The strength of the US economy has pushed interest rates up, attempting to slow inflation to near-normal rates. Caught in the crossfire between outrageous spending and government policy is the fifth-largest industry in the country: auto retail. And sure as the day is long, pricing is bound to soften as consumers’ budgets are constricted by rising everyday costs of groceries, mortgages, and utilities. That’s particularly true for the used car market.
General managers, used car managers, and anyone with a finger on the pulse of the industry is likely to have alarm bells going off regarding the industry’s health. However, history dictates that auto retail is nothing if not resilient, and strategic tweaks are all that’s necessary to weather the downturn.
Understand Where the Most Valuable Traffic is From
When fewer shoppers are making inquiries, making the most out of every lead is paramount. Where simply grouping online inquiries into one batch to analyze used to be standard, there should now be a more detailed approach to determine the origin of the traffic. While 61% of shoppers contact the dealership first by phone, they’ve spent nearly 14 hours of online research beforehand.
Whether from a phone call or online lead, traffic is generated primarily from a dealer’s website and online ads. Determining which channels are most valuable – that is, generate the most sold-and-rolled units – can help dealers allocate their marketing budget where the ROI is highest.
Purchase According to Search Data
How many click-throughs did a particular used car receive? How fast did it sell from when it was first posted, and how many hot leads did it receive? Every marketing channel offers data that can be analyzed extensively, if you know what touchpoints you’re looking for. By evaluating which vehicles shoppers interacted with, how long they spent on the page, and especially if they returned to it subsequently, you can establish patterns that are useful for vehicle acquisition.
Understanding which models are most sought after by shoppers within your sales area can help you put the right inventory on your lot. High-churn inventory is always the goal, but it’s much more important when the market gets squeezed and prices begin to soften.
Acquire Problem-Free Inventory
Car shoppers continue to be wary when shopping for used vehicles, concerned they’re going to be buying someone else’s headaches. As used car prices fall, a temptation is to acquire low-cost inventory that might have blemishes, accidents on record, or mechanical issues. But fewer shoppers and falling used car prices mean that the ball is in the shopper’s court, and their buying power means they can pick the choicest vehicle that’s in the best shape.
A mantra salespeople live by is, “Eliminate the negative, accentuate the positive”. That’s relevant with this market too. Don’t show buyers a vehicle with issues, be it cosmetic or mechanical, or an accident on its vehicle history, if you can avoid it.
Invest in Marketing Strategies
When the market is in a decline, the way to keep your profits flowing is by gaining more of the market share. It feels counterintuitive, but with the right messaging and promotions, dealers can attract more used car buyers. It should target trust-building and brand strengthening to improve loyalty as much as it should attract new customers for sales.
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