The NADA data on gross margin per new car has fallen from over 4% in 2011 to just over 2% in 2018. Your market is competitive, and gross is low, switching to a one price business model may be imperative for you. Why? If you can’t raise gross, reducing costs is the only other way to preserve your bottom line.
In addition to delivering a better, more transparent customer experience it is faster! Faster means more productivity. Moving a transaction through the process in 1-hour vs the 3-5 hours it typically takes means you can sell many more cars per person. More cars per person cuts sales costs per car.
To go even faster, a one price, single point of contact is the ultimate in speed, customer experience and cost reduction. Not only does the customer get the best buying experience, the store removes the bottleneck of the Finance Office.
Sales people that manage the transaction from beginning to end build a stronger, trusting customer relationship. The F&I products can be positioned for the specific needs the customer has been telling the sales person throughout the discovery and presentation stages of the process. Backend gross remains strong, transaction time is dramatically reduced, and the cost of the transaction is significantly lower even if the individual sales person compensation is not reduced.
A hidden benefit is the additional revenue and profit opportunities from increased units. Each transaction may deliver a trade-in bringing additional profit opportunities. Trade gross, F&I on the sale of the trade, lower acquisition costs, profit on reconditioning, parts and on-going service all contributed to a better top line and bottom line.
In addition to direct benefits such as better CSI, employees like one price selling better too. Happier employees lowers turnover rates, another big driver of dealership costs.
The market is capping the top prices we can charge, take control of the costs and velocity to drive profit. More transactions equal more profit opportunities. Better customer experiences drive more transactions. The one price business model creates better customer experiences. Great execution delivers the experience resulting in successful sales and top CSI. A virtuous cycle the gets better and better the more you do.
The best business model for the customer’s experience turns out to be the best business model for the dealership to drive growth and profit. The dealership goals for the future must be faster, more transparency, process driven, higher productivity.