A recent survey by Cars.com identified the top challenges that dealerships are facing in 2023, and one of them is competitive differentiation. The survey garnered responses from 120 auto dealers in the CARS Drivers Seat Community, an exclusive network by Cars.com. Based on their responses, a whopping 80 percent of auto dealers said differentiating from competitors is their number three pain point.
If you’re experiencing the same problem at your auto dealership, the good news is there are ways to achieve competitive differentiation. However, before learning about the best tactics, it’s worth doing a deeper dive into competitive differentiation so that you know the ins and outs of what you’re trying to accomplish.
What is Competitive Differentiation?
Competitive differentiation can be defined as the unique factors that set your auto dealership apart from other brands. To achieve it, you must strategically position your business so that it differs from other companies—but that positioning needs to keep car buyers in mind.
Differentiation is based on what consumers value. That means you can choose almost any element to distinguish your auto dealership from others; the element just needs to be valuable to shoppers. Otherwise, it won’t matter. For example, car buyers won’t care if your indoor dealership has the best floors, lighting, paint colors, and couches, but they will care if your vehicles are cheaper or if your sales transaction is quicker than competing brands.
Why is Competitive Differentiation Important?
The automotive market is like many others: it’s crowded and full of competition. Consumers have various options to choose from when shopping for a car. In most areas, they can walk onto a street and pass five different dealerships on one block, and the one offering something different is the one they’ll visit. That’s why competitive differentiation is so important. It can literally make the difference in whether car buyers browse your lot or the one next door.
Five Categories of Differentiation
Getting car buyers to visit your dealership requires creativity, and your creative methods will vary over time. As shopping behavior and technology change, you’ll need to adjust what differentiates your business. However, what you adjust will typically fall into one of five categories.
1. Product
Distinguishing your auto dealership in this category means ensuring your inventory is unique. For example, the design, performance, benefits, and quality of your vehicles may differ from other auto dealerships.
2. Service
With service differentiators, the goal is to use creative and unique ways to develop relationships with car buyers. In car sales, every interaction is critical, so offering good service is necessary if you want to stay in business. However, going above and beyond with your service is what will differentiate you from competitors.
3. Channel
If you want to differentiate your auto dealership in this category, you’ll need to focus on reaching car buyers in unique ways. For example, maybe your brand doesn’t simply post new inventory on Facebook but also has an engaging TikTok account to attract millennials, the largest generation of new car buyers.
4. Price
This category is straightforward. How you price your inventory can differentiate you from competing auto dealers. If you have more cost-effective prices or better deals (and market them effectively so that consumers know about them), you’ll have an easier time attracting potential customers.
5. Brand Identity
When trying to differentiate your brand identity, your success will be determined by how car buyers perceive, recognize, and relate to your auto dealership. If consumers have a more positive association with your brand than they do with others, you’ll have differentiated your business effectively. You should keep in mind, though, that differentiating your brand identity will require good marketing and advertising.
How to Achieve Competitive Differentiation
Since there are multiple types of competitive differentiation, you have multiple tactics at your disposal. But if you want to know one of the best ways to differentiate your auto dealership in today’s market, here it is: simplify your sales transaction, a tactic that falls in the “service” category.
Car buyers already spend days researching and looking for a car. In fact, it’s estimated that it can take several weeks or longer for consumers to find the perfect vehicle for them. Because the car buying process can take so long, you can get on consumers’ good side by making the actual sales transaction quick and easy.
In the age of Amazonification, where people want things fast and without any hassle, providing a speedy sales transaction can do wonders in differentiating your auto dealership from competitors. And if you don’t believe that, here’s how an article in the Associated Press explained what it feels like for consumers to sit in a dealership completing a sale: “Depending on whom you ask, the time spent completing a deal at the average dealership is between 3.6 hours (J.D. Power 2017 U.S. Sales Satisfaction Index) and an eternity (the average shopper).”
For car buyers, the actual sales transaction feels like forever. But if your dealership has all the hallmarks of success and is also known for having quick sales transactions, you will attract more customers. The only question is, how do you truly shorten the transaction? One way is to make the DMV process sweet and painless.
Instead of allowing car buyers to wait weeks to get their license plates, titles, tags, and vehicle registration from the DMV, you can provide these necessities within days. All you need to do is use a private DMV services company. These types of organizations provide DMV services, and our team at Barry Risk Management is an example of one.
With over 30 years of experience in the DMV industry, we help auto dealers around the U.S. give their customers their license plates, titles, tags, and vehicle registration in little to no time. We do this by using an advanced online platform that enables us to respond to dealers’ requests quickly, and our speed ensures car buyers get what they need in a timely manner, shortening the overall sales transaction. This quickness has become a critical competitive differentiator that keeps the auto dealerships we work with ahead of the pack, which is why we want to help you.
Let us create your competitive differentiation by giving you a shorter sales transaction. Call us at 1-888-995-TAGS(8247) to speak with one of our representatives at Barry Risk Management.
