Stop looking for it, stop trying to make one out of the latest ‘thing’ that you have been sold and let’s put together a road map of how an automotive dealership actually does increase their market share.
First: Establish your month to month actual market share.
- Look at the monthly sales of new and used cars (from 2000 model year forward) in a 15 mile radius of your store using Auto Count or Cross Sell.
- Take your monthly sales numbers and determine what your share of the market is each month.
Each month only so many cars are going to be sold in your market, your job is to get as big a piece of that action as possible. You have to have a measurement, the above is how you measure it. Don’t look at one month, look at the average and the trends.
Second: Know the factors that are involved and how they are weighted.
- Your new and used inventory
- Effect on market share – 30% to 60%
- Demand for your Brand
- Effect on market share – 30% to 50%
- Your internal processes and staff
- 20% to 40%
- Your marketing
- 20% to 35%
Even if marketing accounts for 35% of your ability to positively affect your market share, there is still no silver bullet. There is something, however, called ‘point of diminishing returns‘. There is a point where spending more on marketing above a certain monthly budget does less and less in terms of how many sales it produces. As an example, if you spend $50,000 a month on marketing and you average a 4% market share, spend $75,000 and average a 4.4% market share, but when you spend $100,000 a month you only get to around a 4.6% market share, the amount you spend between $50,000 and $75,000 produces a better return than the money spend between $75,000 and $100,000. Again, you have to look at a set of months to determine this, not just one or two. The more data, the more statistically significant. The less data, the less statistically significant.
Finding a marketing budget that does not go beyond the point of diminishing returns is one part of making an intelligent decision as far as how much to spend. the other part is taking on forms of marketing that consistently stays in front of the right people to maximize the overall effect. And, because repeated images have an accumulative effect, there might be times when you can pull back for a couple of months and still ride the positive effects of the exposures you obtained from the past efforts. But, you can only pull back for a couple of months before you have to start over as new people come into the buying cycle.
All this said, refer to the factors involved (processes, inventory, etc.) as these are the building blocks to a positive increase in market share. Measure your market share in at least 3 month averages and keep this in mind. A good month doesn’t mean anything if it’s not in context with what has happened in the market that month. If you sold 200 cars one month and only sold 170 the month before, it does mean something if the market was static, but if the entire market was up 25% and you were only up 18%, you lost ground, you didn’t gain ground. Conversely, if the market were down 25% and you were only down 10%, there is reason for celebration.
Even though marketing may have the smallest influence on how you do in the market, it can be the difference maker. If your dealership is good on these accounts: Inventory, demand for your brand and Internal processes and staff, marketing can make all the difference by giving you the opportunity to ‘steal’ sales from the competition. But consistency is one of the keys here. You want to have your message in front of the right people on a consistent basis if you want to gain ground in the marketing arena.
If you need any help with any of this, please contact me: Michael Abrams 205-967-9405