Wednesday, March 13, 2013 | Edited by Daniel Moores
||Chrysler, VW Sales Per Store Soar
Most Brands Keep Franchise Count Steady in 2011
The Chrysler and Volkswagen brands increased sales and raised their average sales per franchise last year by about a third, even as they added franchises.
Those percentage increases in sales per store -- 36 percent for Chrysler and 32 percent for VW -- were the largest among mainstream brands last year and were far ahead of the 15 percent average industry increase.
Sales per franchise matter because higher sales mean higher profits and a healthier overall industry. Most, though not all, brands are raising sales per franchise by holding the number of franchises steady.
In 2012, the industrywide number of franchises was essentially unchanged, dropping by just 69, or less than half a percentage point, to 31,376, according to Automotive News' annual dealership census.
Meanwhile, U.S. new-vehicle sales rose 13 percent to 14,492,398 units, lifting the average number of sales per franchise by 60 units, to 465.
John Frith, a vice president at Urban Science, a retail consulting company in Detroit, said that although there are fewer dealerships than there were a decade ago, the current balance of sales and dealerships is good. Dealerships, in general, are larger and easily can handle the increase in sales, he said.
But because profits are tied to throughput, he cautioned that auto companies must be careful not to add or drop too many dealerships.
The Chrysler brand added 55 franchises last year and sold 39 percent more new cars and light trucks. Though the brand's throughput of 137 units per franchise is still far short of the industry average, Chrysler climbed closer to that average, raising per-franchise sales by 36 units, or 36 percent, from the previous year.
The rise in Chrysler brand franchises comes as Chrysler Group has pushed all of its dealers to sell all of its brands. Currently, 91 percent of dealerships that sell Chrysler brand vehicles also sell the Dodge, Jeep, and Ram brands, a spokesman said.
The Volkswagen brand, which added 20 franchises last year, sold 722 units per outlet last year, an increase of 32 percent, and the brand boosted its U.S. sales 35 percent.
Frank Trivieri, executive vice president of sales, said Volkswagen of America keeps close tabs on the number of franchises and dealerships in its markets.
"We do not want to overdealer our network," said Trivieri who was in El Paso, Texas, last week celebrating the 40th anniversary of one VW dealership and the grand opening of another. "We know how important it is for dealers to make a return on investment."
Trivieri said the company plans to add about the same number of franchises in 2013 as it did in 2012. He noted that more new VW dealers enter the network through buy-sells than through new franchises.
The Toyota brand, including Scion, again was the leader in sales per franchise: 1,491 units, up 28 percent. U.S. sales rose 26 percent in 2012. Its franchise count was unchanged last year at 1,233.
Toyota's industry-topping record for sales per franchise was 1,869 in 2007.
Japanese brands collectively sold an average of 941 new vehicles per franchise last year, the highest of any regional group. Their 25 percent increase in sales per franchise in 2012 came a year after new-vehicle production and sales were cut as a result of the March 2011 earthquake in Japan.
By comparison, the Detroit 3's average sales per franchise were 309, up 7 percent; European brands' average sales per franchise were 472, up 27 percent; and Korean brands' average sales per franchise were 798, up 10 percent.
Of the 39 brands examined, 35 had higher vehicle sales per franchise last year, with 25 posting double-digit percentage gains.
Infiniti's big plans
Among those 25 was Infiniti. It increased its sales per franchise 19 percent, to 608, and added only one franchise.
There are more vehicles, more sales and more dealerships in the brand's future, Johan de Nysschen, president of Infiniti Global Ltd., told the Automotive News World Congress in January.
Over the next four years, Infiniti will add at least four vehicles to its U.S. lineup, along with new engines and transmissions, while renewing all current vehicles, he said.
Though de Nysschen gave no timetable, he said expanding Infiniti's retail network is part of the company's plan to transform itself into a global luxury brand and "significantly" increase its volume by 2020. Infiniti's 2012 U.S. sales rose 22 percent.
"We want to grow with our dealer partners," de Nysschen told Automotive News after his speech. "The expansion in volume is aimed at increasing throughput per store and improving profitability. It's really going to be demographic shifts and increasing market share that will dictate the rate of expansion of our network."
Sales per franchise fell at only a handful of brands: Aston Martin, Mitsubishi, Jaguar and Cadillac.
Cadillac's sales per franchise slid by 1 percent, by two units, to 159. The General Motors luxury brand also shed nine franchises, or 1 percent of its total. Its 2012 U.S. sales dropped 2 percent.
These mainstream brands raised their sales per franchise the most in 2012 (with units sold per outlet and change from 2011):
Chrysler, 137, 36%
VW, 722, 32%
Toyota/Scion, 1,491, 28%
Subaru, 542, 26%
Acura, 570, 25%
Honda, 1,220, 24%
Lexus, 1,057, 23%
Source: Automotive News Data Center and company sources
(Source: Automotive News, 03/11/13)
||Auto Buyers Trading in Loyalty for Lure of New Models
Customers like Kelleigh Sheehy of Marietta, Ga., who recently traded the keys of her Volkswagen Jetta for a 2013 Buick Encore, are helping to boost the rate at which some automakers gain new customers.
