Maximising profits on all transactions

This article was originally published in the Autofile Magazine - September 2017 issue. 

Focus on the quality of each opportunity rather than the quantity

In this blog we are going to dive into how you can maximise opportunities from each customer that purchases a vehicle from your dealership.

This is more about profitability and quality of sales as opposed to quantity and trying to sell as many units as you can. At the end of the day, it’s overall profit that determines your business’ success not sales numbers. You need to ensure the opportunities each customer presents are maximised for profit – for today and the future. 

 

The experience you deliver will influence your referral rate

When taking this approach, it’s important to ensure clients also experience great value, as their referral and repeat business comes into play when maximising opportunities you have with them.

If you don’t care about referral or repeat business, you potentially reduce the contribution each customer can make to your business, which is significant over a five-year period.

That’s why if you plan to operate your dealership for more than the next one to two years, you need to include this as part of your business plan and strategy.

When maximising the profit opportunity of a buyer, think about what tools you have at your disposal that contribute towards that sale’s total value and profitability.

Here are some areas to consider:

1. Retail or window price - How can you build enough value in the vehicle, and the experience with your dealership, to ensure as close to the window price is maintained? This is the price that’s fair in the market and is your price.

   Now sell and deliver an experience that justifies customers not needing to have the price slashed and be the cheapest in the market. Remember the old saying, a price objection generally occurs in the absence of value.

2. Finance offering - About 90 per cent of vehicles on our roads are financed in some way with only a small percentage paid for with true cash savings.

   That means people are arranging funds to buy a car from you before they go shopping, or during the process once they have found a car they’d like to buy. Think about your dealership’s finance penetration. If it isn’t in the 80-90 per cent range, then there’s more opportunity for you in this area.

   The key here is educating clients as early as possible in their car-buying process and keeping them informed along the way of the benefits of utilising your finance. Don’t be greedy with interest rates either because any profit you can generate from finance is above what you should’ve made from the vehicle if that was done well.

3. Insurance - Like finance, it’s important to educate your customer early on about protection available. Mechanical breakdown insurance (MBI) is the most common insurance product purchased through dealerships.

   However, this is influenced by the fact that most customers aren’t presented with guaranteed asset protection (GAP), payment (loan) protection insurance (PPI/LPI) or motor-vehicle insurance. These products need to be introduced as early as possible so customers can make informed decisions on the suitability of the benefits.

   Don’t fall into the trap of only presenting these products to customers you think should have them. Offer them to every customer, every time.

   A gauge of how well you sell MBI is looking at how many policies are sold in your dealership each month against non-financed sales. If there are none, then the sales process needs improving.

4. Accessories - This is an area that can cover items such as tow bars, roof racks, tinted windows, paint and fabric protection, entertainment systems and mag wheels.

   It’s hard to stock all these items for every vehicle, so make contact with a local supplier that has plenty of stock and options along with providing you with wholesale prices so you can make small margins.

All of these things provide extra opportunities to maximise profits from customers. Individually they can all have small margins offering excellent value for your clients, but collectively amount to a solid return for dealership. 

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Disclaimer:
The Motorcentral blog is intended for educational purposes only. All writers opinions are their own and nothing published on this blog should be interpreted as a recommendation or advice in any way. Motorcentral is also not responsible for and does not verify accuracy of any of the information contained within this blog.
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