Life of an Internet Entrepreneur

One major indicator of the health of our economy is the state of the automotive industry. Since cars are one of the largest purchases we will make in our lifetime, we tend to put a lot of thought into it, and can generally afford a new car only during good times.

Being that times are not so great for the Detroit 3 and car sales are dropping, let’s look at some strategies that can help dealers sell cars more efficiently. This will hopefully be interesting to everyday people, and vital to car dealers to read.

The inventory of most dealers consists of new and used cars. Although it seems counter-intuitive, dealers usually make a larger profit per car on used car sales than on new cars.

Car Manufacturers

The car manufacturers try to control the amount of a certain model of new cars sold in a given month by:

• national advertising campaigns, to increase interest
• rebates and discounts, to compete with other vehicles in the same class
• offering incentives to dealers, to encourage them to push that car and sell more

Aged Inventory

Car dealers are most stressed out about the car that has been on their lot for the longest, and are wondering when they will finally manage to sell it. This often leads them to corner a potential customer into taking that car, and salespeople push it aggressively.

This is exactly the wrong approach to take, because it is a tactic that is very likely to leave the customer unsatisfied, and there is no faster way to lose long-term business from him.

If the shopper is coming in looking for a Ford Edge, and you were so focused on selling him a Ford Focus, the shopper is likely to leave your dealership, and go to a different dealer who can focus on selling him a Ford Edge.

Dealer Advertising

Furthermore, if we take a look at most advertising that car dealers do, they are advertising the cars they just can’t wait to get rid of…a car in an unusual color, 30 days or more in inventory, without the options most customers want (such as no power windows).  True, you’ll find some dealers pushing new leases, but for each ad like that, you’ll find 15-20 pages of used cars being hawked, and many more of them packed in per page.

So the car manufacturers are pushing millions of dollars to convince John Doe to come into your dealership to get the “wonderful” Ford Edge, and then, instead of satisfying that need, and being consistent with the national advertising – you go and try to sell him something different.

Manufacturer Advertising

Manufacturers usually advertise a lot for two different reasons.

The first one is to push a wildly successful car, and the other one is to try to get rid of a terrible car, that no one wants. As a dealer, you need to make sure you have a good grasp on just which one they are doing. Stay away from the terrible car – resist the urge to advertise it yourself.

Consistency in advertising is key – I can’t emphasize that enough. Unless your car manufacturer is trying to “dump” a certain car by advertising it when they know that people don’t want it, you are ALWAYS best off running the same car in your ad.

The Winning Strategy

The better way to sell is to realize some facts. You know, on average, about how many of a certain car will sell in a given month in your target area. You know this because your manufacturer tells you how you and your competitors did each month for each car. Add up all of the sales of a given car in your market for the month, and you’ll know what the market is in a given month.

If you spend, say, $20,000 a month on advertising it will make more sense to advertise the same car as the national advertising (assuming it isn’t a “dump” as I discussed above) instead of your oldest stocked cars.

The reason is, your $20,000 PLUS the accumulation of advertising from the national campaigns your manufacturer ran, PLUS the already present intention of your car shopper to end up in that car will make it a much easier sell.

On the other hand, you will find yourself spending much more time trying to convince the shopper that what he really wants is the old stock you have (that for some reason 500 other shoppers that month didn’t want).

I will pre-empt the dealers who will say that they need to purchase the bad cars as well as good cars from the manufacturers due to their franchise agreement, by saying that while that is true in some cases, you will still come out ahead in profitability by pushing the better cars and the specific cars your informed customer came in looking for, and either selling the bad car to another dealer, or just having it sit on the lot.

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