While some dealers are still hoping the ongoing inventory crisis will come to a speedy resolve, industry experts aren’t as optimistic.
This is just one of the potentially damaging misconceptions that could be holding dealers back from making the most of their sales, service and acquisition opportunities. Recognizing and embracing the reality of what challenges and opportunities lie ahead is the first step for dealers to secure their future success despite ongoing inventory shortages.
In this blog post, we’ll bust three common myths about the ongoing inventory crisis auto dealers need to know:
Myth #1: Relief from the inventory crisis is coming soon.
As previously mentioned, analysts are currently projecting inventory challenges to continue through at least 2022. Additionally, in a recent report, IHS Markit further reduced its 2021 global new vehicle production forecast to 74.8 million following steady summer declines.
When will new vehicle inventories normalize
Despite the near-term production challenges, IHS Markit’s latest reports demonstrate the declines are slowing. In October, IHS Markit adjusted its 2021 forecast by just -1.3% following a decline of 6.2% just the month previous. Further, IHS Markit now expects double digit production growth in 2022 thanks in part to this lower base.
Looking further ahead, IHS Markit expects pent up demand for vehicles that aren’t available, coupled with OEM pressure to rebuild inventory levels, to elevate production both in 2024 and 2025, increasing the 2024 global production forecast to 97.3 million and 2025 forecast at 98.9 million.
Myth #2: Dealerships can’t market when they have little or no inventory.
Faced with fewer vehicles on the lot and already high consumer demand, some dealers may think there’s no need to market to their customers. But the rippling effects of the ongoing inventory crisis is proving why this is such a short-sighted approach.
How to market with low inventory
By taking a data-driven approach and staying in consistent communication with their audience, forward-facing dealers are sourcing pre-owned vehicles from various sources in their market across their loyalty, service and conquest portfolios.
For example, as interest rates reach their lowest in nearly a year, dealers are presented the unique opportunity to engage their customers with mutually-beneficial trade-in or buy-back offers. Some dealers have leveraged Mastermind’s predictive marketing campaigns to identify and engage customers driving in-demand models with negative equity or a higher-than-ideal interest rate with trade-in offers that presented goodwill.
Myth #3: Loyal customers will wait for what they want.
While auto dealers often pride themselves on their customer loyalty, ongoing inventory challenges are threatening even the longest and best customer relationships.
In a recent report, IHS Markit found overall brand loyalty dropped to a six-year low, undoubtedly due to the inventory crisis. At the same time, body style loyalty grew 1.1%, demonstrating customers’ willingness to switch dealerships or even brands to get the style vehicle they’re searching for.
How to promote customer loyalty and retention
With personalized messaging that meets buyers where they are in their overall lifetime customer journey, dealers are empowered to retain buyers despite inventory challenges. For example, instead of trying to shoehorn customers into a vehicle that doesn’t quite meet their needs (potentially driving loyalty rates even lower) some dealers are looking at new vehicle pre-orders to retain buyers.
Similarly, as rising new vehicle prices have pushed some buyers to delay their purchase, some dealers are looking to their service drive to build rapport and retain their customers. In fact, Mastermind data finds customers who serviced with a dealer are 2.5x more likely to purchase their subsequent vehicle from the same retailer.
What dealers need to know about the inventory crisis
Whether it’s for pre-owned acquisitions, promoting pre-order options or building customer loyalty through the service drive, dealers need to bust the commonly held myths surrounding the inventory crisis to keep in communication with their audience.