The 5 and 14 day rule of the best performing dealers in the US11 februari 2018, Paul
A lead time of an average of 28 days on the used car stock is the norm rather than an exception!
In the Netherlands, a car company that is successful in selling used cars sells its stock 6 times a year. However, most companies will score between three and four times. That means that you take 90 days on average to sell a used car. The advantage of selling faster is clear: every day that the car is sold earlier, it easily saves € 7, – per car, per day in interest, repayment and other costs. In addition, you sell twice as many cars without having them in stock at the same time. So it makes sense to see how successful dealers deal with used cars. Recently I spoke with Brian Pasch about these companies, including Carmax. What are they doing to sell 12x the stock? Striking in the analysis: the 5- and 14 day rule.
The 5 day rule
This rule is very, very good to apply to the Dutch market. We put 99% of the stock cars online, because more than 95% of people search for cars online. For example, after five days you can see if there is any interest in a car at all. And so there are more factors (KPIs) to view that indicate whether a car will sell quickly. Or not.
- • VDP views on the car – View them on their own website and on portals such as Marktplaats
- • Call leads on the car – In 2017 you can see how many calls there have been per car using call tracking
- • E-mail leads on the car – analyze how many you get through the different channels
- • Quotation requests for the car – which of course also indicate the popularity of a model
If you look at the first point, then you know that all portals provide this information per car. Don’t they do that? Do you demand it? You can also measure the VDP views via Google Analytics for your own website, provided you do not use i-frame.
We know at Marktplaats, for example, an Opel Zafira is removed from Marktplaats after 44 views on average. That is an important fact. Virtually all cars are available at Marktplaats and when they are sold they are immediately removed as the advertiser does not want to pay for the next month of advertising. Do you have the number of required views clear and do you know that, for example, all channels need 60 views and that you only have five after five days? Then it’s time for action, because otherwise it takes 60 days at this rate before you’re on the required number of views.
If you provide an average conversion of 20% on e-mail leads, on call leads 25% and on physical offers 60%, then you can calculate after five days if you will be successful in the coming 25 days. A car that does not have any traction after five days also does not have it after 30, 60 or 90 days. Especially if you don’t change a thing.
The most successful dealers will therefore look at what they can and must adjust after five days. Lesson 1: do not immediately go for a price reduction. First think about specific marketing on the car. For example the so-called ‘Raiders’ or ‘Move-ups’ on Marktplaats and Facebook. But also consider marketing on customers from your own database and an AdWords campaign is also worth considering. Especially realize that all these interventions are activities at low costs, especially if the alternative is a price adjustment.
The 14 day rule
Is the car still there after 14 days and are the KPIs still not in the ballpark? And did you do extra marketing, and put high quality photos and a clear description online? Then you can look at your pricing. Is this market conform? A price adjustment after 14 days is less painful than a price adjustment after 60 or 90 days. Now, a price reduction of € 250 can make the difference to get engagement, while you might need € 750, -. Are you going through a price adjustment? Then check after five days if this has had any effect. And also decide whether you need to do something about marketing to get that specific car even more into the spotlight.
At Carmax they use the 14-day rule in a different way. There the car is irrevocably moved to a location (they have more than 150) that fits the type of car better compared to the locally applicable demographic data. So it may be that a pick-up truck moves from New York to Utah.
Not everyone has a different location at their disposal for cleaning up a long-standing model. But what everyone does have, or should have, is data. Because in addition to the 5- and 14 day rule, the successful companies all have one thing in common: they use data to make decisions about the lead time and thus profitability faster. That data analysis is not a task for a salesperson, but for a data analyst, that seems more than clear to me.
About Paul de Vries
Paul de Vries became a Key Automotive Spokesperson at eBay (Marketplace) after selling Nieuweautokopen.nl to eBay back in 2015. Paul is the founder and CEO of the #DCDW Academy and the presenter of the #DCDW Podcast. He is also a by dealers and importers frequently asked speaker in the online automotive industry. Paul is the winner of the prestigious Lighthouse Award 2016 in the U.S.! `Lead the Way op de digitale snelweg’ is Paul’s new book, which can be used as a guide in the online automotive industry. More information is available at: DCDW.nl.