Here’s a question that’s had me thinking: Has the evolution of the automotive retail business reached a point where dealers need to stop hunting and start farming?
The question came to mind during a conversation with an industry analyst. He offered an anthropologist-type view of the industry — some dealers are hunter-gatherers, while others appear to have advanced to more agrarian or farmer-like modes of operation.
To explain his view, the analyst shared two philosophies that guide distinct types of investors.
The first philosophy, known as “market timing,” has investors aiming for one-off opportunities that, because of market changes, offer quick-hit potential to maximize their returns on investment (ROI). This approach can yield big returns but it carries sizable risks and, by its nature, is a less-efficient investment strategy.
The analyst considers this investment philosophy akin to the traditional way dealers have managed their used vehicle inventories. For these dealers, the age of vehicles is less important than finding a buyer willing to pay the maximum front-end gross profit they expect on any given vehicle. Like hunter-gatherers, the dealers encounter periods of feast or famine, depending on their ability to find buyers. Unlike hunter-gatherers of the past, though, most dealers cannot pull up stakes and move to another area where buyers (or live game) might be more plentiful.
The second philosophy, known as “dollar-cost averaging,” emphasizes the execution of a consistent investment strategy over a longer course of time. Most of us, I think, typically follow this investment philosophy with our retirement portfolios—we align a mix of investments and risk to our strategy and seek a long-term, positive gain as we ride ups and downs the market.
The analyst likens this investment philosophy to the market-focused approach many dealers have undertaken in used vehicles. These dealers are like farmers, selecting a specific, strategy-based mix of vehicles (or crops) that will yield the best return given local market conditions. These dealers, like farmers, can be opportunistic on occasion, but their profitability rests on consistently and efficiently executing their strategy over time.
As we discussed the analyst’s view, we recognized that many dealers actually embody a blend of both types of investment philosophies in their used vehicle departments. Some dealers operate like hunter-gatherers as they set above-market prices for “fresh” used vehicles that don’t necessarily deserve the profit-prime market position. The hope, of course, is that the pricing decision, timed to reflect their desire for maximum gross profit on a “fresh” car, will yield a buyer willing to pay the premium.
But as the vehicles inevitably age, the dealers shift to a more farmer-like mode. They mine the market and readjust prices as they wind down their expectations for front-end gross profits and wind up their desire to sell the vehicle before it becomes a money-loser.
We then asked ourselves if there were any dealers who might truly follow the “dollar-cost averaging” or farmer-like philosophy in its purest form.
The analyst and I quickly realized that dealers who have adopted one-price or limited negotiation strategies in their used vehicle departments would qualify as automotive retail farmers in today’s market.
First, their strategy rests on a long-term view — they haven’t adopted one-price/limited negotiation environments as a quick fix; the dealers believe their strategy is right for customers today and tomorrow.
Second, the strategy emphasizes efficiencies and customer satisfaction. The dealers waste no time pricing every “fresh” car to its correct market “sweet spot,” and their showroom processes give sales associates the ability to close more deals in less time. In addition, the dealers believe that as their processes satisfy customers, they’ll see higher levels of repeat and referral business.
As the analyst and I wrapped up our conversation, we both predicted that the “dollar-cost averaging” or farmer-like philosophy would likely be the dominant operational model for dealers in the coming months and years.
The prediction flows from recognition that while many dealers may blend the two investment philosophies in their used vehicle operations today, the duality will eventually become counter-productive in the face of an ever-increasing need for improved efficiencies and sales throughput.
The analyst closed our discussion with an appropriate take-away quote: “If dealers were cavemen, it seems time to put down the club and pick up a plow.”
Dale Pollak is the founder of vAuto. This entry and Pollak’s entire blog can be found at www.dalepollak.com
Do you remember the last time you were excited to watch a commercial on television?
If you're like most people, that probably never happens, says Paul Potratz, of Potratz Automotive Advertising, in his latest “Think Tank Tuesday” video report.
In this week’s video, he touches on a tactic he says can increase the percent of new automotive shoppers who are more likely to watch your commercials by over 50 percent.
What tactic is this?
There is another way to do TV advertising — but it’s a bit different from a commercial: He’s talking about video pre-roll.
For example, when you go to YouTube, before you can watch your video, there is a pre-roll or commercial you have the opportunity to watch first or skip.
