What a change a year makes! In 2020, businesses shutdown in response to Covid-19. Most businesses adapted with strategies learned in prior recessions, cutting costs and laying off employees to preserve cash.
A year later consumer demand has snapped back, complicated with unanticipated supply chain issues and many businesses are struggling to adapt.
The COVID-19 pandemic accelerated change and created a confluence of forces, including:
- Severe supply chain disruptions across industry sectors.
- Changing consumer expectations around convenience, speed, and ability to purchase online.
- Federal stimulus payments that accelerated consumer spending.
This has led to high labor demand and low inventory levels, coupled with enormous consumer demand. It’s a tumultuous time, and many businesses are struggling to adapt.
Automotive has been one of the most impacted industries. So how can dealers navigate this new, difficult landscape and position themselves for future growth? Read on to find out.
The Auto Sales Landscape
In Q1 2021, sales increased by 8.9% when compared with Q1 2020; remember, the pandemic didn’t begin to impact the US economy until the last two weeks of Q1.
These cars are also selling faster. Around 17% of all cars sold within 5 days in 2021, versus just 14% in 2020.
Cars are selling for higher average transaction prices (ATP) as well. Analysts at Edmunds estimate that the average ATP in Q1 2021 is $40,320, the highest ever recorded.
How Dealerships Attract Leads
How are dealerships generating new leads in 2021? Primarily through a mix of advertising, social media, SEO, and referrals.
North American dealerships spend more than $10B on online advertising per year, with more than 55% - or $5.5B - being spent on digital advertising. This includes pay-per-click advertising, social media ads, and other digital channels.
The current challenge of low inventories and high demand provide the opportunity to evaluate the ROI of each lead source. Reducing spend on those sources that do not produce consistent sales. This will enable a reduction in ad spend without impact to overall sales.
Importantly, prospective customers are looking at more than just ads. They’re frequently checking online reviews, social media, and review sites, too. In fact, more than 60% of consumers said they switched dealerships as a result of online reviews.
How Dealerships are Responding
Anecdotally, we’re hearing reports of dealerships de-prioritizing lead response out of fear that they won’t be able to serve the prospect.
This is frankly a mistake.
Consumers likely know that dealerships are facing supply chain challenges and accompanying supply shortages. They will know to expect it. What they won’t expect? Poor Service.
Now, perhaps more than ever, it’s important to offer leads an exceptional experience. Emotions are running hot. This presents a unique opportunity to be memorable for the right reasons; namely, top-notch service and a supportive process amid tough times.
As the data shows, customer reviews go a long way. This current supply shortage is temporary, but a negative experience? That’s much longer-lasting, and potentially more damaging to your business.
Rapid lead response ensures that your prospects have a positive experience, even if you’re letting them know that you don’t have that specific vehicle in stock just yet. It also gives your sales team the opportunity to talk with the customer about other vehicles in inventory, the option of ordering and captures new prospects in your CRM for future marketing.
The Bottom Line
Looking at possible futures facing the automotive industry a year ago, this is a pretty good outcome. No, things aren't perfect. But dealing with low inventories and too much demand is preferable to all the challenges faced a year ago.
Providing prospects and customers with exceptional service during this challenging time is essential. The inventory constraints should be resolved soon, but negative experiences last a lifetime. Fortunately, ensuring a positive experience is within your control.
One way you can ensure a positive experience with your business is to respond to your lead inquiries quickly. The data is clear that quick lead response results in more won sales. But it also shows your prospects that you care. When you commit to meeting them where they are, at the time they’re most interested, you’re sending a signal that they’re important.
It’s not the only way your dealership will demonstrate to your prospects that you care - but it is the first.
Learn how to implement rapid lead response in 7 steps here.
