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ProfitTime 2.0 in Practice: How VDP Values Vary Across Used Vehicle Investments

More than a decade ago, dealers were coming to understand the value of Search Results Pages (SRPs) and Vehicle Details Pages (VDPs) metrics for their used vehicle inventories.

In October of 2009, I wrote a post that highlighted how a Wisconsin dealer achieved 10,000 VDPs in a month, and how this achievement gave him a significant leg up on the competition. The post included this passage that attempted to explain why SRPs and VDPs should matter to every dealer:

“Because an SRP is the virtual equivalent of a shopper driving by your dealership and a VDP is the virtual equivalent of somebody coming in off that street and saying, “I want to take a closer look at that car.” Can you imagine running your dealership without knowledge of the drive by’s or walk-ins? Well, if you don’t know SRPs and VDPs you’re missing the virtual equivalent of these two critical pieces of information.”

Today, it’s almost second nature for dealers and used vehicle managers to consider VDP counts as they re-price their used vehicles. If they’ve had a vehicle in inventory and on the market for some time, they will invariably look to see whether the vehicle is getting any VDPs and, if so, whether there is any trendline in the data. The analysis is a precursor to a re-pricing decision. If the vehicle hasn’t received any VDPs, or the VDP counts are smaller than they should be, dealers and used vehicle managers typically lower the vehicle’s price to garner more attention/interest from online buyers. The converse scenario is also true.

The VDP analysis remains relevant in today’s era of investment value inventory management, but the degree of relevance depends on a specific vehicle’s investment value.

For example, in recent weeks, I’ve heard from several ProfitTime 2.0 dealers that they’re being advised by used vehicle consultants to lower the prices on their best investments, the Platinum and Gold cars. The consultants believe that, because the vehicles have reached a specific point of time in inventory (call it 30 days or so) and the vehicles have not received a sufficient number of VDPs, dealers should lower the prices to get more attention for the vehicle and sell it.

Dealers say they’re often pushing back on the advice, preferring to leave their prices aligned with ProfitTime 2.0 recommendations. In almost every case, the dealers have resisted the guidance to lower prices on Platinum vehicles, despite an apparent dearth of VDPs, and the vehicle sells soon anyway for all the money.

“Are these guys wrong?” a dealer asked the other day. “I’m not sure I should be paying them to tell me to give away my best cars.”

I answered the dealer’s question by explaining that the consultants are not yet familiar with, or they don’t fully understand, the investment value strategy dealers deploy through ProfitTime 2.0. If the consultants were more familiar with investment value inventory management principles, they would know two things.

The first is that time in inventory, and more specifically a milestone like 30, 45 or 60 days, is no longer relevant when you manage used vehicles by their individual investment values. The most disciplined ProfitTime 2.0 dealers no longer look at the calendar as they make pricing decisions. They understand that if they price a vehicle appropriate to its investment value in the market and their inventories, it will sell when it’s supposed to for its optimal profit (assuming all the requisite elements of sound merchandising have been applied to the vehicle). This is why ProfitTime 2.0 dealers give Platinum vehicles more time to sell and maximize gross profit, and work hard to ensure their lesser investments, their Bronze and Silver vehicles, sell in a matter of days, not weeks.

The second thing is that the investment value method for managing used vehicle inventory has given us the insight to understand that VDP counts matter more with some cars compared to others. For example, ProfitTime 2.0 dealers routinely see Platinum vehicles selling with fewer VDPs than a Bronze or Silver vehicle might receive before it sells. The primary reason for the distinction is that Platinum and Gold vehicles possess all the characteristics of vehicles customers actively seek out. They understand these vehicles are in high demand and short supply. They’re the cars that generate calls from customers, and calls to customers from sales associates, when they arrive in your inventory. We’ve seen time and time again that Platinum and some Gold vehicles often sell without the VDPs and price reductions that consultants may recommend.

I’ll tell dealers that they should hold their current course and heed the ProfitTime 2.0 price recommendations that enable them to maximize gross profit on their best investments, even if the absence of VDPs makes them nervous. Over time, I’ll add, the consultants will likely see the light, too.

The post ProfitTime 2.0 in Practice: How VDP Values Vary Across Used Vehicle Investments appeared first on Dale Pollak.

About the Author

Dale Pollak serves as executive vice president for Cox Automotive, a position he’s held since the company he founded, vAuto, became part of the Cox family in 2010. At Cox, Dale helps drive integrated innovation across the company’s auction, media and software divisions to help dealers increase efficiencies, sales volumes and profitability. The latest innovation, Provision ProfitTime™, debuted at the 2019 NADA convention, helping dealers embrace an investment value–based used vehicle management methodology. Prior to Cox, Dale led vAuto to become the premier inventory management solution provider for franchise and independent dealers. Dale pioneered the Velocity Method of Management®, which has been adopted by thousands of dealers. Dale has written five books, the latest of which, “Gross Deception,” was released in 2019.

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