There are a number of ways to use video pre-roll.
Potratz touched on the following:
- You can target a customer based on their search behavior or by geography, etc.
- You can also do video pre-roll through retargeting.
Video pre-roll is targeted to a potential customer’s behavior. If someone is online searching for a Honda Civic, you can target someone with pre-roll based on that behavior.
Potratz says this form of advertising is largely underused by new-car dealers, but according to the statistic, this number should be much higher, he says.
For example, according to YouTube pre-roll statistics, one fourth of new-car shoppers will watch over one hour of online video when seriously shopping for a new vehicle.
For more stats on how video pre-roll can help your advertising strategy, click here to see the latest Think Tank Tuesday” video.
It wasn’t too long ago that dealers routinely kept used vehicles for 90 days as retail units.
More recently, dealers have adjusted this retail timeline to account for rising price competition and transparency spurred by the Internet, as well as the always-increasing costs of keeping cars in retail-ready condition on your lot. It’s now common for dealers to set a 45-day or 60-day retailing timeline for used vehicles.
In my work with dealers, I’ve urged them to maintain at least 50 percent of their used vehicle inventory under 30 days of age. This operational standard effectively forces used vehicle managers to make pricing and merchandising decisions that will reduce the average days to sale for every vehicle, and helps them beat their 45- or 60-day retail window.
But lately, I’ve seen a growing number of dealers move the goal posts. They are making 30 days the maximum amount of time they’ll give any used vehicle a shot as a retail unit.
At a Chicago-area dealership, for example, the average age of its 70-vehicle inventory is 10 days, with all but four or five cars selling under 30 days. “I know exactly why those few units didn’t sell more quickly,” the dealer says. “We made a mistake along the way with our merchandising or pricing, plain and simple. Our next goal is to consistently retail everything under 30 days.”
At a six-store group in Indiana, the used vehicle director took a more data-detailed path to determine that retailing cars after 30 days isn’t doing the dealer group any financial favors. He examined the front- and back-end net profit generated from used vehicles sold by age (e.g., 0-10 days, 11-20 days, etc.).
The results were eye-opening: Cars retailed before 30 days generated an average net profit of $927/vehicle; those retailed between 30 and 60 days actually lost an average of $757 (even though average F&I gross profits were higher for the older units).
“I was a little shocked when I saw the numbers,” the used vehicle director says. “We’ve got a lot of work to sell more used vehicles under 30 days.”
Meanwhile, a New York dealer came to a similar conclusion. “We’ve crunched the numbers and found the return on investment (ROI) fades quickly after 30 days,” the dealer says. “With 30 days as our new goal, we’re putting our attention and time on vehicles where the effort is worthwhile to the dealership from an investment perspective. I now expect the cars to be gone on day 31.”
These dealers’ comments and performance suggest two takeaways for other dealers — particularly those who still consider a 60- or 90-day inventory age policy as OK.
First, less is more when it comes to a used vehicle’s time in inventory. The old axiom that “fresh cars deliver the best gross” is truer today than it’s ever been. I would submit that dealers who allow a retailing window beyond 45 days do not yet realize how much they could improve used vehicle sales and profitability if they shortened the timeline.
Second, turn-and-earn efficiency in used vehicles works. A dealer with a 30-day retailing window will sell three times as many vehicles—and triple the opportunities in F&I—than a dealer with a 90-day age policy. In addition, the more-efficient dealer will likely see little, if any, wholesale loss compared to the other dealer.
Each of the three dealers referenced in this article were highly profitable and successful in used vehicles before they focused on a 30-day retail timeline. I asked each of them why they felt the need to raise the bar.
“We’re never satisfied with good enough,” the New York dealer says. “We’re in the business to make more money, not just get by.”
The Chicago dealer adds: “Whether it’s in business or my personal life, I’ve always pushed to get better. I’m just applying that philosophy to used vehicles, where the market requires us to sell cars faster than we used to.”
Dale Pollak is the founder of vAuto. This entry and Pollak’s entire blog can be found at www.dalepollak.com
I had an email exchange with a Chicago-area Honda dealer the other day that I think is relevant for all dealers, especially those who have adopted the Velocity Method of Management.
