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Market Adjustment Metric Tied to Dealer Performance, Points to Strategic Shifts

Market Adjustment Metric Tied to Dealer Performance, Points to Strategic Shifts

By Jeff Englishmen, VP of Dealer Success at ZeroSum

Say you’re in the market for a new dishwasher. You do some research, identify a brand that meets your needs, and search for prices at Lowe’s, Home Depot, and Best Buy. You discover that all have choices that are generally similar in features, but one has a sale price that is lower than the others.

Now, it’s not a given that the retailer with the lowest price will automatically get your business. Maybe one is farther away, or you had a bad experience at another, or you have a discount credit card at a third. But the one with the lowest advertised price has at least one advantage that will capture your attention.

Buying a car and choosing which dealer to do business with is very similar, and while price is not the only factor, it certainly is an important one. These days, the majority of consumers will visit just one or two dealerships in person, making the information they can find online all that much more crucial.

In doing so, most consumers will compare a dealer’s marketed price with the MSRP to quantify the differential, and a larger gap is naturally more favorable to shoppers for whom cost is a key consideration. Paying attention to the competition’s list and reduced pricing is therefore critical to ensure that a dealer is well positioned to garner consideration.

ZeroSum’s Market Adjustment metric—which takes into account discounted pricing and marketed incentives—coupled with vehicle movement metrics such as Turn Rate illustrates this point. A comparison of list and marketed pricing for the Nissan Rogue at five Kansas City DMA dealerships points to a connection between these two factors.

As can be seen in the chart below, Dealer A has the biggest gap between its marketed price and MSRP at -5.1%, and also has the highest Turn Rate at 46%--well above the DMA average. Dealer D and Dealer E have lower-than-average discounts (-2.4% and -1.4%, respectively) and are underperforming Rogue’s overall Turn Rate in this geography.

But Dealer C also stands out in this example. Its Market Adjustment is sizeable, exceeding that of the DMA average, and management at that rooftop may therefore feel that it is priced competitively. But a price-oriented consumer searching for a Rogue in this market has two larger marketed discounts to consider at Dealer A and Dealer B.

MrktAdjustmentvsTurnRate

Again, there are other factors at play in how consumers choose where to shop and buy such as marketing, availability and sales process. But more often than not, the relationship between the Market Adjustment and vehicle movement metrics work in favor of dealerships that are aggressively showcasing their discounted pricing.

Monitoring and adjusting the approach to this crucial element requires complete competitive visibility and real-time information. Fortunately, ZeroSum’s tools provide exactly that. Our team is also able to help you understand where you stand on each of your models and more importantly, which factor to adjust to maximize your return. Click here to learn more.

 

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