As the ongoing chip shortage continues to delay OEM production, dealership inventories have reached historic lows. At the same time, increased consumer demand – further sparked by concerns over vehicle availability – has driven both new and pre-owned prices to new highs.
This combination has dealerships on the hunt for in-demand, high-quality vehicles. With auction prices rising alongside the consumer index, many dealers have turned their focus to buy-backs and trade-ins to maintain profitable and sustainable pre-owned inventory.
As new research from IHS Markit finds the average age of light vehicles in production rises to 12.1 years, increasing by nearly two months in 2020 due to the pandemic, new opportunities are emerging in the service drive.
With an aging fleet prompting additional maintenance visits, the service drive provides dealers a prime opportunity to acquire in-demand trades while flipping their existing inventory through replacement sales.
The service drive offers a treasure trove of customer and vehicle information that can be leveraged to acquire in-demand, high-quality trades, but your entire dealership needs to be on the same page when it comes to your acquisition strategy.
Members of the service team should be in-the-know about in-demand makes and models, and internal standards for buybacks should be made clear to all departments. While these details are key, identifying which customers represent the best inventory opportunities is a bit more complex as service customers typically aren’t in the market yet for a new vehicle.
Leveraging advanced data mining tools allows dealers to engage customers who represent promising prospective trades, such as those who are out of warranty, over their lease mileage or want a lower monthly payment.
Some dealers have reconfigured their BDCs to dedicate tech-savvy team members to act as service-to-sales liaisons. This strategy enables service teams to identify trade opportunities and engage prospects before they enter the service drive. This is especially important as an increased demand for pre-owned vehicles breeds dealership competition for the best models.
Using the same data mining tools with predictive marketing capabilities to identify prospective leads, dealers can leverage the factors driving purchasing decisions and uncover insights, such as customers’ CARFAX history or vehicle maintenance history.
By automatically assessing factors like estimated trade-in values and incentives that may be available, dealers can engage prospects with personalized messaging and specific offers that factor in demographic information, such as household composition and previous purchase history. This allows dealers to engage prospective leads before they start shopping around.
This approach offers dealers numerous opportunities beyond the initial service buy-back or trade. Data from automotiveMastermind demonstrates customers who serviced with a dealer were just over 2.5x more likely to purchase their subsequent vehicle from the same retailer – a critical factor amid inventory shortages to both immediate and long-term success.
Loyalty customers and their households are an invaluable source of high ROI sales, less likely to haggle, more likely to generate service and other fixed-ops revenues and more likely to contribute to referral business. These dealership inventory sourcing opportunities provide the highest margin sales on the new car going out, as well as the trade coming in.
By using dealership marketing technology that integrates with your dealership’s CRM and DMS, dealers are promoting loyalty by automatically engaging customers at key touchpoints, such as using timed and personalized service notifications and developing connections with customers until they are ready to re-enter the market.
While there is some relief in sight by the end of 2021 as vehicle production ramps up, leveraging the service drive as a source of profitable buybacks and trades empowers dealers to stay a step ahead to adapt to whatever lies ahead.
Did you enjoy this article from Steve DeWitt? Please share your thoughts, comments, or questions regarding this topic by submitting a letter to the editor here, or connect with us at firstname.lastname@example.org.