The dealer asked two important questions — What’s the optimal percentage of used vehicle inventory that should be maintained under 30 days of age?, and, What’s an average front-end gross profit benchmark for today’s market?
The questions go to the heart of the challenge dealers face in today’s used vehicle market. In the past, the age of vehicles in a dealer’s inventory and the front-end gross profit averages they might produce weren’t closely correlated. This retailing blessing gave rise to the operational belief that the age of a vehicle didn’t matter as long as it delivered a $3,000 to $4,000 front-end gross profit.
Today, unfortunately, things are different. Dealers now face a higher degree of pricing transparency, competition and operational costs as used vehicle retailers. The result: Most used vehicles lose their ability to make a meaningful margin contribution sometime between 30 and 45 days. In effect, these market conditions have tightened the correlation between inventory age and front-end gross profit potential, forcing dealers to retail vehicles in less time to make the investment and opportunity cost of capital for each car worthwhile.
In light of these circumstances, I advised the dealer that it’s now an imperative for dealers to maintain at least 50 percent of their inventory under 30 days of age—an operational benchmark that requires constantly striking a balance between pricing vehicles for what you hope to achieve in front-end gross profit and what the market will truly bear in 45 days or less.
I also told the dealer that he’d be better off worrying less about his average front-end gross profit for used vehicles and focusing more on the “total gross” each vehicle generates for his dealership.
I explained that most Velocity dealers now understand that every used vehicle really represents four opportunities to generate gross profit—in the used vehicle department, in parts, in service, and in F&I. With this understanding, the average front-end gross profit is only one element of a holistic strategy that seeks to maximize the “total gross” on every car quickly, and repeat the process again and again.
After I shared my thoughts, the Honda dealer did some calculations. He determined that he would meet the inventory age benchmark, sell more cars faster and maximize his “total gross” if he trimmed his front-end gross profit expectations by $300 to $400 per car.
I congratulated the dealer on discovering the secret to success in today’s more-challenged used vehicle market. But his new-found understanding about the necessity and bottom line value of a “total gross” strategy still eludes an awful lot of dealers.
For these dealers, I must ask the question: Do you pay your bills off your average front-end gross profit or your total variable gross profit? And, if it’s the latter, why wouldn’t you sacrifice a little of your average front-end gross for the benefit of increasing your “total gross” on every car time and time again?
Dale Pollak is the founder of vAuto. This entry and Pollak’s entire blog can be found at www.dalepollak.com
I recently met with a general manager who was concerned about competing with a particularly large and savvy auto group, and was looking to shift some of his advertising to digital. He asked me, “Where should I focus my budget? SEO, or paid search? What is the difference between the two?” This is a question I am asked often, and it’s clear that many dealers are still unsure of the difference between SEO & SEM. So I’m going to give you a crash course on what all of this stuff means.
This question is the digital marketing equivalent to, “I want to get in shape. Should I be eating better, or start working out?” Ideally, the answer is both, but each of these options has its own function and its own benefits.
Search Engine Optimization (SEO), or work that improves your visibility within Google’s unpaid “organic” rankings, is the “eating better” part of this equation. It requires constant, direct attention and discipline.
Would you rather leave your website on autopilot than taking the time to write quality content someone would actually want to read? You can do that, but it’s the equivalent of grabbing a greasy cheeseburger from the food cart next door.
The healthy chicken-and-rice diet of SEO is using your website to give customers useful information about your dealership and your inventory. Content is the backbone of your website, just like food is the backbone of any good diet. Feed your website great content, and you will reap the rewards by ranking higher and more often for search terms.
Search Engine Marketing (SEM), is the opposite of SEO, through which you purchase rankings rather than earning them. SEM is the “working out” part of getting in shape. This brings paid traffic to your site: immediate results, regardless of your site’s ranking in search engines.
Paid search can take on many forms:
- Text ads displayed to customers who are searching a particular phrase
- Banner-style display ads shown to customers who are reading about a particular vehicle on a review site
- Animated “remarketing” ads shown to visitors who have visited your site
- Video ads served up to customers on video-sharing sites like YouTube.
Display advertising and retargeting are great ways to stay in front of consumers as they browse the Web, giving you opportunities to communicate your unique value proposition and reinforce your brand.
