A couple years ago, I remember seeing a study that found the number-one concern among car dealers in the United States was the trend of declining gross profit. At 20  group meetings across the country, you'll almost always find a conversation relating to gross profit on the agenda. So let's play a little bit of car-dealership “Family Feud.”

Top four answers on the board; what do dealers think are the most effective ways to increase gross profit? Survey says:

• Sell the value
• Under-allow on trades
• Don't let your people take shortcuts in presenting the product
• Encourage your people to not talk price on the lot

Now, don't get me wrong. These are all very nice answers and exactly what has been repeated at meetings across the land for decades. Everybody shakes their heads up and down, agrees those things are what need to be done, then the conversation shifts to something else. Unfortunately, those answers all ignore a basic reality—the reality that the majority of customers we end up spending most of our day with have, in many cases, been shopping for days, if not weeks, for a vehicle. Those answers would be absolutely correct in a world where people weren't shopping your 16 closest competitors in three states before they hit your lot.

Selling the value is great. I'm sure your customers all appreciate the thorough demonstration and demo drive between Dallas and Oklahoma City. But at the end of the day, you'll still hear this as your salesperson or manager is presenting numbers: "We love the car, but we know what we’re willing to pay for it. We already have quotes from three other dealerships."
What about under-allowing on trades? "Nice try, but we already know what our car is worth. We've made a hobby of having it appraised for the past month."
So your people don't talk price on lot? They just end up waiting a little longer to find out the customer has been stocking their toddler with every color of car-dealership balloon for the past three weekends.

So here's the answer you've been waiting for: The key to increasing gross profit and, in fact, making a fair gross profit?because really that's all we’re after here?is getting to customers before they've had an opportunity to shop all your competitors, before they've been high-balled, low-balled, misled and misinformed by everyone in town. Who are those customers? I'm sure there are thousands of them currently residing in your CRM. They are people who you sold to previously, who aren't yet thinking about replacing their current vehicle, but given the right incentive, are very likely to do just that.
When I was in the U.S. Marine Corps, immediately following boot camp I attended infantry training school at Camp Lejeune, N.C. I'm pretty sure in the class about ambushes, there was a discussion that it is much better to be the ambusher than the ambushee. In other words, you want to get to them before they get to you. That puts you at an advantage. This is the exact opposite of what we see at most dealerships as salespeople wait to be ambushed by customers at the front door.

Get to them before they get to you!  Let's proactively motivate and draw people into the market just a little bit before they're even thinking about it. Don't just wait and hope that you're the last dealership a customer eventually comes to. That's not good enough. You want to be the first and last dealership they visit.

Vol. 9, Issue 9

About the author
Alan Ram

Alan Ram

President and Founder

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