Inventory Flow = Sales Projections = Ad Budget Projections
By: Kristen C., Senior Marketing Coordinator
How quickly is your team turning inventory? When you receive trade-ins or vehicles from the auction, how long are they sitting on your lot? How often are you adjusting your pricing? As a rule of thumb, the GOAL for turning USED inventory should be 70%, however, we find that many are comfortable at 50%. Abiding by this “rule” will help increase your turn rate, profits, and overall units in operation.
We recently connected with one of our semi-rural dealer partners who does a great job at merchandising and turning inventory. We believe his process allows him to maintain a steady turn ratio.
“Whatever we take in on trade or receive from the auction, we immediately turn the following day to service.” Their goal is to have it out of service within three days. They have a photographer on a three-day schedule each week to take pictures of inventory and he posts no less than four pictures of the outside of each vehicle. Once it goes through detail, he comes back and takes photos of the inside.
He says, “the key is getting pictures taken and posted on the website as soon as possible to gain visibility.”
In regards to pricing, he is looking at it every single day and adjusting it at least every other day. He aims to adjust pricing within a couple of hundred dollars to keep movement. Most of our successful dealers DO NOT RELY ON ONE SOURCE - like vAuto, MaxDigital, DealersLink, VinCue, etc; they use the information from those tools and third-party providers like AutoTrader, Cars.com, and CarGurus pricing algorithms. If you utilize third Party platforms, it is essential to understand their algorithms and what makes your inventory rank the best - besides paying to be “at the top.”
We find that the best way to maintain a healthy inventory turn ratio is to have a strong process in place.
This topic is fun, as some dealers may think that their marketing may need to be changed or altered if their leads seem “down.” But, we have seen across hundreds of rooftops, if your inventory is managed well, and increases - you get NATURAL ORGANIC traffic increases. And as most know, a well-stocked used inventory lot can directly impact your new vehicle sales.
Thus - your inventory should help you predict your sales velocity. Depending on the brand, and OEM inventory availability, it is sometimes tough to predict your new car velocity. However, if you are well stocked on new, the goal should be to turn 50% of that inventory, and 70% of your used inventory. OEMs where the inventory is lacking or have a ton of pre-orders, we see 100-150%+ turn rates on New.
Utilizing the 50% of New, and 70% of Used inventory turn goals, along with a Cost Per Sold Unit Goal or a Total Gross Margin Goal - you should be easily able to project what you desire to spend in advertising. Keep in mind, that many of your dollars that seem to be allocated for sales, actually drive service business, so we recommend having a Cost Per Customer (Sales/Service) or Total Gross (Sales, Parts, Service) metrics to calculate your ad expense.
If you are looking to learn more about optimizing and right-sizing your advertising spends, please contact our team!
Visit us at www.amg.team
Jonathan Thompson, Lead Guru | CEO email: email@example.com