Turning Over Aging Inventory: How VIN-specific Campaigns Can Help Your Dealership
The issue of aging automotive inventory has become a pressing concern for dealerships across the country. Dealerships are struggling with an overabundance of inventory as new car allocation arrives faster than it can be sold, creating a backlog of aging inventory.
This prolonged aging of inventory can have severe financial implications for dealerships, as they incur additional costs related to storage, insurance, maintenance, and depreciation expenses. These costs can quickly accumulate, eroding profit margins and negatively impacting the overall financial health of the dealership.
Furthermore, aging inventory can create a domino effect of operational challenges. Overcrowded lots make it difficult to showcase and maintain newer models effectively, potentially leading to customer dissatisfaction and lost sales opportunities.
This situation becomes increasingly problematic in a market where customer experience and efficient inventory management are crucial for success.
Customers and dealers share several obstacles: the average MSRP on most new cars is around $50,000 compounded by a need for manufacturer incentives and high interest rates. Many customers are in negative equity situations due to over-MSRP pandemic pricing, with an average negative equity of $6,000, leading them to hold onto their vehicles longer. Inflation exacerbates these challenges, and yet the advice and strategies around moving inventory have stayed the same:
- Ensure all inventory is properly merchandised with pictures, detailed descriptions, and “story.”
- Utilize all the digital platforms, listing sites, and social media.
- Discount aging inventory and incentivize the sales staff to promote those vehicles.
But many of these efforts do little to turn aging inventory if customers are not exposed to your vehicles.
Understanding Aging Automotive Inventory
Within the automotive industry, the term "aging inventory" typically refers to vehicles that have remained unsold on a dealer's lot for an extended period. While there is no universal definition, most dealerships and manufacturers generally categorize new vehicles as "aging" after 60 days on the lot, and used vehicles after 90 days.
However, these timeframes can vary based on several factors. For instance, luxury or high-end vehicle brands may consider their inventory to be aging sooner, perhaps after 45 days for new models, due to higher carrying costs and the expectation of more rapid turnover. Conversely, dealerships in rural or smaller markets may extend the aging period to account for lower inventory turnover rates.
Seasonal fluctuations can also influence how dealerships define and manage aging inventory. During peak selling seasons, the aging thresholds may be shorter, while in slower months, dealerships may allow more time for vehicles to sell before categorizing them as aging.
Ultimately, individual dealerships often establish their own policies and timeframes for defining and addressing aging inventory based on their specific circumstances, market conditions, and operational strategies.
While several factors contribute to this issue, the core problem lies in the lack of vehicle visibility. Even with the proper merchandising, digital platform mix, and attractive discounts, vehicles can still languish on the lot if they are not adequately exposed to potential buyers.
Traditional methods of inventory management often fall short because they do not address the core issue of visibility. Without sufficient exposure, customers are unaware of the options, leading to prolonged inventory aging. This lack of exposure is especially problematic in today’s market, where digital presence and targeted marketing play a pivotal role in reaching potential buyers.
Addressing this visibility issue requires a shift in strategy. Dealerships need to adopt innovative marketing approaches that ensure each vehicle gets the attention it deserves. This involves leveraging VIN-specific paid campaigns, which focus on promoting individual vehicles, thereby increasing the likelihood of sales. By improving the visibility of aging inventory, dealerships can enhance turnover rates and mitigate the financial impact of unsold stock.
The Impact of Aging Inventory on Dealerships
Aging inventory significantly impacts dealership operations and financial health. When vehicles sit unsold on the lot for extended periods, dealerships face several challenges.
Financial Implications
Holding costs for aging inventory can accumulate quickly, including expenses for storage, insurance, and depreciation. As vehicles age, they often require more maintenance and detailing to remain saleable, adding to the financial burden. Furthermore, the necessity to discount older inventory to entice buyers erodes profit margins, impacting the overall profitability of the dealership.
Operational Challenges
Managing a large inventory of aging vehicles can strain dealership resources, as staff must spend more time on maintenance, updates, and promotions for these vehicles. Additionally, space occupied by unsold inventory limits the ability to showcase newer models, thereby hindering the sales of fresher stock.
