similar services at competitive prices, but the dealers must make mining the independent market a prime target for parts marketing.

It was no surprise to learn that most of the 17 detailed strategies that were presented to the delegates at the NADA Business of the Year (BOTY) road show leaned heavily towards the use of strong industry partnerships, technology, web space and the use of other digital communication methods in the rapidly changing environment in which motor dealers are now operating in most part of the world, including South Africa.

Olsen also stressed the importance of still maintaining the personal link with customers, staff, and other business partners as it is still very important for a business to have a face and a human side in these changing times.

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