Winning the Allocation Battle
Most OEMs’ vehicle allocation is based on a “turn and earn” system that allocates new inventory to the dealers who turn it the fastest. With production constrained, having a vehicle on the lot even a for day in some cases can negatively impact future allocation. As Gabe Montano from Mike Maroone Automotive put it, “You have to turn your inventory faster than ever while also driving your allocation by pushing higher demand models while they’re still in your pipeline.”
That means every day a vehicle sits on your lot unsold could be costing you more than just floorplan…it may be costing allocation. You can’t sell them if you don’t have them and you won’t have them if you aren’t turning your vehicles faster than the same-make store down the road.
Selling What you Have
One interesting trend we have seen in our near real-time automotive insights platform, EDGE, is how far and where customers are driving to purchase vehicles… and yes, many are driving further than before the pandemic and the chip shortage. More on this soon…
As dealers, automotive marketers and agencies are painfully aware, the automotive sales process has changed for the foreseeable future…and possibly forever. The days of well-stocked dealerships attempting to get in-person shoppers through the door seem like a distant memory. Gabe Montano says he believes that “after everything settles down, I believe we are going to see a shift to a more European model where customers order more and dealers will carry less inventory on hand.”
But for now, with long lead times on orders and customers who are used to getting what they want quickly, dealers must adapt to finding the customers that want what they can build. Savvy dealers are focusing on selling the vehicles before they land at the dealership and are pushing “order your vehicle from us” messaging.
Selling to specific customers means targeted advertising is more important than ever. Dealers and marketers need to keep a real-time finger on the pulse of their market and understand by ZIP code what the sales trends are as they unfold. If you don’t serve up the vehicles you have available (or will soon) to the customers that are in the market for that specific vehicle, then customers will find what they want elsewhere and make the drive. In Montano’s words,
“Yes, people are doing so much more research and are more willing to drive, but we’re also pushing our marketing out further based on what we’ve been seeing. We’ve identified high-value areas in our state and have campaigns that are targeted to those areas to drive increased market share and remote deliveries.”
The change in purchase patterns may also mean more customers in your backyard are buying from dealers many miles away. These “orphan customers” need a place to get their vehicles serviced. According to Montano,
“It’s also important to use EDGE for service conquesting: we use direct and geo-based marketing like OTT to reach owners of the vehicles we service in our 15-mile backyard but didn’t buy from us. In an environment like today, if I can’t compete with another dealer for the sale, I want to be sure I compete on the service side.”
It is true that you can probably sell everything that lands on your lot right now, but if you wait that long to actively sell your vehicles, you may have fewer vehicles to sell in the future.
VP of Sales