The core issue, as highlighted previously, is visibility. Without adequate exposure, even the most attractive deals on well-maintained vehicles can go unnoticed. This leads to a vicious cycle where vehicles continue to age, becoming less appealing to buyers and further diminishing their value.
Addressing the visibility problem through targeted marketing strategies is essential. By ensuring that inventory is effectively exposed to potential buyers, dealerships can reduce the financial and operational strain caused by aging inventory.
The Role of Marketing in Inventory Management
Marketing plays a crucial role in addressing the challenges posed by aging automotive inventory. Effective marketing strategies can significantly improve turnover by enhancing the visibility and appeal of vehicles to potential buyers.
How Marketing Affects Inventory Turnover
Marketing directly impacts how quickly inventory moves by increasing the exposure of vehicles to potential customers. Well-executed marketing campaigns can draw attention to specific vehicles. They highlight the features, benefits, and value propositions of these vehicles. This not only attracts more potential buyers but also helps to differentiate these vehicles from the competition.
The Importance of Exposure and Visibility
Visibility is key to turning aging inventory. Digital marketing, in particular, plays a vital role in achieving this visibility. Utilizing various online platforms such as social media, automotive listing sites, and search engines can ensure that vehicles reach a broader audience.
There are however some potential pitfalls:
- Overspending or lack of budget control: Without proper monitoring and budget management, paid campaigns can quickly become cost-prohibitive, diminishing their overall effectiveness.
- Broad Targeting: Casting too wide a net with audience targeting can lead to inefficient ad spend and lower conversion rates, as the campaigns may not resonate with the intended buyers. This is often the case with paid campaigns that drive traffic to SRPs, where consumers are unlikely to convert to VDP views or buyer engagement.
Implementing VIN-specific Paid Campaigns
Implementing VIN-specific paid campaigns can shift a dealership strategy from struggling with aging inventory to ensuring that vehicles with too much exposure are tapered off and vehicles that need exposure get it.
Unlike broader marketing strategies that promote a brand or a range of models, VIN-specific campaigns focus on promoting a single vehicle. This allows for dynamic advertising to highlight the vehicles that need more exposure.
Benefits of VIN-specific Advertising for Individual Vehicles
- Enhanced Visibility: By focusing on individual vehicles, dealerships can ensure that each car gets the attention it needs. This targeted approach increases visibility, reducing the chances of it aging on the lot and increasing turn.
- Higher Conversion Rates: Targeted ads are more likely to reach potential buyers. And driving them to a VDP increases engagement in the form of map views, condition report downloads, lead submissions, and test drives - all of which increase the chances of a sale.
- Cost-Effective Marketing: VIN-specific campaigns are more effective and efficient than broader efforts. By directing resources toward promoting specific vehicles, dealerships can maximize their return on investment.
By implementing VIN-specific paid campaigns, dealerships can significantly enhance the visibility of their aging inventory, improving turnover rates and reducing the financial strain of unsold vehicles.
Enhancing Inventory Turnover with VIN-specific Marketing
The challenges posed by aging automotive inventory require a comprehensive and adaptable strategy. While traditional methods of inventory management may fall short in today's digital landscape, implementing VIN-specific paid campaigns can significantly enhance the visibility and turnover of individual vehicles.
VIN-specific paid campaigns offer a targeted, effective solution by enhancing the exposure of the individual vehicles that need visibility. These campaigns ensure that each vehicle gets the attention it needs, improving the likelihood of sales and reducing the financial strain of unsold inventory.
As market conditions, customer behavior, and technologies continue to evolve, dealerships must remain agile and adapt their strategies. Regularly evaluating the effectiveness of their inventory management processes, including targeted marketing campaigns, and making data-driven adjustments will be key to staying ahead of the curve and maximizing inventory turnover.
By embracing innovative solutions like VIN-specific paid campaigns and adopting a holistic, integrated approach to marketing, dealerships can effectively address the challenges of aging inventory, improve profitability, and enhance the overall customer experience.
To continue optimizing your inventory management strategies, consider a VIN IQ Free Marketing Analysis.