analyst note july 2013
TRANSCRIPT
1 J.D. Power does not guarantee the accuracy, adequacy, or completeness of any information contained in this publication and is not responsible for any errors or omissions or for the results obtained from use of such information. Advertising claims cannot be based on information published in this publication. Reproduction of any material contained in this publication, including photocopying in part or in whole, is prohibited without the express written permission of J.D. Power. Any material quoted from this publication must be attributed to J.D. Power.
© 2013 J.D. Power and Associates, McGraw Hill Financial. All Rights Reserved.
Canada July 30, 2013
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§ It’s understood that across a segment, there are some differences in the various models available. However, the notion that one compact car, for example, has drastically different capabilities than another is spurious at best. As such, when there is a high percentage of vehicle rejecters saying they did so because a vehicle didn’t fit their needs (29% of compact car shoppers; 33% small CUV; and 31% midsize sedan) it’s important to ascertain which vehicle they ultimately purchased.
§ Secondary analysis finds that despite rejecting a particular model due to the perception that it wouldn’t meet their needs, the majority of shoppers eventually buy a very similar model. For instance, of those who rejected a compact car due to a perceived gap in needs, 66% ultimately purchased another compact car. A similarly significant percentage of rejecters of small CUVs (47%) and midsize sedans (51%) also stayed within the respective segment for their eventual purchase.
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§ What is the potential impact in terms of dollars at the dealer level? If a hypothetical mass market franchise sells 30 compact cars per month, average industry-‐ wide close ratios suggest those 30 sales are generated from approximately 88 prospects, resulting in 12 prospects who left the showroom prior to any price negotiation and under the impression that the vehicle they evaluated did not fit their needs.
§ What has been regarded as an unavoidable product issue now takes on new meaning, given that eight of those 12 brand rejecters walk directly into another dealership, where they purchase a very similar vehicle. Given that the YTD average front-‐end gross profit on a compact car in Canada is approximately $1,050, those lost sales amount to more than $100,000 in annual lost profitability.
§ What remains is a soft-‐skill opportunity for dealership staff, particularly in the discovery phase. A vehicle may well suit a customer’s needs, but if you don’t know what those needs are, you’re never going to convince them it will.
Behind the Numbers
Selling Customers on a Better “Fit” [email protected] 416-‐507-‐3254
The December 2012 Analyst Note, Gate Crashers, debunked the myth that the majority of lost vehicle sales occur during the price negotiation phase (they happen earlier in the process) and the top reason for vehicle rejection is price, (it’s actually the shopper’s perception that a particular vehicle did not meet their needs).
New analysis suggests that far from being a product issue dealers cannot control, sales staff may exert influence over that impression simply by staying more in tune with shoppers’ needs in the vehicle discovery phase.
Indeed, recent sales data indicates the majority of shoppers eventually buy a vehicle in the same segment as one previously rejected because it “didn’t fit their needs.”
THE CASE FOR A BETTER NEEDS ASSESSMENT Most Customers Stay In-‐Segment
Source: J.D. Power Canadian Consumer Retail Experience StudySM
29% 33% 31%
0%
10%
20%
30%
40%
50%
60%
70%
0%
10%
20%
30%
40%
50%
60%
70%
Compact Car Small CUV Midsize sedan
% Rejected a model because "didn't fit my needs"
% Purchased another in-‐segment vehicle
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Brian Murphy 416-507-3253 ▪ [email protected] July 30, 2013
J.D. Power & Associates does not guarantee the accuracy, adequacy, or completeness of any information contained in this publication and is not responsible for any errors or omissions or for the results obtained from use of such information. Advertising claims cannot be based on information published in this publication. Reproduction of any material contained in this publication, including photocopying in part or in whole, is prohibited without the express written permission of J.D. Power & Associates. Any material quoted from this publication must be attributed to J.D. Power & Associates.
© 2013 J.D. Power & Associates, McGraw Hill Financial. All Rights Reserved.
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19 48 49
3
New Vehicles Used Vehicles
Cash Lease Loan
48
53
58
63
68
Jun-
12
Jul-1
2
Aug
-12
Sep
-12
Oct
-12
Nov
-12
Dec
-12
Jan-
13
Feb-
13
Mar
-13
Apr
-13
May
-13
Jun-
13
New Used
$465
$485
$505
$525
$545
$565
Jun-
12
Jul-1
2
Aug
-12
Sep
-12
Oct
-12
Nov
-12
Dec
-12
Jan-
13
Feb-
13
Mar
-13
Apr
-13
May
-13
Jun-
13
New Lease New Loan
Percent of Total Transactions (Past 12 Months)
Average per Customer
72 Months and Greater
63%
0%
10%
20%
30%
40%
50%
60%
70%
2008
2009
2010
2011
2012
2013
Data from JDPA PIN Incentive Spending Report (ISR)
20%
30%
40%
50%
Jun-
12
Jul-1
2
Aug
-12
Sep
-12
Oct
-12
Nov
-12
Dec
-12
Jan-
13
Feb-
13
Mar
-13
Apr
-13
May
-13
Jun-
13
% Negative Equity Trade-In %
Percentage of negative equity vehicles at trade-in
$27,000
$28,000
$29,000
$30,000
$31,000
$32,000
Jun-
12
Jul-1
2
Aug
-12
Sep
-12
Oct
-12
Nov
-12
Dec
-12
Jan-
13
Feb-
13
Mar
-13
Apr
-13
May
-13
Jun-
13
Vehicle Price Transaction Price