Pre-NADA Workshop to Bust Used-Car Myths

By Richard Greene, Auto Remarkerting NewsMagazine Editor
February 08, 2008

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SAN FRANCISCO — When Joe Lescota and Chip Perry tag-team today during a special pre-NADA workshop, they will shift into their myth-buster roles.

No, they are not reprising Dan Aykroyd and Bill Murray's famous 1984 parts in a "Ghostbusters" sequel.

Instead, the duo will be busting several myths surrounding the used-car buying experience during a ground-breaking, first-ever presentation. The 90-minute session begins at 1:30 p.m. and will be held at the San Francisco Hilton.

Lescota is automotive marketing chair at Northwood University. Perry is president and chief executive officer of AutoTrader.com.

Their Approach

They will call upon their extensive backgrounds in the retail and online spaces to present a statistic-laden case for how dealerships can boost profitability by strengthening their used-car department, while at the same time effectively using the Internet to attract an even greater number of customers into their stores.

"Some of the information that Chip and I will share will be new, while some of it will be a cold-hard reminder to dealers on how critical the used-car department is in a time when new-car sales are on the decline," Lescota pointed out.

"There are tremendous opportunities in used cars today, but regrettably many franchised dealers have for years never taken advantage of the used-car market the way they need to," he added.

"In fact, quite frankly, many new-car dealers gave up a lot of that business to the independents," Lescota said.

"Well, guess what? The market is shifting, and it appears new-car sales may not break 16 million this year. And with profit margins as slim as they are today, dealers and used-car managers can't afford to make mistakes. Too much is at stake," he continued.

So for dealers to be profitable in 2008, they basically have a couple of choices, Lescota said.

"Either shore up their service department or get into the used-car business. By getting into the used-car business, they can certainly improve their fixed coverage because they go hand in hand. Chip and I will help dealers and used-car managers not only grasp the importance of this new reality but also how to come up with practical solutions they can implement," he further explained.

At the same time, Lescota said he hopes dealers will look at the used-car department as an additional franchise, and not as a separate department.

"Many dealers who are thinking 2008 will be a tough year are considering adding a new franchise to supplement their existing franchise. Well, they already have it. It's sitting right in front of them - used cars," Lescota explained.

"That is their franchise. No need for additional parts, additional signage, additional investment in buildings or land," he added. "And this is especially true in the area of certified used. Grosses are higher. F&I dollars are higher. Satisfaction is higher. And the likelihood of a certified buyer becoming a new-car buyer down the road is higher. So Chip and I will help attendees embrace this aspect as well."

The Heart of the Material

And a part of what Lescota and Perry will do today is bust a handful of myths.

1) The automotive Internet is more about new-car shopping than used-car shopping.

"Many dealers have the impression that if somebody is going to use the Internet, the majority of hits or inquiries is towards new cars. That's really not true," Lescota indicated.

"Far more people are going to the Internet seeking out used-car information, and we'll show how that number has grown tremendously over the years," he said.

As a result, dealerships need to better position their used-car inventory online with more information, content, photos and videos," Lescota added.

In that context, Lescota said he and Perry will explore how dealers can draw more traffic to their stores.

"We have groomed over the years numerous lot lizards, where salesmen hang around the showroom floor like a lizard with their tongue hanging out waiting for the next fly (customer) to walk in, and if the flies don't come, the lizards die," he explained.

"Chip and I will present specific ways dealerships can attract more people to their showrooms by effectively placing cars on the Internet," Lescota said. "And then we will detail how sales associates can properly work the Internet to entice customers to set appointments to come into the store. The majority of Internet inquiries lead to a direct phone call, and dealerships need people who can work the phone better, not someone who can write e-mails."

2) Newspapers, television, radio deserve the largest share of a dealership's advertising budget.

Lescota pointed out that newspaper circulation and readership are shrinking, yet many dealers continue to invest the lion's share of their marketing budget in newspapers.

"More and more of us no longer get our information from the newspaper, and 18- to 25-year-olds don't even read the newspaper. So, dealers need to look at the Internet as a very valuable source of advertising investment," he observed.

3) Car buyers always know what they want to buy before they start looking for a new or used car.

According to recent studies, vehicle shoppers are perhaps a bit more open to considering all their available choices than many experts previously thought.

Recent data from Lescota indicated that 37 percent of used-vehicle buyers originally intend to buy a new car, but have a change of heart and go with a used car instead.

An AutoTrader.com study pointed to data that indicated 64 percent of its shoppers choose the "All" vehicles option on searches, implying they are interested in both new and used.

"With better long-term reliability and certified pre-owned programs bringing a new-car confidence to used-car purchases, buyers who wouldn't consider used cars in the past are increasingly looking at and buying used cars," Lescota said.

"Dealers also have the misconception that when customers look at used cars, they are looking at a particular car," he added. "That's really not true. Even when the come into the dealership, they may want to see a specific vehicle, but a sales person who is doing his or her job might just find out that the customer only asked about that particular car because it's all they knew. So it's the sales person's job to educate that customer on options."

Today's presentation is designed to help those attending use this insight to improve their marketing.

"One of the things we'll talk about at this presentation is how to leverage this trend and merchandise your used cars effectively to reach this new market of used-car buyers," Lescota added. "Our aim is to explode some of the myths and ‘conventional wisdom' that might be getting in the way of dealers getting the most profit from their used-car inventory."

The workshop will also delve into maximizing profitability, inventory and remerchandising, moving vehicles off the lot, motivating salespeople and how to maximize Internet marketing.

"There are so many opportunities to sell more cars more profitably if people will look at their business practices — many of which worked in the past but that now need updating or outright change," Perry said.

"With technology, marketing channels and customer preferences changing so quickly today, things that might have been true even five years ago may now be myths and should be revisited," he continued.

"With this up-to-the minute research and information we'll be presenting, dealers will have actions they can implement the day they return from the show that will help build their business and maximize profitability," Perry concluded.

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