SEO or Paid Search
Should you be spending your time and effort “eating better”, or “working out”? It depends on the budget and goals of the dealership. Are you looking to drive low-funnel car shoppers to your website, or are you more focused with branding your store within the local community? Perhaps you’re looking to improve the experience on your website, increasing your time on site and conversion rate.
Regardless of what is most important to you, it’s essential to understand what to expect from organic or paid search. SEO is like a marathon, and SEM is like a sprint. They both deliver great results, but in a very different way and over a different time frame. The best digital marketing strategies include a combination of both SEO and SEM, allowing you to achieve your goals today and tomorrow.
Impress your pals at the water cooler
SEO: Search Engine Optimization – work that improves how you rank for phrases that customers type into search engines like Google and Bing.
SEM: Search Engine Marketing – Digital advertising campaigns that show your ads in text, image or video format to relevant consumers.
Display Advertising: Banner ads or videos, shown based on the context of a site being visited, phrases that a customer searches, or sites they’ve previously visited.
PPC: Pay per click, the most common advertising model in digital, under which you only pay for advertising when a customer clicks your ad.
What’s All This Talk About Hats?
Black Hat SEO refers to practices that attempt to manipulate search engines into artificially giving pages a higher rank. They include:
- Cloaking: attempts to show search engines different information than users see
- Link farming: Building networks of shallow, “spammy” websites for the purposes of creating links and improving sites’ ranks
Black Hat tactics can sometimes fool search engines for months, but search engine algorithms eventually adjust to punish sites that use black hat tactics.
White Hat SEO refers to practices that improve search engine rankings by providing useful information to searchers.
Want to learn more about SEO and SEM and find out which one is the better fit for your dealership? Contact Kevin Gordon at kgordon@convertus.com or (888) 354-6441.
Kevin Gordon is an international speaker and thought leader in the automotive industry, regularly speaking at conferences across North America. Kevin co-founded Convertus, a digital marketing solutions provider for dealers. Learn more at Convertus.com.
One of the key benefits of owning a group of dealerships is capitalizing on the efficiencies that can come from good centralized purchasing and planning activities. The math just works, and dealer groups are the fastest growing ownership structure in the Canadian automotive industry.
If you’re a single-store owner operator, don’t fret: you can make advantages for your business under just one rooftop, to get car-by-car efficiency that is scalable from a 40-store corporation to a family-owned small-town dealership.
Here is a look at three areas of opportunity, to control expense, maximize time and increase gross profit.
Reconditioning: Easily the biggest expense on used units retailed, after the actual cost of the car. Keep control with set guidelines that state exactly what degree of wear or what condition specific safety and aesthetic items should be in.
Don’t replace parts that can be repaired, or which have a decent amount of use left on them; instead, balance the cost of machining or simply leave the component as it is — so long as doing so leaves the vehicle fit for its intended use for a reasonable amount of drive time. Brakes and tires, especially, should be monitored. When you do need to replace parts, consider quality line aftermarket parts, in many cases these will have warranty on them just like OE parts, and most customers don’t really care as long as the component does the job just as well.
Getting your Vehicles Online: I always tell my dealers, it’s not for sale until it’s online! Whether you are a market value pricing dealer or not, and regardless of how your price position to market is, one thing is for certain, no one will ever look at your car if it doesn’t show up in their search results.
Have a detailed process for getting inventory, both new and used, online. Set strict timelines for work to be completed and for vehicle information captured into a custom listing, being clear about whose job it is to chase cars through this system. Simply setting a firm three day rule, for example, from a status quo of seven days, can shave 7-10 percent off of the turn time of a unit (assuming the car is otherwise desirable) at a dealership operating on an average 50- to 60-day turn. That means you could get an extra half-turn in each year, just by making sure you do the same things you are doing now but without lag time.
Plan for 50-50 Front and Back-End Gross: Don’t accept “Our customers don’t buy that stuff,” as an answer! If you put your warranty, chemical protection and insurance options on an iPad and showed them to people on their way out of the grocery store, I bet many of them would say they didn’t even know they could buy such things!
Change the mindset in your store if your staff think it’s okay to only offer some products to certain customers, and make sure that all of your customer facing staff understand that products sold to protect the car and car buyer have value not just on their bottom line, but also on the long term satisfaction of their own customers.
