The future of the automotive retail industry is undergoing a significant transformation, ultimately changing how dealerships operate and communicate with customers.
As buying behaviors and product mixes change and the customer journey becomes increasingly complex, understanding and adapting to this shifting landscape is crucial for dealerships that look to stay ahead of their competitive curve.
To adapt and achieve sustainable success, proactive dealers are future-proofing their dealerships today, positioning themselves for continued success in an evolving market.
The Road Ahead: Future of Car Dealerships in 2024?
Looking towards 2024, auto dealers face significant trends involving inventory levels, brand loyalty and vehicle aging.
Industry-wide Brand Loyalty Stalls
While retail advertised inventories have risen substantially, brand loyalty has not followed. According to S&P Global Mobility’s data, in the first half of 2023, industry-wide brand loyalty rate was 50.6% – nearly identical to the same period in 2022, despite a 7% increase in return-to-market volume among consumers. This suggests a lack of inventory isn’t the primary factor currently motivating customers to switch brands or dealers.
Aging Vehicles Fuel Service Drive Opportunities
The aging vehicle fleet in the US also presents significant opportunities. With a record-high average vehicle age in the US, the aftermarket is likely to see significant growth in service drive opportunities, repair and maintenance work, as older cars will see even more miles driven than traditionally expected, according to analysis by S&P Global Mobility.
Model Year Sell-down Amid Accelerating Inventory
The transition between the 2023 and 2024 model years is creating unique challenges as well. As inventory begins to normalize at car dealerships and customers slowly return to market, dealers are facing new challenges surrounding the 2023 model year sell-down.
There still are more 2023 model vehicles in dealer-advertised inventories than incoming 2024s – however, 2024 model year advertised inventory is now reaching the level of the remaining 2023 model year units. And while we see the 2023 MY advertised inventory decreasing, the 2024 MY inventory is growing at a faster rate than the 2023 MY sell-down.
Importance of Adapting to Changing Customer Demands
As the automotive industry continues to evolve, dealers must recognize the crucial role that adapting to changing customer demands plays in their ongoing success. The future retail experience in 2024 presents unique challenges and opportunities, making flexibility and responsiveness more important than ever.
Car dealers need to adapt their business model with marketing and sales strategies that address the changing customer profiles and expectations. This involves understanding and leveraging new media and digital channels, adopting more flexible financing options, and offering customized solutions that cater to individual customer needs.
By adopting responsive marketing, improved car buying process, and sales strategies that are adaptive to changing customer profiles and expectations, dealers can stay ahead of car buyers returning to market and identify their best opportunities.
Four Key Personas for Dealers to Know in 2024
Understanding customer personas is vital for dealerships to individualize their approaches for each buyer effectively and improve the customer experience. In 2024, several key personas stand out in the automotive retail landscape, each requiring a unique engagement strategy.
Future Electric Vehicles (EV) Buyers
The automotive market now offers nearly 450 vehicle nameplates for buyers to consider, and that number is set to increase with the influx of EVs across major OEMs. This means approximately 650 models will be competing for showroom space, marketing budget and customer attention within five years.
However, EV buyers have remained an elusive target for US auto dealers and the future of car sales. Electric vehicles remain a mostly additive purchase, with 7 in 10 EVs joining other vehicles in the driveway instead of replacing one. To effectively engage this segment, dealerships must not only have the right inventory but also the expertise to address customer motivations, address common misconceptions and highlight the benefits of EV ownership.
Buyers New to Your Dealership’s PMA (Primary Market Area)
According to U.S. Census data, the share of movers from a different state or county rose by 2.4 percentage points in 2022 while the share of movers from abroad approximately doubled, from 2.3% to 4.9% – the highest since 2018.
These new buyers moving into a dealership’s Primary Market Area likely lack brand loyalty to any local dealership, presenting the perfect opportunity for proactive engagement to build long-term retention. Dealerships can capitalize on this by mining their PMA for new conquest customers, offering welcoming introductions and personalized services that build trust from the first touchpoint.
Service-to-Sales Customers
With the average age of light vehicles reaching a record high of 12.5 years in 2023, dealers have a significant opportunity for service-to-sales conversions. By mining their upcoming service appointments, dealers can leverage predictive marketing technology like Mastermind to identify the best service-to-sales leads, such as when a service customer is due for an upgrade based on the age and condition of their vehicle. This strategy allows for a seamless transition from service to sales, benefitting both customer retention and dealership profitability.
Nomad Buyers
Nomad buyers, characterized by their tendency to switch brands often, represent both an opportunity and a challenge for dealers in 2024. Nearly 6 in 10 nomad shoppers are expected to switch brands with their next vehicle purchase so for proactive dealers, getting ahead of this trend is key.
Using the insights from dealership marketing tools, dealers can dive deep into the consumer behavior and understand reasons for brand switching. If a customer left due to unsatisfactory after-sales service, emphasizing a commitment to post-purchase support, offering extended warranties, or providing special service packages can help build loyalty. To conquer these nomadic shoppers attracted by new features, dealers can engage buyers with sneak peeks of upcoming models, exclusive test drive invitations, or loyalty programs that offer early access to new launches.
Seamlessly Integrating Customer Data for Sustainable Success
In the evolving auto retailing landscape of 2024, a data-driven approach is pivotal for dealerships, focusing on conquest, loyalty and service strategies. By taking a data-driven approach, dealers can stay ahead of opportunities in 2024, even as the market continually changes.
The key to this approach lies in the seamless integration of comprehensive data from various sources, which empowers decision-making and fuels proactive marketing efforts. This requires dealers to integrate their sales and marketing technology, taking a comprehensive approach with insights including:
● Inventory data
● Service records
● Buyer history
● Credit report
● CRM & DMS
By taking a data-driven approach, dealerships can quickly adapt to new market shifts and updated customer preferences, setting a strong foundation for long-term success.
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Moving Into the Future of Automotive Retail
Looking ahead, dealerships are facing unprecedented challenges and opportunities ranging from changing customer buying behaviors and product mixes to an aging fleet and growingly complex customer journeys.
In the rapidly evolving automotive market, it’s more important than ever for dealerships to keep pace with evolving customer behaviors and preferences. The ability to leverage data to make better, more informed decisions plays a pivotal role in dealer’s ability to future-proof their sales and marketing strategy in 2024 – and beyond.
Want to learn more about how Mastermind can help you maximize your dealership’s available inventory and stay ahead of the curve? Contact us for a free demo.
