5 Steps to Recalibrate your Dealership’s Business Model


The dealership industry continues to undergo a transformation. To better serve customers in a digital first environment, many dealerships have adopted new technologies and strategies to enable digital and remote capabilities.

These capabilities give customers more options for interacting and transacting with dealerships. Some dealerships can now conduct the buying and finances processes entirely through phone, email and chatbot conversations. Some even provide virtual test drives and delivery services.

Such changes and advancements are a significant disruption in the buying process. For an industry that once proudly relied on engaging with customers face-to-face, this is a dramatic and complex shift. However, dealers must consider new buying habits and expectations and pivot accordingly if they aim to thrive and stay profitable.

New business models in the industry have introduced shopping conveniences and efficiencies that buyers appreciate and that are likely to remain in popular demand. Your current and future competition knows this, and they’re strategizing to capture that business.

An overhaul of this caliber may equate to a business model transformation for your dealership. The design and outcome of that business model might look different for each dealership.

It’s impossible to forecast with 100% accuracy what the future will hold. However, business leaders can prepare for anything by building agility into every function. The key to this agility is to embrace new models: technology, data analytics, flexible workplace and a readiness for change.

To understand the best new direction for your business – what should stay, what should go and what can be enhanced – take the following measures to start rethinking your business model:

1. Reflect on Changes You’ve Made

As the industry has changed and customers have come to expect more digital, remote experiences, you’ve likely already made many significant changes at your dealership. There is value in analyzing what worked, what didn’t and what had more potential if better executed.

Review the past couple of years closely, action by action, and gauge each decision and approach’s effectiveness. Crowdsource insights from customers and employees to ensure you’re getting a realistic perspective and identify where you already have buy-in. Your new business model will capitalize on your successes and opportunities for improvement.

2. Assess the Performance and Viability of the Solutions You’ve Used

Review the solutions, including technologies and new service methods, you implemented to serve customers as their needs shifted. The solutions you implemented may not have been optimal and may need to be adjusted or replaced, or they might be the leading solution for your new business model.

Common issues dealerships have battled with through industry shifts include:

  • Enhanced websites and e-commerce with a messy patchwork of platforms and plug-ins
  • Chatbot capabilities that don’t quite perform
  • Delivery services that are difficult to fulfill efficiently and effectively
  • Increased cybersecurity risks that must be dealt with and managed

Perform a thorough assessment of the solutions you have in place. Once you’ve determined the right focus for your business model, you can choose which of these is worth fixing, updating, swapping or dropping. You want to have your goals in mind before making technology and operations decisions to ensure they align with your value proposition.

3. Analyze Your Competition’s Strategy and Performance

There is much to be learned from how your competition performed during the challenges over the last several years. Some businesses’ initiatives fell entirely flat and forced them to close their doors. Others’ strategies helped them be tremendously successful. There’s a lot of trial and error within this range. Understanding the outcomes can help you make more effective decisions at your dealership.

As part of your competitive analysis, consider what might be on the horizon and how your business model might better meet the customer of the near future, rather than simply meeting today’s industry standard. What alternatives to traditional dealerships are posing immediate threats? What might be around the corner?

Understanding your dealership operations as a whole is critical for maximum profitability and performance. When all parts of your dealership are operating at peak, you can feel confident your dealership will have the competitive edge and ultimate success.

4. Prepare to Adopt New Standards

Considering what customers have begun to prefer and need, and what your competition offered, you can make some assumptions about new industry standards. They might include offers such as:

  • Solely online negotiations and purchasing
  • Online financing processes and approvals
  • Chatbots
  • Enhanced website experiences
  • Contact-free test drives
  • Delivery
  • Special requests tailored for each customer

These might now be fundamental expectations for dealerships. They are essential to your operations and must be integrated into your business model, though they aren’t your differentiators. Technologies and strategies that support these services should be on your list to adopt. You might not be able to sustain your dealership without them.

5. Identify Your Differentiators

With this lay of the land, you can determine how you’ll set yourself apart from your competition and establish yourself moving forward. As you know, the dealership industry can be difficult to differentiate in, and a lot of those fundamental and expected services take enough effort on their own. However, merely following the trends won’t ensure a sustainable, profitable business in the future.

Here are a few questions you can ask yourself to help identify your differentiators.

  • What are some initiatives that have been successful in the past?
  • What has proven effective in your dealership as well as with competitors?
  • How can you go above and beyond with the new standard services? For instance, you could offer a robust live chat program instead of just chatbots.
  • Which areas should you focus on? If you try to excel in all categories, you might not excel in any.
  • How can you capitalize on your most successful initiatives? For example, if your website is garnering a lot of business, you could enhance your on-site SEO efforts and your website’s search capabilities.
  • Is there a niche you can create for your dealership? You might:
    • Carry all of a particular line or type of vehicle/equipment
    • Strategize ways to become a more valued business citizen
    • Establish yourself as a thought leader in industry publications
    • Pursue charitable initiatives, perhaps monthly
    • Offer high-value service programs to customers
  • Could you expand into a different market, be that physically, online or in terms of demographic?
  • Can you offer value-add items, like a virtual class?

Recalibrate Your Business Model to Overtake the Competition

Dealerships will continue to need to pivot with any new challenges that may emerge in the industry, the economy and customer buying behaviors. Maintaining operational efficiency and profitability requires being well-informed and nimble. These steps can help you set yourself up for success.

Recalibrate your dealership’s business model with a digital transformation. Download our Digital Transformation guide to develop the necessary roadmap.

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