The digital fragmentation of car listings means that there is a definite cap on what a car or truck is worth, but the complicated nature of Canadian families’ finances means that there is no limit to the value that security and protection can bring. Rely on quality F&I products to increase your average deal gross profit, unless you can find some downside to making money and offering customers protection from breakdowns of their car or their cash flow.
There are definite advantages to leveraging assets ranging from inventory to computer systems, tocontracts to human capital, between multiple rooftops in a dealer group. But don’t let’s get so focused on the big picture that we forget, at the end of the day, that the story simply goes like this: Desirable products, bought and brought to market at the right price point and in the shortest span of time, shown to the highest number of people, with the most logical accessory and aftermarket options offered equals a win. And you are never too big or too small to understand the logic of that.
Stop valuing quantity over quality when you’re purchasing marketing services. Stop purchasing packages because they're cheap and not because they're effective.
On this week's Think Tank Tuesday, Paul Potratz, chief operating officer of Potratz Advertising, explains a “sickness” he coins “marketing hoarding” and offers his prescription. During the video he made the connection to the television show “Hoarders: Buried Alive.”
“People value themselves in the stuff that they have, but the stuff they were collecting were worthless,” he said.
And the same goes for marketing.
“Are you a marketing hoarder?” asks Potratz.
In other words, are you quick to sign on to the next best radio, TV or digital marketing deal, before weighing the pros and cons?
If you are buying “get-rich-quick” advertising deals, Potratz says it may be time to reconsider.
“If it’s too good to be true, you might want to question that ad deal,” he said. “More is not better … It’s about quality, not quantity.”
Click here to see the latest “Think Tank Tuesday” video from Potratz Advertising.
Writing about the technical aspects of auto detailing to an auto dealer is very difficult, to say the least. In my experience working with dealers, few, if any, dealership management level personnel are that familiar with, nor really care about, the technical aspects of auto detailing. And that is how it should be for the most part. Your job is not to manage the technical aspects of every department in the dealership.
Even those who believe they know about detailing because they have gotten their “feet wet” in the automobile business working in the detailing department, you have to realize that the technology of paint finishes and interior materials have changed so much in recent years that what you knew “then” is not relevant “now.”
There are a number of things that management should know regarding detailing, whether you do it in-house or have it done by an outside shop.
Paint Technology Has Changed
For example, in the past, paint finishes were either single stage lacquer or enamel put on the car in thickness of six to eight mils, including the primer. Today, clear coat finishes are no more than 4.5 mils thick and that includes a base color coat of less than 1 mil, and a clear coat of 1.5 to two mils (mil = 1/1000th of an inch).
In the past, it was okay to use a wool cutting pad to attack the single stage paint finish. Cutting, swirling and taking mils and mils of paint off the car. But with a polyurethane clear coat of 1.5 mils, you don’t have much to work with. On top of that, today’s clear coats are just like a piece of plastic, and when it is scratched, it is difficult, if not impossible, to get the scratch out.
Consider then, what an aggressive wool pad, not to mention a heavy compound, is doing to a clear coat finis
Yet today, most “experienced, old-time” detailers are using wool pads and heavy compounds on clear coat finishes. And, not just on used cars, but on brand new cars being delivered to the customer.
New-Car Managers: Read this Carefully
To make my point let me give you some personal experiences with the purchase of a new vehicle in my own family.
When I purchased a BMW for my wife one of the selling points was the inclusion of a “high shine polish.” Being a new car, I interpreted this to mean a paint sealant. After all, why would you buff a brand new car? When the car was delivered, it was shiny all right, but covered with buffer swirl marks. It seems that the detailer had done what he always did: buff a cheap wax on the car with a high-speed buffer and wool pad. How long had this been going on at the dealership? Who knows?
Later, both my brother and nephew bought matching 300Z cars. One in Oregon and the other in California. Short version of the story: both were delivered with buffer swirls.
When I purchased a black Ford Explorer, after careful inspection I found buffer swirl marks on the left side of the hood and left fender. It appeared the vehicle had been scratched, and the buffing was done to remove the scratches. But why was the buffing not followed with a swirl remover/polish and finishing pad? The answer, “We do not do that in our detailing department.”
As astute dealers, you can see the point. Who is making the decisions about what is done to your new and used cars in the detailing department? Are you insuring that the detailers who obviously made the decisions in the stories above have the most up to date training and technology, equipment, and are well versed in paint finishes, problems and methods of correction?