It is known as conquesting -- when automakers steal buyers from other brands -- and it's rising for some brands, especially certain models.
One brand that's gaining new buyers is Buick, which says its conquest rate has grown from 28 percent in 2007 to 43 percent in 2012, and continues to grow. Buick credits its growth to vehicles like the Verano sedan and the all-new Encore crossover, which just hit showrooms. Sheehy is representative of those new buyers.
"I buy more according to what meets my needs," Sheehy said in a telephone interview, adding she also looked at the Toyota RAV4. "So if I have to change brands, I'll do so."
Car shoppers today are more willing to make a change in brands, now that there have been widespread improvements in quality, analysts say.
J.D. Power and Associates tracks loyalty and conquest rates for automakers using vehicle trade-in data: those who trade in a brand from a different automaker, or have no trade-in at all. Deirdre Borrego of J.D. Power said high conquest rates could continue in 2013 with product launches and the many choices auto shoppers will have.
"Everyone is continuing to try to grow their share of retail," Borrego said in an interview last month at the National Automobile Dealers Association Convention and Expo in Orlando.
"Vehicle quality has improved significantly across the board, so that's another thing. People in some instances are more open to migrating to a brand they may have not considered before because quality has improved, and as new models have launched, portfolios have expanded."
One reason for migration among buyers is the shortage of lease customers coming back to the market. Many automakers stopped leasing during the recession, and others cut back. That also cut the numbers of buyers coming back to trade-in leased vehicles for new ones, Borrego said.
She also pointed to the inventory shortages at Toyota and Honda in 2011 that pushed buyers to other brands.
The opposite of conquests are loyalists -- those who don't change brands. And they are just as critical, or even more so, to a company's success, analysts say. The loss of loyalists -- and ultimately market share -- hurts automakers' bottom lines, said Scott Waldron, president of Experian Automotive.
Experian Automotive found that Toyota Motor Corp.'s corporate loyalty rate of 46.9 percent in third-quarter 2012 rose from 41.6 percent during the same period in 2011. And with that gain of car owners remaining loyal to that manufacturer, Toyota saw a surge of 33,677 new-car registrations in third-quarter 2012. Using a $30,000 price per vehicle as a basis, Toyota's loyalty increase impact on sales was worth nearly $1 billion, Waldron said.
The automotive data provider also found that Honda Motor Co., Volkswagen AG, Mercedes-Benz USA, Subaru of America and Chrysler Group LLC also had gains in loyalty over the period, and saw positive upticks in new vehicle registrations.
Conversely, some automakers saw corporate loyalty rates fall during the same period: Ford Motor Co., General Motors Co., BMW of North America, Hyundai Motor America and Nissan Motor Co., all had defections in corporate loyalty during the third quarter, which translated into lost revenue, Waldron said.
Cadillac proving popular
GM, for example, whose corporate loyalty rate fell from 49.2 percent in third quarter 2011 to 45.8 percent in third-quarter 2012, lost the equivalent of 26,078 in car sales, or about $780 million in lost revenue, Waldron said.
"These companies and what they do with loyalty really do matter, and it adds up," Waldron said during a news conference at the Orlando convention.
GM's Cadillac brand is seeing growth with conquests: More than 75 percent of customers buying the new ATS sports sedan so far this year are newcomers to the Cadillac brand -- and nearly 60 percent are new to GM, the automaker said. GM said it mostly is seeing customers trade in the BMW 3-Series and Lincoln MKZ for an ATS.
GM's Kurt McNeil, vice president of U.S. sales operations, said GM will continue to go after new business, particularly along the coasts and with a better retail experience at dealerships. "We think the products are good enough for them to give us a chance, and good marketing will at least give us a chance. But everything in that customer experience has to be there to reinforce that," he said.
Honda's John Mendel, executive vice president of automotive sales, expects more availability of the Honda Fit and an upcoming new small SUV will continue to help it improve conquest rates. He said the automaker saw its loyalty figures fall for the first time recently, as defections were greater than conquests.
Volkswagen, too, is seeing growth in conquests. The brand says its conquest-to-defection ratio is at a five-year high. Volkswagen said for every one Volkswagen owner who leaves the brand, 1.6 come to Volkswagen from other brands. Volkswagen said it sees the most conquests from Toyota, Honda, Ford, Chevrolet and Nissan.
Ford buyers most loyal
R.L. Polk & Co., in another survey, recently found 48 percent of car buyers are loyalists and stay with the same brand when buying a new vehicle. Ford had the highest percentage of customer loyalty at 62.2 percent and Volkswagen was the most improved in loyalty, jumping 5.9 percentage points.
Ford also has had some success in conquests. The Dearborn automaker says nearly 70 percent of Fusion Hybrid owners are new to the brand, and a little more than 60 percent of C-Max Hybrid owners are conquest buyers, often fleeing Toyota.
Chrysler Group LLC has steadily gained market share in the U.S. for the past two years. Analysts say most of Chrysler's gains have been coming at the expense of GM and Ford. Ram President Fred Diaz says it's clear where most of those conquests are coming from.
