Auto dealer’s road to sustainability with effective burn rate analysis!
The automotive industry is already at the cusp of changes! Dealerships are looking at innovative ways to retain customers while also improving their bottom line. Some of the most popular schemes being applied are up-sell & cross-sell such as “extended warranty” and “service contracts” respectively. These ensure dealerships "lock-in" customers ensuring long term loyalty!
But are the dealerships monetizing their strategy, right? What is the metric they need to be evaluating to ensure they are not incurring losses with their up-sell & cross-sell schemes.
This is where dealerships need to monitor their “Burn Rate” metric- which shows a spend trend of a dealership against a claimed amount either for an extended warranty or a service contract.
Calculating the burn rate will ensure a self-sustaining business model and help dealerships understand and tweak their pricing strategy for an extended warranty or service contract implemented across the up-sell and cross-sell strategies respectively.
If the burn rate is high for an extended warranty that a customer receives from a franchise, then it implies frequent issues with a particular model or variant of a vehicle and needs to be addressed with the OEMs. Similarly, if the burn rate is high for a service contract, then it means the pricing strategy needs to be reworked which has been given by the dealership to their customers.
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It’s crucial to understand whether a scheme is profitable or not.
Let’s look at the graph that explains how a dealership should be looking into the burn rate for a given timeline –
Our analytics team at NRoot Labs can help break the above analysis by franchise, model, year, variant, etc. Understanding when costs were high and taking appropriate actions to lower them requires insights into seasonal trend of burn rate.
Higher the burn rate, higher the chances of a dealership chasing behind cash to sustain their strategy.
NRoot Labs is an end-to-end BI solutions provider transforming Data into Valuable Insights for Automotive Dealerships. To know more contact – sales@nrootlabs.com