Unfortunately, the answer is no in most dealerships. The detailing department is the “dark hole of Calcutta” in the dealership, and no one goes back there other than to complain about the quality of the work, etc.
Paint Finishing Procedures for Detailers and Dealers
The remainder of this article will deal with some very simple, but basic procedures to follow when working on the paint finish of a new or used car. They are procedures that involve the having the correct tools, pads and chemicals and knowing how to use them. There are procedures that your detailers should know before touching a paint finish on a car.
In detailing, or new car get-ready, the paint finish is the most important part of the vehicle because that is what the customer first sees when they look at the vehicle. And, it is one area of the vehicle that can be severely damaged if it is worked on incorrectly and is very expensive to repair.
From a detailer’s point of view, there are really only two kind of paint finishes to be concerned with: single stage finishes and finishes with a clear coat.
For the detailer, it is the final finish that is important to understand because that is what his work involves.
A properly detailed paint finish requires the following:
Identification of the Paint Finish
While most new vehicles on the road have clear coat finishes, and vehicles prior to 1980 will likely have a single stage paint finish, it is still critical to not assume, but check to be sure. A simple test is to put a small amount of polish on a clean cloth and rub it on the finish. If you get color on the cloth, it is a single stage paint finish. No color, but dirt — it is usually a clear coat. Simple, but effective and accurate.
Identification of the Problem
This is where more skill and analysis comes in. The evaluator must be able to identify problems and what is needed to correct them. Incorrect analysis can cause damage and/or customer dissatisfaction.
Typically, paint finishes can oxidize, discolor, fade, water spot, etch and scratch.
In many cases, with the proper tool, pad, and chemical you can correct these problems. In some instances the problem cannot be corrected, but improved. This is where skill and knowledge comes in.
Choice of the Proper Tool
For today’s paint finishes there are two basic types of tools: high speed rotary buffers and dual-action polishers.
They can be either electric or pneumatic. From my perspective, the pneumatic tools are better because they are lighter and easier to handle, have variable speeds, and allow the user to feather the trigger on edges and ridges to prevent burning.
They also require less maintenance and have a longer life. The only reason most detailers still use electric tools is because that is what they have always done.
Dealers: go look in your service department and body shop and you will find all air tools. But I will bet your detail department is still using electric buffers.
High Speed Rotary Buffer
This tool is utilized for severe paint problems and irregularities.
Used with a pad and chemical, the high speed of the buffer creates friction, which heats the paint finish. The pad and chemical create the abrasion to correct the irregularity.
Obviously, the use of too aggressive a pad and chemical on certain paint finishes can create more problems than what you are attempting to correct. The detailer must understand that you cannot use tools, pads or chemicals that will create more problems than they correct.
Never put a high speed buffer in the hands of a person who cannot, or does not, think.
Dual Action Polisher
Whether to use an electric or pneumatic tool is often misunderstood, and these tools are often misused in the detail industry.
The orbital (dual action motion) is designed to provide a less aggressive action on the paint. It creates some friction, and therefore, can provide some correction on the paint surface in the same way as a rotary buffer.
On certain paint finishes, especially clear coats, used with the proper chemical it will do an excellent job of surface cleaning, shining and protecting the paint finish, and it is the best way to apply wax.
The dual action polisher is functionally misunderstood by most detailers, and therefore, used incorrectly or not used at all. For the dealership, it will save time and reduce labor costs if the detailers are trained in its use.
In my opinion, a dual action polisher should always be used to apply the final coat of wax or sealant.
Choice of Correct Pad
Unlike the early days of detailing when there was only the wool pad, today the detailer has a choice of pads. The choice should not, however, be based on preference, but on the type of paint finish and problem to be corrected.
Wool Cutting Pads
Traditionally used with compound to buff out surface irregularities on single stage paint surfaces. Many detailers use it incorrectly for polishing and waxing. A wool pad will cause swirls, especially on clear coat finishes. Using a wool pad on a clear coat finish is often frowned upon.
Poly/Wool Blend Cutting Pads
Use a less aggressive pad than a 100 percent wool pad, it will correct imperfections on clear coats and not cause damage.
