October automotive wrap-up: Feast or famine for retailers?

October is always an odd month in the motor trade, especially when it follows a strong September plate change.

For dealers with exposure to the fast-growing brands (read Chinese!), September will have generated some excellent part-exchanges to prepare and sell during the traditional October used car market. For those representing brands that have gone backwards, the picture is rather different. They will have entered October facing something of a famine, with fewer part-exchanges and less stock to sell. So, the success or otherwise of October has been heavily dependent on a dealer’s brand portfolio and how those brands performed during September.

But the real significance of October is how it sets dealers up for what is traditionally their most difficult quarter. With around 90% of the trade operating to a December year-end, attention naturally turns to costs as the market slows. Q4 is often about protecting margins and minimising losses, particularly for those businesses that haven’t had a strong October.

I believe the focus needs to be on two key areas.

1. Really understanding what is working in marketing

We invariably see dealers cutting back on marketing spend in Q4. It’s one of the easiest costs to control and can provide an immediate improvement to the bottom line. But this can be a false economy. The important question isn’t how much marketing can be cut, but which marketing activity is actually generating enquiries and, ultimately, sales. Without proper attribution, dealers risk cutting the very campaigns that are delivering their best returns while continuing to spend on those that aren’t.

2. A relentless focus on conversion and internal operations

This is an area where relatively small improvements can make a significant difference to profitability. Our data consistently shows that dealers are often too slow to respond to enquiries, allowing potential customers to slip through their fingers and into the hands of competitors. Having spent good money generating those leads, failing to convert them is an expensive mistake.

Understanding the cost per lead, cost per sale and typical conversion rates provides the benchmarks needed to identify where improvements can be made. Equally important is understanding what happens to those enquiries once they reach the dealership.

The bottom line?

Dealers cannot control the overall market or the performance of the brands they represent, but they can control how effectively they spend their marketing budget and how well they convert the opportunities it generates.

As we head into the final two months of the year, the winners won’t necessarily be those spending the least. They’ll be those who understand what is working, stop spending on what isn’t and make sure that every enquiry has the best possible chance of becoming a sale.

In a difficult Q4, that could be the difference between profit and loss.