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    1. Home
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    3. 2015
    4. NADA conference day two

    NADA conference day two

    24 Jan 2015

    2015

    • Transitioning support for auto supply chain companies
    • Innovation in Australia
    • New FBT entertainment cap introduced
    • New reporting obligations for multinational companies
    • Unlocking super
    • The truth behind business failure
    • 2015 Distinguished Family Business of the Year
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    • New South Wales Real estate & construction update
    • State revenue offices and the ATO information sharing
    • Redundant corporate entities?
    • Streamlined process for new business applications
    • Imported building materials under scrutiny
    • Tightened lending rules threaten industry growth
    • Any GST hike must be offset
    • New PM appoints Minister for Cities
    • Reforming Australia’s Federation and Tax System
    • A message from our Global Head of Real Estate & Construction
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    • The deadline is looming for the Exploration Development Incentive
    • Valuing Employee Share Schemes (ESS) – Impending Tax Changes
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    After visiting San Francisco Honda and hearing how consistent their issues are with Australian dealerships I thought it would be worthwhile sharing some of the sales trends recently published by the NADA Industry Analysis Division.

     Average US Dealership Profile YTD Oct 2014  YTD Oct 2013  Australia benchmarks
    Total sales  37,321,711 34,824,092  
    Total gross   4,967,287 4,717,230  
     As % of sales  13.31% 13.55% 12-14%
     Net profit before taxes 922,023 865,810  
     As % of sales  2.47% 2.49% 2.20%
    Advertising expense 371,264 358,124    
    As % of gross  7.47% 7.59% 3.20%
    Per New Vehicle Retailed   601 608 225
    Rent and Equivalent  353,264 344,054    
    As % of gross  7.11% 7.29% 9%
    New vehicle floor plan interest  -68,282 -51,814  
    As % of gross  -1.37%  -1.10% 3.80%
    Average new vehicle selling price 32,335   31,501  
    Gross % of selling price 3.68% 3.81% 9%
    Average gross profit 1,190 1,200 2,100
    Average used vehicle selling price 18,796 18,000    
    Gross % of selling price 12.60% 13.20% 12%
    Average Gross Profit   2,369 2,375 2,200

     

    With the average net profit as a percentage of sales slightly below 2.5%, the average US dealer is achieving profit in excess of the Australian benchmark and 0.5%-1% in excess of the average Australian dealership.
    With an average new vehicle profit per unit of only $1,200, what are the key differences driving this profit?
    Easily the most significant is the current interest rate environment that has resulted in the average US dealership paying zero interest on their new vehicle inventory. The other most significant difference is that US dealers are paying significantly less rent than most Australian dealers.

    These benefits are slightly offset by increased spending on advertising. It is clearly apparent from both the dealership tour and the NADA workshops that the sole focus for advertising  in the US is digital and maximising your online presence.

    One of the sessions I attended on this topic was:

    Two Google advertising tactics you aren’t using – Tim McLain, Senior Marketing Manager Netsertive

    The main learning from this session was that the US market is much more sophisticated when it comes to managing their website and interpreting the data available when compared to Australian car dealers. Technology is moving so rapidly if you don’t have a fully qualified Digial Marketing Manager you will be left behind.

    The first part of the presentation provided some background as to the six digital marketing tactics that most successful dealerships have mastered:

    • search engine marketing 
    • display banner advertising 
    • display retargeting
    • mobile (basic search advertising and mobile website)
    • call tracking
    • landing pages

    Some of the KPI’s to review in respect to these tactics, include:

    • Search Engine Marketing – two-three average ad position, 60-80% share of voice, and 3-6% click through rate
    • Display Banner Advertising – 100-500 thousand impressions per month
    • Display Retargeting – 20-40% return visitors

    The second part of the presentation focused on taking two new technologies that can enhance your online presence even further: 

    • Conquest Remarketing for Search 
    • Enhanced Mobile Campaign

    Put simply Conquest Remarketing for Search enables dealerships to remarket to a potential customer who has been onto their website and searched for either a particular model or service when they search for another model or service from a competitor. For example, after visiting your website and viewing a Toyota Camry you can advertise your dealership when they search for a Mazda 6.
    The benefits to this type of marketing are: 

    • the potential customer has been on your dealership website so they are familiar with who you are
    • you can expand your PMA and cross selling customers are traditionally easier to convert

    With recent research showing that people spend more time viewing their mobile devices than televisions and 50% of all internet searches being conducted on Mobile devices the second key focus of the presentation was to enhance are dealers mobile advertising campaigns.

    The main takeaway from this part of the session was that data is now so refined that a Dealer can not only find out whether a customer has viewed their website from a desktop or mobile device but also the type and model of the mobile device and where they searched from.
    The benefit of this type of information is that you can design your website for the types of devices being used and focus and pay a premium in order to market and deliver a message to people who are searching closer to your dealership.

    Overall, a very interesting and eye opening session.

    Ivy League Financial Formula for Success in Service – Chris Collins

    The second presentation I attended today focused on the Service Department and trying to increase your effective labour rate to drive profitability.
    Like Australia, in the US repair order numbers are dropping as the manufacturers continue to produce better cars with longer service intervals.
    In addition, the US market has been significantly impacted by “Quick Lube” service centres with most franchised dealers now offering this service to compete. The common complaint with doing this is that dealers often utilise their less experienced technicians in these areas and they are less proficient at diagnosing upsell opportunities.
    Chris began the session by explaining how to calculate an effective labour rate, its importance to profit and how to calculate you net profit per hour sold. For the accountants these calculations can seem easy however they are often overlooked by dealerships.
    The main focus of the workshop was then on strategies to increase this effective labour rate. Some of the suggestions made included:

    1. Establishing a deeper connection with your customers. This can come through training Service Advisors in customer relations rather than in products. Changing the way they introduce themselves to customers so that they are able to “talk about them not too them”. Doing this should establish trust and increased sales and retention.
    2. Reworking your Drive System for greater upsell conversion. Chris called this Service Judo and the premise being if a customer sees the issue with their vehicle they are more likely to agree to having the work completed, for example balding tyres.

      Whilst not a new concept, the key to its success would clearly be being able execute it quickly and smoothly with the client. To do this, Chris suggested cherry picking cars that are more likely to have upsell opportunities such as those out of warranty or >50,000 kms and using experienced technicians or foreman to diagnose the vehicle.
    3. Customer VIP Program. This concept (whilst quite simple) can be very effective at bringing customers back to buy cars, service retention, and building customer rapport. The key to these programs is  what  are provided as a benefit, some of the suggestions included: free car washing, loan cars, annual pit stop vehicle inspections (good upsell opportunity) and fluid top ups.

    Tomorrow I’ll be attending sessions on used cars and the top questions to ask your CFO.

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