Analyst Note January

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Analyst Note January

  1. 1. CANADA CANADA February28 , 2013 January 14, 2011 Beyond Closing Rates jd_ney@jdpa.com As closing rates rise, satisfaction with new-vehicle (416) 507 3254 deliveries declines One of the most critically evaluated measures among most Canadian dealerships today is their individual closing rates — and for good reason. The number of new-vehicle shoppers being turned into new vehicle buyers is an important indicator of the effectiveness of the salespeople. By measuring the number of same-brand and off- brand dealerships visited by new-vehicle purchasers in the most recent Consumer Retail Experience Study, the closing rate for dealers in Canada can be pegged at 32%, with individual brands ranging from a low of 20%, to a high of 42%. However, focusing solely on closing rates may blur the bigger picture for many dealers and manufacturers. Source: J.D. Power and Associates 2012 Consumer Retail Experience Study Behind the Numbers  New research suggests that as closing rates  But what is a loyal new-vehicle owner worth to a improve by brand across the industry, there is also dealership overall, and why should the a somewhat intuitive but no less problematic measurement of sales-success be linked with correlation between those improved rates and a service loyalty and advocacy metrics instead of decrease in customer satisfaction with the final just closing rates? delivery of their vehicle.  According to Power Information Network, in 2012  Rushing a new-vehicle delivery in order to return to the average age of a trade-in was 6.3 years. If a the sales floor is shortsighted, particularly from a dealer were to retain all of the original owner’s holistic, long-term view of the overall customer service occasions, the service department would dealership experience. Notably, the most recent interact with that customer an average of 14.6 study shows that 58% of customers who say their times, with revenues totaling an average of $2,016, dealership staff spent the right amount of time on thereby significantly increasing the value of that the new-vehicle delivery also say they “definitely vehicle to the business as a whole. will” return to that dealership for service work that  By the time the vehicle delivery occurs, the sale they would pay for. However, when that experience has been closed, which makes it tempting to rush is rushed, only 25% say they “definitely will” return. the process in favour of new business. However,  Ask consumers to rate their delivery experience with new-vehicle front-end gross margins currently and the problem becomes even more acute. hovering in the $1,100 range, a dogged pursuit of Among those who rated their delivery experience increased closing rates may sacrifice years of as a 10 out of 10, 74% say they “definitely will” continued revenues and profitability, not to mention return for service. In contrast, when the rating slips the lost opportunity to generate advocacy and to an 8, only 41% of customers say the same. brand loyalty in the longer-term.J.D. Power and Associates does not guarantee the accuracy, adequacy, or completeness of any information contained in this publication and is not responsible for anyerrors or omissions or for the results obtained from use of such information. Advertising claims cannot be based on information published in this publication. Reproductionof any material contained in this publication, including photocopying in part or in whole, is prohibited without the express written permission of J.D. Power and Associates.Any material quoted from this publication must be attributed to J.D. Power and Associates. 1© 2012 J.D. Power and Associates, The McGraw-Hill Companies, Inc. All Rights Reserved.
  2. 2. Brian Murphy ▪ 416-507-3253 ▪ brian_murphy1@jdpa.com February 28, 2013 January 14, 2011 Vehicle Purchase Type Percent of Total Transactions (Last 12 Months) Days to Turn New Used New Vehicles Used Vehicles 70 3 66 18 62 47 58 21 61 50 54 50 Jan-12 Jun-12 Feb-12 Dec-11 May-12 Jul-12 Oct-12 Nov-12 Dec-12 Mar-12 Sep-12 Aug-12 Apr-12 Cash Lease Loan Monthly Payments Vehicle Price versus Customer Facing Vehicle Price* Average per Customer *Data from JDPA PIN Incentive Spending Report (ISR) New Lease New Loan Vehicle Price Customer Facing Transaction Price $32,000 $560 $31,000 $30,000 $540 $29,000 $520 $28,000 $27,000 $500 $26,000 $480 $25,000 Jan-12 Feb-12 Jun-12 Dec-11 Mar-12 May-12 Jul-12 Oct-12 Nov-12 Dec-12 Dec-11 Jan-12 Feb-12 Jun-12 Jul-12 Sep-12 Nov-12 Dec-12 Mar-12 May-12 Oct-12 Sep-12 Aug-12 Apr-12 Aug-12 Apr-12 Percent New-Vehicle Loan Term Percent Negative Equity + Trade-In 72 Months and Greater Percentage of negative equity vehicles at trade-in % Negative Equity Trade-In % 70% 50% 58% 60% 50% 40% 40% 30% 30% 20% 10% 20% Jan-12 Jun-12 Feb-12 Dec-11 May-12 Jul-12 Oct-12 Nov-12 Dec-12 Mar-12 Sep-12 Aug-12 Apr-12 0% 2007 2008 2009 2010 2011 2012J.D. Power and Associates does not guarantee the accuracy, adequacy, or completeness of any information contained in this publication and is not responsible for anyerrors or omissions or for the results obtained from use of such information. Advertising claims cannot be based on information published in this publication. Reproductionof any material contained in this publication, including photocopying in part or in whole, is prohibited without the express written permission of J.D. Power and Associates.Any material quoted from this publication must be attributed to J.D. Power and Associates. 2© 2012 J.D. Power and Associates, The McGraw-Hill Companies, Inc. All Rights Reserved.

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