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Franchised dealers lose money from point of sale

Franchised dealers start losing service and repair customers from the moment they sell the car.

In year one, they retain 80% of business; by year four that has slumped to 25% and by the eighth year they retain just 5% of customers.

Pat Reininger, CRM and aftersales director, Polk Europe, speaking at the AM Aftermarket Conference, says: “Franchised dealers have three years to convince customers to go somewhere else and they do a damn good job of it!”

He believes dealers need to take immediate action to stem the loss of customers to the independent sector, or face a significant drop in aftersales revenue.

Dealers take just under 63% of the £1.8bn segment one (cars aged up to three years), with independents taking 37%. They take just a quarter of the £2.7bn segment two (four to seven years old), with 74% heading to independents. And they have virtually no presence in segment three (eight to 11 years) and segment four (12-13 years).

Polk predicts vehicle sales over the three years to 2010 will be flat, which means the aftersales growth will come in the older segments. Reininger says this means dealers will lose 6% volume, worth £122m in 2010, while independents will raise sales by 6.7%, or £338m.

“By doing the same old thing, dealers will lose 55-60% of net profit,” he adds.

How? There will be 9.8m cars in segment one, down by 853,000 by 2010. That equates to a parts revenue fall of £203m. Dealers need to focus on loyalty with predictive marketing targeting defections with the right message at the right time.

In segment two, the car parc will fall by 109,000 to 9.2m, a £32m dip in parts opportunities. Here, dealers need to focus on second owners, booking first services when they sell a used car, implement vehicle inspection processes and remain in constant contact with clients.

Growth will happen in segment three and four, where the car parc will rise by 1.6m units to 8.9m. Profits revenue will increase by £451m.

“This segment is all about conquest customers. You have to understand the vehicle part and engage inactive customers with targeted mail drops,” says Reininger.

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