MCLEAN, Va. — The National Automobile Dealers Association (NADA) has commissioned an independent study to take an in-depth look at the cost effectiveness of factory image programs that require new-car dealers to invest billions of dollars each year.
NADA Chairman Stephen Wade, who’s traveled across the country over the past several months speaking to dealers, says one resounding concern he’s hearing over and over, regardless of dealership size or brand, is the frustration dealers have with their manufacturer’s facility image programs.
“These investments have a significant impact on dealer balance sheets, in many cases severely straining them and in some cases even persuading a dealer to leave the business rather than commit to such a large investment,” said Wade, a multi-franchise dealer in Utah and California.
NADA has undertaken this fact-based, objective study to uncover both the positive and negative factors that drive return on investment so that dealers are in a better position to make informed, rational and fact-driven decisions on facility investments.
“The perception today is that the decisions made by dealers on facility investments are often based on opinions, pressure and personalities, which is no way to guide significant spending,” Wade said. “We want to find out the truth so these important decisions can be based on facts, not perceptions.”
Surprisingly, little evidence on return on investments to either manufacturers or dealers exists. Factory programs are typically justified on qualitative grounds such as, “the store image must support the brand” or “customers expect all our stores to offer a similar look and feel,” he said. Solid economic arguments such as, “updated stores sell X more cars for every $1 millioninvested” or “CSI scores soar when a facility is upgraded,” are generally absent.
“By moving the facilities debate away from opinion and assertion and more towards facts and data, we expect the findings of the study to be extremely valuable to dealers and manufacturers alike,” Wade added.
The study, conducted by industry consultant Glenn Mercer, is expected to be completed by late November with a detailed White Paper to follow by the end of the year. Mercer is a former partner with McKinsey & Company’s automotive practice.
NADA, founded in 1917, represents nearly 16,000 new-car and -truck dealerships operating about 32,500 franchises, both domestic and international. For more information, visit www.nada.org.