Reaching the Inner CircleSuccess Tips for Auto Dealers

Improve Your Net Profit in 2011 : Accessory Best Practices

Toward the end of last year I spent time consulting with one of our dealer group clients. The client was frustrated because their team worked like crazy during 2010, selling and servicing more cars in 2010 than in 2009, but ended up making less money because of decreasing front-end grosses and declining finance residuals. We know from working with our dealers that this is not a unique case: gross and residual pressure is being felt across the industry.

The economic crisis of the past two years has forced everyone in our industry to cut costs, focus on what works, and to rethink business models to find a way to add more gross, profitably, to every car sale. By retooling their processes to add an accessories sales process to their showroom sales process, izmo dealers using our AddOnAuto accessories solution are doing exactly that: selling tens of millions of dollars in accessories in 2010! The AOA average dealership 2010 generated an average of $475 in accessory-revenue-per-vehicle-sold, up from $80-$120 per vehicle sold before the new accessories sales process was implemented. Furthermore, these dealerships enjoyed average gross margins of 45%, adding an average (results vary depending on your franchise, geographic region, etc…) of $40,000 per month in additional gross revenue, which translates into additional ANNUAL NET PROFIT of $150,000.

Only 10% of accessories sold in the U.S. are sold by dealerships. The tragedy is that dealerships actually have powerful, built-in advantages to ‘own’ far more of the accessories market than they do today. Psychologically, consumers are far more likely to spend on accessories at that exciting “sweet spot” moment of purchase.

My comments (and the data cited) all come from dealerships using our AOA product. But whether or not you opt to use our tool there are some key accessory sales best practices:

• Take advantage of any “wait time” after the purchase has been negotiated and financing is being arranged to let the customer digitally configure their new vehicle with accessories.

• Find an online tool that can literally configure the exact vehicle (including the year, make, model, interior and exterior color) with the accessories on the fly so the customer can immediately visual the enhancements.

• You will likely sell mostly genuine OEM accessories, but After-market accessories can play an important role in supporting OEM sales and prices, as well as filling in fast-moving accessories not offered by the OEM (e.g. window tint, remote starter, etc…).

• Interior accessories (like DVD players, navigation, dash kits, etc…) are critical to your accessories profitability, so make sure the tool you choose has interior as well as exterior visualization capabilities.

• Ease the financial pain by calculating the enhancements into the overall financing and monthly payment as well as providing the upfront price.

• Ensure that the accessories sales, financing, and installation process is coordinated across the entire dealership, facilitating the efforts of everyone involved (customer, sales, F&I, service, parts, management). Your accessories sales efforts will crash and burn quickly if any one member of the value chain has a bad experience.