"It's definitely GM," he told The Detroit News in January.
"The trick to this is not really a trick," Diaz said. "It's just getting the awareness out there. It's getting butts in seats," he said. "We do that and we do that well and we continue to conquest and have defections from the other brands. That is what has allowed us to gain market share over the past two years."
(Source: The Detroit News, 03/11/13)
||New Efforts to Shorten the Process of Purchasing a Car
"Let me run that by my manager."
To minimize the use of that shopworn delaying tactic -- and other haggling strategies that can drag out the car-buying process -- more companies are experimenting with ways to slice the time consumers spend in vehicle showrooms.
Their tools range from mobile devices that can calculate a car's trade-in value in the parking lot to expanded call centers to handle rising traffic from smartphone shoppers.
Despite the long-standing promise of the Internet to streamline a vehicle purchase, it still takes two to three hours, on average, for a consumer to negotiate a new-car deal, hammer out financing and get enough training on a vehicle's technology to safely drive home, according to industry officials and researchers. Market research firm J.D. Power and Associates says new-car buyers spent 12.5% more time negotiating at showrooms last year than in 2010 -- even though more than 80% of buyers have already spent an average of 18 hours online researching models and prices, according to Google Inc. data.
AutoNation Inc., the largest dealership chain in the U.S., says it is rolling out a new pricing strategy that will base selling prices not on the manufacturer's suggested retail price printed on the car-window sticker, but on current market data. New software will also allow salespeople to quickly present a menu of financing or leasing options. The company's goal: to cut transaction times in half.
AutoNation's Chief Executive Mike Jackson says customers are more price savvy than ever. "They've all done their homework," he says. "They don't want to step into a process designed for the village idiot."
Dealers say they're still learning how digitally savvy customers behave -- which can sometimes involve more traditional channels. Group1 Automotive, a national dealership chain based in Houston, is gearing up to open a big call center to help people who shop on their smartphones. The company, which says it saw a 14% increase in phone information requests in 2012 over the year before, says the agents will speed smartphone callers to the nearest local dealer.
Rick Gibbs, chief executive of Dealer.com, which sells eCommerce software to car retailers, says more dealers are moving away from writing price offers on paper, and instead adopting digital "pencil tools." These software systems enable salespeople to use an iPad program to quickly adjust variables such as the trade-in value of a used car or a down payment. That information can also be relayed to a sales manager, potentially eliminating some of the time wasted by salespeople running back and forth to superiors to vet an offer.
Other parts of the negotiation can be streamlined as well. At Prestige Volvo in East Hanover, N.J., owner Matt Haiken says he equips his salespeople with software that can appraise a customer's trade-in vehicle by scanning the vehicle identification number into a system that links to regional pricing data for that vehicle.
A growing number of consumers are opting to reduce the time spent buying a car by outsourcing the bargaining process. Costco Wholesale Corp., the big warehouse-club retailer, says 87,000 people in December asked for referrals to dealers through its car-buying service. The 2,700 dealers in Costco's network agree to sell at a discount -- although Costco doesn't tell customers the price before they go to a showroom.
Truecar.com, a shopping site that operates car-buying clubs for Consumer Reports and other organizations, gives users online access to up to three price offers from dealers.
Mike Cavanaugh, 50, a biotechnology executive from Thousand Oaks, Calif., says he bought an Infiniti G37 from a dealer who had given him a quote through Truecar. Once he got to the showroom, he says it took just half an hour, "with small talk," to close the deal.
"I knew exactly what I wanted -- the color and the options. The salesman said, 'I have two on the lot.' It was no hassle," he says. His previous car purchase, he says, "was probably a good hour-and-a-half to two hours of back-and-forth negotiation."
One worry for consumers confronted with "no-haggle" pricing is that they will pay more than they should. While possible, the increasing accuracy of pricing information available online is narrowing the gap between the highest selling price a dealer can get for a car and the market average. Data compiled by Truecar shows that gap narrowing to $1,203 in 2013 from $2,361 in 2000 -- roughly the dawn of the e-commerce era. Truecar CEO Scott Painter predicts that by 2020, price transparency in the auto industry will have narrowed the price ranges for new-car transactions to the point where the customer who pays the most only pays $172 more than average.
(Source: The Wall Street Journal, 02/27/13)
Daily Sales Tip: The Problem-Finder
In Daniel Pink's best-selling book, To Sell is Human, he talks about solving customer problems. But the most profound learning for me is when he says, "The ability to move others hinges less on problem solving than on problem finding! We should not be selling the product, but the insight of the product!"
How many times have you heard that the best sales professionals are good at solving problems, yet as we dig deeper into Pink's book, we learn that solving problems does not set salespeople apart from their competitors. To truly stand out, you have to understand the customer's situation so well that you can find problems that they haven't even thought of. That's what separates the great salespeople from the pack.
To become a problem finder, build trust. One way to do this is by providing them what they need and want in the way they want it, which also makes you more likeable. Pink says, "We are more persuaded by people we like because they remind us of us." The more we can mirror our customers' style, the more likely they are to feel comfortable and open up.
Source: Business author/consultant Stu Schlackman