Using Market Share To Map Your 2015 Sales Goals
I received an extremely astute question from a fixed operations director in Gainesville, Fla.:
Dale: What’s the best way for us to forecast our sales goals for 2015? We typically look at current year volume as a guide for the future. However, this approach seems like we might be misleading ourselves, especially if we have been, and expect to be, in a strong selling environment. For example, our dealership is performing at 145 percent of last year’s sales volumes. But I concede we are in a better selling environment and the market this year was better than last year. I believe we should be looking at market share as opposed to volume. Your thoughts?
Before I share my response, I think it’s appropriate to offer two observations that don’t directly pertain to the question at hand.
First, it’s an extremely good sign that a fixed operations director wants to get a more realistic read on sales expectations for the coming year. As we all know, dealers are increasingly dependent on fixed operations revenue for their overall profitability—a reality this fixed operations director no doubt fully understands. By asking the question, this manager is clearly looking beyond the four walls of his department to properly manage his team’s performance next year—evidence, I believe, of a “total gross” mindset at the dealership.
Second, the manager’s looking ahead to 2015 before Thanksgiving. This proactivity suggests a careful, deliberative approach to planning for the new year, a stark contrast to the rush-jobs that often typify next-year planning at many dealerships.
Now, on to my response:
I told the fixed operations director that I agree with his assessment of the value of market share, rather than sales volumes, as a benchmark for future performance—particularly in the current environment where “a rising tide lifts all boats.”
I also cautioned that sales volume forecasts and projections are often too broad to be meaningful for dealers in a specific market or region, where more localized factors (e.g., economic conditions, weather, etc.) can spur or stunt vehicle sales volumes.
By contrast, a dealer’s new and used vehicle market share essentially measures a store’s piece of the automotive retail pie in a given area. Even as the pie itself grows or shrinks, a dealer’s market share remains a telling gauge of sales performance.
I would encourage all dealers to undertake the same exercise as the fixed operations director. Calculate your dealership’s new and used vehicle market share for the current year, and then, with an honest assessment of your retailing strengths/opportunities and the competition, set your sales goals for 2015.