Automotive News Canada - November 2020 - 21

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Grow Your Sales Volume with a Retention Strategy
Develop
incremental
sales volume
while lowering
acquisition costs

SALES LEADERSHIP
Insights & Selling
Strategies
leveraging scarcity of inventory to grow
margins is not a sustainable success
strategy. Normal inventory levels will
return, OEM volume pressure will
resume, and higher staffing levels will
be required to retain and properly serve
customers. This knowledge gives dealers
a unique opportunity to re-evaluate their
past sales and marketing strategies, and
to look for new ways to grow their sales
in 2021, all while maintaining healthier
profit margins.

By JEFF WILLIAMS
President & CEO, Absolute Results

Car dealers live in a 30-day year. At the
end of every month their accounting
team completes a " year-end " financial
statement and they start the next 30-day
period at zero. As a result, dealers have
developed very comprehensive financial disciplines and accounting systems
to ensure that they maximize the gross
profit of every deal and achieve a viable
and rewarding profit at the end of each
month.
No matter how comprehensive these
disciplines and accounting systems are,
they still rely on one very important
thing: achieving or exceeding the dealer's
monthly sales target. Hence, the legendary sales " war cry " that every car dealer
has used to rally the sales team: " Nothing
Happens Until Someone Sells A Car! "
Over the last several years,
increased volume pressure from
Original Equipment Manufacturers (OEMs) and growing
financial rewards derived from
meeting OEM targets have
added a new complexity to the
business. Many dealers have felt
the pressure to increase their
marketing spend, to offer more
aggressive pricing, and to potentially accept lower margins in hopes that
the additional volume generated would
result in increased profit. This has not
always been the case.

Over the last several months, I have been
personally working with the leadership
team of a dealer group that sells 74,000
cars per year. Pre-Covid, this organization had experienced year over year sales
growth, and their focus now is to standardize sales processes and marketing
spend. Their commitment to this strategy
will allow them to grow in efficiencies
as they expand their operations. Their
dealer's mandate for 2021 is to grow sales
while lowering the overall cost of customer acquisition.
This leadership team asked me to help
with this strategy by training the sales
management of their dealerships how
to create the Appointment Culture, and
then to help them to develop a scalable
Appointment Strategy in order to gain
incremental sales volume.

RETENTION
IS THE
HOLY GRAIL
OF THE CAR BUSINESS

Although many dealerships have found
inventory shortages over the last several
months challenging, many have found
themselves reinvigorated by the challenge. Many have discovered that-even
with less inventory and lower sales
volumes-their dealerships can be highly
profitable thanks to low costs and greater
sales-team margins produced by the
scarcity of inventory.
Dealers that I've spoken with over the last
several months all recognize, however,
that operating with reduced staff and

A monthly focus on client retention is
at the foundation of the strategic plan
that I'm building with this group. Why?
Because retention is the holy grail of the
car business. Typically, dealers with high
retention rates have lower client-acquisition costs, busier service departments,
and greater opportunities to supplement their used car inventories with
late-model trades.
Of course, common sense dictates that if
a dealer can keep more of their current
customers, they won't have to spend as
much money to find new customers.
Clearly, however, it is not an adequate
plan for success in today's complex world
to simply tout this age-old adage, lower
marketing spend and add pressure to the

sales teams. Instead, dealers need to build
a Retention Strategy with a focus on three
very important things.

department each day. Dealers who focus
on service-to-sales renewal are able to
convert two per cent of their service
repair orders each month into car deals.
This generates incremental sales volume
that often results in increases of 15 per
cent of a dealer's total monthly sales.
THIRD, THE DEALERSHIP NEEDS
A PORTFOLIO MARKETING
SYSTEM. This involves a defined and
measured cadence of marketing by email,
SMS, and phone. It should include not

A Retention
Strategy
needs:

Portfolio
Audit

CARS

Portfolio
Business Plan

FIRST, DEALERSHIPS NEED TO
CONDUCT A PORTFOLIO AUDIT.
They need to accurately measure their
dealership's historical retention rate, and
then create a system to evaluate retention
at the end of each month. What percentage of each month's sales came from
existing customers? Which department
generated the sale opportunity - sales,
service, parts or body shop? What is the
dealership's retention rate by finance
type? By model segment, and for newand used-vehicle customers? The answers
to these questions will provide dealerships with the ability to establish benchmarks that allow them to clearly measure
client-retention progress.
SECOND, THEY NEED A PORTFOLIO BUSINESS PLAN. Put simply,
looking at their monthly lease penetration and upcoming renewals to predict
repeat sales is not enough. Every dealer I
know can tell me their monthly advertising and digital-marketing spend to
acquire new customers, but few are able
to calculate their retention budget. Loyalty programs and quarterly loyalty events
are a start, but developing renewal plans
for each segment of the database is key to
sustained retention growth. Such renewal
plans can start with by analysing trading
cycles by ownership length. They can
then overlay analyses of seasonal trends,
new model introductions, and inventory
opportunities to generate appropriate
upgrades for each customer.
An important, but often overlooked,
part of a dealer's Portfolio Business Plan
are the customers who visit the service

Portfolio
Marketing
System

only a mix of sales and service offers,
but also periodic product and market
updates, driving tips, and car-care recommendations. It's a best practice of top
dealers to share their Portfolio Communication Strategy with customers during
vehicle delivery so their customers come
to expect this communication. The more
personalized this communication is, the
higher the ongoing customer engagement.
How much incremental sales volume
will a well-executed Retention Strategy
generate for a dealer? A recent study
revealed that many Canadian dealers
have a retention rate of less than 25 per
cent. Meanwhile, brand retention rates
exceed 50 per cent, marking a substantial
opportunity to grow sales from existing
customers. Add to that the incremental
sales volume from service customers, and
a 20 per cent boost in volume is realistic
for many dealerships.
Starting each 30-day year, with a growing portfolio of business renewing each
month, dealers can then strategize and
add the right budget of conquest marketing to achieve their sales volume targets.
This will help lower their overall cost of
acquisition, while preserving healthier
margins.
Schedule
a Portfolio
Audit for your
dealership.

Automotive News Canada - November 2020

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