Dealers could be in danger of having the new car upsell opportunity taken out of their hands. While some car manufacturers are determined to allow customers to stamp their own personality on their next car, plenty of others are reporting that they’re paring back the optional extras in favour of a well specified car that the customer can buy out of the box.
This puts the manufacturer even more in control of exactly what is being sold, and how, but the risk for the dealer is that yet more opportunities to increase revenue and profits are being taken away. This comes at a time when dealers’ incremental earnings from GAP and finance are already under the spotlight from the Financial Conduct Authority.
It seems that what has been traditionally known as an ‘upsell opportunity’ makes many car manufacturers a little uneasy. Having contacted numerous carmakers for this feature, many don’t actually want to be seen as encouraging ‘upselling’. Perhaps they worry it has connotations of persuading the customer to buy something they didn’t actually want. Many talk about wanting ‘customer-pull’ with the consumer making all their own choices, yet ‘product-push’ still seems endemic in the industry as manufacturers set dealers higher volume targets with bonus attached.
Has ‘selling’ become a dirty word for carmakers?
With some manufacturers having introduced ‘product geniuses’ and ‘showroom hosts’ to their franchised networks, and with the availability of car configurators on most manufacturer websites to let prospective buyers build their ideal car, the trends suggest ‘selling’ is becoming a dirty word.
Having a more limited catalogue may result in damage to manufacturer profit and in turn dealer profit, resulting in either a manufacturer-dictated target or simply a silent need to sell more vehicles.
At East Midlands-based Sturgess Group, chairman Chris Sturgess said: “Retailers need to push their manufacturers to make sure they continue to develop options and accessories that help keep the products exciting and relevant.”
Hyundai Motor UK said its focus is on simplicity of its trim strategy, rather than offering an extensive options list, so that its cars appeal to a broader spread of consumers, who will expect to pay the price at which the car was advertised.
A spokesman said: “Hyundai does not offer a broad range of optional extras across the majority of our models.
“Rather we have a trim strategy, which includes varying levels of equipment, and move customers between these trim levels so that they gain the equipment they desire. This provides our dealers with a simple and clear message when communicating product messages and standard equipment to customers.”
He said the finance and PCP offers available are what drive the opportunities for Hyundai dealers, not so much an upsell as “an informative discussion”.
On smaller models in the range – the i10 and i20, for example – the ‘price walk’ between trim levels in terms of finance is typically £10 per month. From a customer perspective, this makes it much easier to balance their requirements against their budget. This, in turn, is more profitable for dealers, said Overall.
‘Keeping the buying process simple’
Suzuki GB said its current range doesn’t actually include any factory optional extras, as its focus is on the cost and keeping the buying process simple for customers, with a ‘one price’ strategy so the customer knows what they’re paying. However, its website does promote dealer-fit accessories from rear parking sensors to alloy wheels, with an ability to purchase and book fitting online.
Product manager Ed Norman said: “Suzuki is known for keeping things simple across our model range, sales activities and communications. Also, we can ensure we have regular availability of each model, which allows us to deliver cars to customers very quickly.”
At Toyota, a decline in accessory sales led to the roll out of an iPad-based tool in 2014, which dealer sales staff can pass across to the customer to browse through and make selections. It led to a 50% sales improvement network-wide.
The personalised car and the growth of the option pack
A simplified trim range may work for growing brands that want to battle the old guard and need to demonstrate added value through the technology offered as standard, but well established brands, such as Vauxhall and Audi, have customers who want more.
Peter Smyth, director of Swansway Group, whose dealerships in North West England include Audi, Jaguar, Land Rover and Volkswagen, said: “The era of the personalised car is definitely here; it seems to be a swing against the globalisation and homogenisation which we are seeing across our high streets in the retail sector. This desire to own your unique car does have cost implications for the customer, but they are happy to pay for a bespoke car; much like having a suit tailored for you rather than off the peg at M&S.”
Much of the growth is in option packs, which bundle systems together to make it simpler for the consumer to purchase, and to provide a discount against buying each element individually.
Phil Nothard, a Black Book editor at CAP Automotive, said: “The packs allow the build to be better controlled and analysed for trends, and we need to consider that many more options are now becoming a standard expectation. Once, air-con was always a desired option, now you would struggle to find a new car without it as standard. This can now be said for satellite navigation, etc.”
“The model line-up has unquestionably risen over the years to in excess of 9,000 derivatives available in 2014. However, the Vauxhall Adam had over 85 trims to choose from launch but through time Vauxhall will understand what sells and what to stock,” Nothard added.
At Vauxhall, more than 60% of Adam sales have been on PCP, which has helped the dealers in selling options given that the customer is spreading the cost over monthly payments.
A spokesman said: “It’s amazing how as much as 80% of retail sales are now financed in some way and the majority are PCPs. People are not ‘owning’ their own cars anymore.
“It’s not difficult to mount up the spec on a PCP with £5 here for one thing and £10 the next.”
For example, adding £1,200 of options to a new Adam on a three-year Vauxhall Flexible PCP with zero deposit can make as little difference as £25 to the monthly payment.
MG Motor UK is another carmaker fully committed to giving its dealers upsell opportunities. It has a no-haggle policy on the price of its cars, with dealers earning a fixed amount. However, at the launch of its MG3 supermini in late 2013, the carmaker said its retailers could sell up to £1,500 worth of personalisation options, from graphic packs and special colours to a lux pack with leather-fronted seats, to earn extra profit.
Mike Latimer, managing director of MG dealer Michael Edwards, said the personalisation options available to customers on the car mean additional profit opportunities for the business. Latimer said it is from £150 to £850 per MG3 sold, but with F&I add-ons and accessories the margin is an average £900 – or 8% of the car’s transaction price.
