Hannibal the DMS Cannibal Part I

Hello Clarice.  Still chilling to hear those words, one of the best movies all time, my opinion.  Hannibal the Cannibal scored even the hardest of hearts, maybe because he was from the outside, just so ordinary.  Kind of like our DMS, and the mail houses that dig through them each and every month.   They look harmless enough.

But what exactly is the price to pay for the DMS blasting that has been done for the last 4 to 5 years?  I say we are living it, the start of it, right now.  Let me ask you, does it seem odd that over the last, say six months there have been such broad pockets of strength and weakness, with no rhyme or reason?  Move forward now to those dealers who are on their second turn through the DMS.  The problem with this?  It is simple, if you haven’t replaced that customer you pushed forward within the last few years, than when it comes time for their normal trade cycle, the dealer must find themselves a replacement customer.  The cost?  Well, I am willing to bet it is A-Lot higher than that $616 average NADA acquisition cost.

I propose the cost to you is far greater than even that.  Let’s do some quick math to prove a point.  If Bob bought a car from ABC Toyota, and has a normal trade cycle of 5 years, than Bob as a customer can be monetized as follows:

1. Sale Gross Profit    $1400.00
2. Service Profit (PM) $1250.00
3. Service Retention $$   $1000.00
4. RO Repair $$ $  900.00

$4550.00

In a perfect world Bob can be monetized as a customer to the tune of $4559.  But, if I push him forward by two years in his normal trade cycle, than profit looks a bit more like this:

1. Upgrade Gross Profit:  $1200.00
2. Service Profit: $550.00
3. RO Repair $$ $150.00
4. Replacement Cost ($616.00)
5. Lost Service Revenue ($700.00)

$584.00

The lesson here to learn is that pushing forward from our DMS, is a bad business proposition no how you slice it, unless you can replace the customer, and the profit they represent over there normal ownership lifespan.

So where do I find the solution to replacing these customers?  Well, part II of this story breaks down the how’s, but let’s define it:   It is called your service lane, and the one place you don’t have to spend thousands in advertising to get your competitors customers to come in your doors.  So while you are saying Hello to Clarice, you might want to look down the service lane.  If you don’t, it can certainly get a little scary.