Prime is Where Prospects Are, Not Subprime
Online lead generation companies focus on turning outlier sales prospects with bad credit into deliveries for your dealership.
But according to Wells Fargo & Co. reports, the subprime bubble is reaching dangerous heights.
Since 2009, subprime auto bonds have risen from $2.5 billion to $26 billion this year. Subprime auto loan customers are defaulting at a higher rate, and it’s being compared in small scale to the subprime mortgage crisis in the Great Recession.
If the subprime auto industry deflates suddenly, your lead generation investments will be largely futile. You’ll need to change your marketing focus on a dime, and that’s not easy to do.
There are other reasons why subprime customers aren’t your best demographic to target:
• Subprime purchasers are less loyal. Because they’ll buy wherever their deal can get done, it’s extremely difficult to keep them at your dealership for repeat sales.
• Often, subprime buyers are cash poor. That means when they need maintenance or repairs, they’ll choose the lowest-priced shop and that’s probably not your dealership.
• Emotions can be unstable. A subprime deal isn’t attractive to the customer by most standards other than getting a car. Emotions can run hot at times, leading to confrontations in the store, poor SSI scores, and unlikely referral business.
• There’s an increasing chance of defaulting on the loan, burning your lenders and creating tense relationships and tighter approvals.
Instead, focus on prime-rate buyers. These are the buyers who drive a profitable dealership. Their profile is almost exactly opposite to subprime – they can be fiercely loyal, extremely satisfied, and are often able to afford ongoing service at the dealership level.
You don’t want to repel subprime customers, but rather focus your advertising budget on the customers who will sustain your dealership beyond the initial sale.
Strategize with your lead generation provider to target higher-income, low-risk customers. Advertise on media strategies that are proven to generate high-quality leads. Engrain a culture of asking for referrals from your prime customers.
Most of all, command loyalty by providing an exceptional customer experience.
The documents posted on this Website contain external links or pointers to information created and maintained by other public and private organizations. These links and pointers are provided for the user’s convenience. Center for Performance Improvement does not control or guarantee the accuracy, relevance, timeliness or completeness of this outside information. The inclusion of links or pointers to particular items is not intended to reflect their importance, nor is it intended as an endorsement by or for the Center for Performance Improvement.