Adam Ouart on Acquisitions and Engagement in the Agent Space
Q. How will a second year of flat unit sales affect agents?
A. Going into a second year of flat unit sales, dealers will be looking to agents for more solutions on how to maximize their back-end profit. Today’s slow down comes with higher vehicle prices and deeper manufacturer incentives, resulting in extremely thin front-end margins. To help dealers recoup as much profit as possible, agents will focus on installing market-differentiating products and increase their scrutiny on income development. Dealers will also increase their focus on customer retention. As such, agents will be tasked with providing products that can be sold in the business office that tie consumers back to the service bay in some way. Aside from traditional powertrain protection products, agents will need to provide creative ways for dealers to position and sell aftermarket products like tire and wheel, or dent protection, as a service retention tool.
Q. How will agents work to insulate themselves from shrinking profit margins?
A. They will look at dealership production levels more closely and will be more engaged with dealership operations overall to keep production levels high. At the same time, agents will focus more of their efforts on acquisitions to offset any production level decrease. In 2018, we can expect agents to be more circumspect and selective when it comes to approaching dealers. There will be an increased competition among agents for those higher-volume dealerships, which will force agents to differentiate themselves based on more than just products. Strategic agents will take a more engaged approach to both servicing and acquiring clients, identifying needs, providing training, product menu updates, pay plan support, pre-owned inventory analysis, and even compliance.
Q. What dealership challenges will agents need to be prepared to address?
A. To better capture the customers in the market to buy, we’ll see dealers relying more heavily on agents to increase their brand presence. Because of their focus on back-end profit, we’ll see more marketing efforts around consumer protection products. We’ll see more dealerships asking about the best method to provide consumers basic information about the products they provide outside of the dealership. We’ll see more agents helping dealers re-evaluate where to spend their ad dollars to include market differentiating consumer protection products in their outreach. In addition, we’ll see more dealerships begin to list their F&I products on their website. The point here will be to better educate consumers about F&I products outside of the dealership to generate more interest and awareness with the end goal of increasing PRU and penetration.
Beyond unit-sales volume, agents will also focus on helping dealers better manage their pre-owned inventory. Dealers have already seen the benefits of applying factory CPO programs on the pre-owned units that fall within their brand. Agents will be better positioned to offer CPO programs that can cover most of the inventory on a retail dealer’s pre-owned lot. This will help differentiate the dealer in their space, and enable them to capture more front-end margin.