How To Overcome Low Consumer Confidence – Rich Dealers Daily
(average: 5.00)
Loading ...Posted on: March 3, 2010
Have you noticed less people coming in to buy a car? Has the natural traffic you used to get been slashed in half? Are your ups, down?
On today’s episode we’ll reveal the undisclosed reasons why less people are coming to your dealership and what you must do to overcome their fear and get more car shoppers on your lot. We all know that more shoppers means more buyers. Watch it now!
Rich Dealers Daily is the show for automotive professionals who want to get rich or richer!
Attn: Auto Dealers! You are losing $1 million a year in net profit due to simple marketing mistakes. Request a Million Dollar Marketing Call and find out how to stop the bleeding and put more of your profit back in your pocket. Calls are limited and on a first to reserve, first to receive basis. Visit www.TheMillionDollarCall.com
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March 3rd, 2010 at 1:22 PM
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March 3rd, 2010 at 2:53 PM
Great insight. Building confidence is absolutely essential in the used car business. In fact, George Akerlof won the 2001 Nobel Prize in economics for the mathmatical proof that markets where the seller knows more about a product than the buyer will fail if buyers believe some proportion of the poducts for sale in the market have differing levels of quality.
With information asymetry, buyers impose a risk penalty on their offer price equal to the proportion of the products they believe to be “lemons”. So if the buyer thinks 10% of used cars are lemons, then, absent some external signal, they will insist on a 10% discount from market price. Sellers who know their product is not a lemon are less willing to accept 90% of market value, so they transact less often. Sellers who know their product is a lemon are happy to take 90% of market value, so they transact more often. This dymamic increases the proportion of “lemons” in the market. Buyers impose larger risk penalties based on the increased frequency of “lemons”, further reducing offer prices, further reducing the overall quality of the market until the market goes into failure and no transactions occur.
In this kind of market, buyers need exogenous signals of product quality. This is why CPO cars sell at a premium and why dealerships with big shiny showrooms command a premium price for similar vehicles sold at smaller or less classy dealerships. This is also why 1-owner cars and cars with clean Carfax reports sell faster and for more money.