The auto retail industry is evolving, but many of the basics remain constant
Rock star Bon Jovi made a few dollars a few years back with his catchy song “The More Things Change.”
The saying, I believe, comes from a French proverb describing change as nothing more than a cementing of the status quo.
There is a strong belief that the world has changed forever. The “new” attitudes of Generation Y and their technology driven world and value system are often touted as true game changers.
The question I want to ask is this: Is the status quo really changing or is there truly a repaving of the status quo?
Often in this wonderful industry of ours, we run around chasing those elusive customers like dogs chasing their own tails.
Let’s examine two elements of our dealership world to see if the status quo has changed or if it is staying the same.
CANADIANS NEED A VEHICLE TO FACILITATE EMPLOYMENT
In the good old days of selling cars, the car itself was the key attraction and driver of the masses to purchase new vehicles.
Driving a new vehicle was a status symbol, and many strove to be the first on their street to bring home the latest and greatest model.
This was in an era where vehicle quality and longevity was questionable. Some believed that vehicle design and innovation were the key sales drivers and were more important than vehicle sustainability.
Society’s values have evolved. Vehicle quality, safety, reliability, environmental responsibility and lifetime cost of ownership have emerged from an environmentally concerned society with high housing prices and two income families.
The fact remains, however, that Canadians by and large need a vehicle to facilitate employment.
Today, many believe there is little differentiation in vehicle quality. Vehicles now remain on the road for a much longer period of time, allowing for various entry points into the car ownership process.
Extended vehicle quality now gives a wider range of customers a better opportunity to match their needs for access to those kilometres in a more cost effective way in today’s high price environment.
Specifically for Generation Y, or millennials as they are often referred to, it’s more about access to a vehicle when needed than ownership.
Is this a fundamental challenge to the status quo that Canadians need a vehicle to secure employment? I do not believe so. Canadians still need a vehicle to facilitate employment.
The millennials, however, are redefining how they gain access to those kilometres, especially in large urban centres. Car sharing, for example, is one method with which millennials seem very comfortable with.
Car sharing is different from renting a vehicle. Car sharing allows for a better matching of millennials’ short-term, routine transportation needs, with convenient vehicle access.
Car sharing also allows for millennials to defer the vehicle ownership decision.
I do not believe it will eliminate the millennials’ need or want for vehicle ownership, but it is having an impact of when millennials consider purchasing a vehicle.
So I do not believe that the access habits of millennials are a challenge to the status quo that Canadians need a vehicle to facilitate employment.
We as players in the new vehicle industry need to determine how we can participate in the new Generation Y phenomenon.
SALES DRIVES SERVICE
We have all seen diagrams of the retail sales funnel and its impact on our service businesses.
To access the higher gross margins from the history of the vehicle, we need to have a robust throughput of new and used vehicles.
The wider the funnel, the deeper the service opportunity. The status quo here is that a dealer must sell vehicles in order to gain the opportunity to access service customers.
It has been said that in today’s world, service drive Sales. Let’s look at what this really means.
Service in “sales drive service” refers to the maintenance of vehicles where in “service drives sales.” It’s the whole range of the customer experience that drive sales, including service sales.
We all know competition is fierce both from your fellow dealers that represent the same brand as you, and from all dealers representing other brands.
In addition, competitors come from a whole range of single purpose business carve-outs such as independent parts, maintenance, body, used vehicle, finance, insurance, warranty, audio, video, detailing, window tinting and replacement etc. The list goes on and on.
The fact remains, however, that dealers need vehicle sales to keep their services bays full.
There is no question that the way that you attract new customers has changed. Keeping the customers you have has not really changed that much at all.
It’s fundamentally driven by the theory of no games, no tricks and no lies. Deliver on your promises. These values, however, have expanded to the new customer communication touch points in the markets today affecting all aspects of our dealership businesses — not just vehicle service.
Information available to consumers has been the game changer but the status quo that sales drives service is still quite alive and well. Try not selling any vehicles for a period of time and observe the impact on your service bay throughput.
Many of us lose sight of the basics in our businesses and get caught up in the details. In some cases it’s almost paralyzing, with deer in the headlights type reactions.
Business has always been challenging. That’s nothing new. Attracting customers was much easier in the good old days, but keeping them was the challenge. Today we are all more focused on keeping the customers we have, but growing our dealerships by attracting new ones has increased in complexity and challenge.
As time moves on, influences on dealerships change. Today influences from our brand owners, technology and consumer behaviour have never been stronger.
It’s almost at a feverous pitch, a state of uncontrollable restless excitement. The basics of our business, however, have not changed all that much.
Customers still need a vehicle to facilitate employment and sales still drives service. It’s getting your unique message out to your marketplace that is the challenge, just like it’s always been.