Foam Cutting Pads
The foam cutting pad is usually a less dense foam that can be used with rubbing compounds on clear coat finishes and single stage paints to correct surface irregularities. The benefit is that the pad will not create swirls if used correctly and will allow a detailer to sometimes skip the polishing step. These are the choice of most knowledgeable detailers today.
Foam Polishing Pads
The foam polishing pad is usually made of a more dense foam and is softer to the touch than the foam cutting pad. Used with the correct chemical this pad will remove swirls and leave a high shine on the finish.
Choice of the Proper Chemical
The choice of chemical is as critical to the paint finish process as the tool and pad.
Basically, these are the types of chemicals used:
Compounds – for correction
Swirl Removers – to remove buffing swirls
One Step – both a cleaner and protectant
Waxes & Sealants – protectants
Which you use depends upon the paint finish, the irregularity and the paint finishing process the detailer chooses to follow.
Editor's Note: Stay tuned to the Aug. 15 edition of Auto Remarketing for more from Bud Abraham on proper procedures for the detail department.
I received a note from a Velocity dealer asking for guidance to trim $100 to $200 from his reconditioning costs, part of a broader effort to increase used vehicle profitability.
It should be stated that this dealer is a smart operator who’s already wrung significant costs out of his reconditioning processes. He’s reduced mark-ups on parts to roughly 33 percent, and uses lower-cost, aftermarket parts to recondition vehicles that do not meet factory certified pre-owned vehicle program requirements.
Aside from lowering the retail labor rate used for reconditioning work or scrutinizing repair orders (ROs) to eliminate any “padding” by technicians, I didn’t see any sizable opportunity to cut more cost out of the picture.
Then it hit me. Perhaps the dealer, and others who are reexamining reconditioning costs to improve profit margins, may be focusing on the wrong aspect of their used vehicle retailing operation. The real problem, I thought, may well lie with the costs dealers incur to acquire inventory. If they pay too much, there’s really no amount of cost-cutting in reconditioning that’ll improve a vehicle’s profit potential.
In other words, while it’s good for dealers to continually ask, “what is the right amount of money to spend on reconditioning?,” the more important question should always be, “what is the right appraised value of a vehicle, given the likely costs needed to ready the vehicle for retail?”
The latter question is especially important in the current market. Wholesale values remain relatively strong and dealers are hungry to put customers in new vehicles — conditions that make it easy to over-pay for a used vehicle.
I liked how my friend and Velocity dealer Brian Benstock of Paragon Honda, White Plains, N.Y., addressed this challenge in an Auto Remarketing article this week.
“We cannot make the same mistakes that we used to make by overpaying for a car and worrying about that later on down the road,” Benstock says. “You have to buy it right from Day 1. You have to make sure you’ve taken all of the known factors into consideration from Day 1. And, frankly, you’ve got to be more judicious in purchasing the vehicles.”
With this approach, the costs required to recondition a vehicle effectively become a cost of doing business, which dealers can pass on to customers if a) it’s reasonable and b) they understand the hows/whys behind the reconditioning work. As Benstock says in the article, vehicle sellers and buyers “tend to be very understanding” of reconditioning costs if you take the time to explain them.
I complimented the Velocity dealer who contacted me for recognizing that consistent cost efficiencies in reconditioning are essential to profitable used vehicle operations. I also urged him to look a little further up the food chain to his acquisition process, where I suspect he’ll find far more than $100 to $200 in margin opportunity on every car.
Dale Pollak is the founder of vAuto. This entry and Pollak’s entire blog can be found at www.dalepollak.com
In the latest “Hard Facts” video from Potratz Advertising, vice president of account services Samantha Cunningham tackles the handling of customer concerns.
She points out how many companies recently have faced major scrutiny for poor handling of customer issues.
“How you treat customers is a reflection on how your business operates as a whole,” Cunningham says.
Cunningham delves into the world of customer reviews, noting a couple “musts” when analyzing and respond to positive and negative reviews:
- Always respond to your customer’s feedback on social media.
- Never delete bad feedback. Find and respond with a solution.
“And remember, online, a customer is always right, even if they are wrong,” Cunningham said.
Watch this week’s video for strategies for handling customer concerns online, and learn how to better manager the reputation or your business to avoid potential crisis.
Click here to see the latest “Hard Facts” video.
