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I've been thinking about this alot lately since I've been helping to collect data for the MD/VA group and several posters have asked the question: Why would a dealership want to give a large group an advantaged price? What's in it for them? I'm going to jot down some of my own thoughts and I'd be very interested in other peoples' ideas also!
How Many Reservations?
At last count, Ford had over 230,000 reservations for the Bronco. For the sake of argument, let's round up to 300,000 total reservations by the time they stop accepting them. With a population of 330 million, that means there's one reservation for every 1100 people in the US. Just looking at Maryland, the state population in 2019 was just over 6 million. That means that Maryland has around 5500 reservations total. Divided across the 46 Ford dealerships for Maryland listed, that means the average dealership in Maryland is holding about 120 reservations. Some will obviously have much more. Some will have much, much less. Some states will be over-represented in reservations (we're looking at you, Texas) and some under-represented, so I'll readily admit this is not a super-accurate snapshot. But - again for the sake of argument - let's use that number as a jumping off point: 120 reservations per dealership.
What percentage of those reservations will convert to orders? Remember, a $100 refundable reservation fee is a VERY low barrier for entry, so there's likely a large percentage of holders who placed a reservation on a whim, based on mild interest or perceived scarcity. How many will have life circumstances change? Run into financial problems between now and December? Have a vehicle emergency and have to make a new purchase right away...? You get the drift. For my own part, I think the likely conversion ratio is south of 50%. I think Ford's product roll-out was magnificent, brand awareness is high, and anticipation is unprecedented, so I'm not surprised by the "buzz". How much of that converts to orders however...? I'm skeptical, but again for the sake of argument, lets assume 50% conversion.
This means that the average dealership could expect about 60 Bronco orders from all this. Now, how many of those orders will convert to deliveries? Remember, the deal isn't closed until the vehicle is delivered, so there will be a further winnowing down after orders are placed. My guess is that most individuals who order will take delivery, but there will likely be a handful who cancel the deal for one reason or another. So let's say the average number is 50-55 Broncos. Again, some will sell more, double that or higher even. Some will sell much, much less. I don't know the car business, but my guess is the difference between the "haves" and the "have-nots" is pretty extreme with major dealerships soaking up the lion's share.
This is why I think a group of buyers has some leverage in this scenario: despite the fact that many of these dealership have a large number of reservations, many of them will NOT convert to actual vehicle sales. The participants on this forum represent a smaller, much more enthusiastic segment of the Bronco market however. The conversion ratio on this forum is going to be much, much higher than 50%. My guess is it will be closer to 80-90%. Remember, we have only collected information for about 3000 reservations of ~250k so far. So we are about 1% of the total market - the most enthusiastic 1%. A dealership should COVET our reservations because they are much more likely to convert.
Sales Growth
I have mentioned this a few times, but the Bronco is not out on these dealership lots right now. Hasn't been for 24 years. With a new product launch, comes new markets, new customers and access to new dollars. Now, there's likely to be cannibalization from other products in Ford's lineup, yada yada yada... The essential point is irrefutable: Ford had nothing to compete with the Wrangler until now. So these customers and sales all represent sales growth to Ford dealerships. Sales growth is one of the major performance indicators for any retail or product-driven business. I'd argue it's the king of KPIs, but that's for your MBA class, not this forum.
With the potential for 50 Bronco sales next year, with an average price of $50k - to keep the math simple - that means these dealerships are looking at an average of $2.5 million in sales growth, so long as the conversion ratio of reservations to orders holds up for them. One way to guarantee that would be to solicit those who are most likely to place their order to transfer their reservation.
Harnessing the Buzz
Without a doubt, this is the most talked-about car at the moment. The customer interest is going to be ridiculous over the coming years, especially if dealer allocations slip into 2022. Ford knows this and incentivizes dealerships to shoot for volume goals. Did you move the most Broncos in your state/area? Here's a financial incentive and some fancy marketing materials labeling you "Bronco HQ" or something else catchy. So it's in the dealerships own interests to move the most Broncos next year, not just for the increased sales volume, but to capture Ford's approval and the extra local marketing buzz.
And don't forget, Broncos are going to be scarce for a while... How many people have you talked to who have said, "Yeah, it looks really great, but I need to see it, sit in it, drive it before I'll decide." If people want to see the new Bronco before buying it, they're going to have to go to a dealership that has them on the lot. For the early weeks of the release at least, the only Broncos anyone will be able to see are ones that have been ordered through reservations. The more orders a dealership fills, the more Broncos roll on and off their property, the more attention they'll attract.
So those are my thoughts. I have no idea how much sense they make, but I'd be really interested to hear other peoples' ideas also, especially those of you who have experience in car sales. If you've read through this whole thing, congratulations... You're as big a nerd for this as I am!
How Many Reservations?
At last count, Ford had over 230,000 reservations for the Bronco. For the sake of argument, let's round up to 300,000 total reservations by the time they stop accepting them. With a population of 330 million, that means there's one reservation for every 1100 people in the US. Just looking at Maryland, the state population in 2019 was just over 6 million. That means that Maryland has around 5500 reservations total. Divided across the 46 Ford dealerships for Maryland listed, that means the average dealership in Maryland is holding about 120 reservations. Some will obviously have much more. Some will have much, much less. Some states will be over-represented in reservations (we're looking at you, Texas) and some under-represented, so I'll readily admit this is not a super-accurate snapshot. But - again for the sake of argument - let's use that number as a jumping off point: 120 reservations per dealership.
What percentage of those reservations will convert to orders? Remember, a $100 refundable reservation fee is a VERY low barrier for entry, so there's likely a large percentage of holders who placed a reservation on a whim, based on mild interest or perceived scarcity. How many will have life circumstances change? Run into financial problems between now and December? Have a vehicle emergency and have to make a new purchase right away...? You get the drift. For my own part, I think the likely conversion ratio is south of 50%. I think Ford's product roll-out was magnificent, brand awareness is high, and anticipation is unprecedented, so I'm not surprised by the "buzz". How much of that converts to orders however...? I'm skeptical, but again for the sake of argument, lets assume 50% conversion.
This means that the average dealership could expect about 60 Bronco orders from all this. Now, how many of those orders will convert to deliveries? Remember, the deal isn't closed until the vehicle is delivered, so there will be a further winnowing down after orders are placed. My guess is that most individuals who order will take delivery, but there will likely be a handful who cancel the deal for one reason or another. So let's say the average number is 50-55 Broncos. Again, some will sell more, double that or higher even. Some will sell much, much less. I don't know the car business, but my guess is the difference between the "haves" and the "have-nots" is pretty extreme with major dealerships soaking up the lion's share.
This is why I think a group of buyers has some leverage in this scenario: despite the fact that many of these dealership have a large number of reservations, many of them will NOT convert to actual vehicle sales. The participants on this forum represent a smaller, much more enthusiastic segment of the Bronco market however. The conversion ratio on this forum is going to be much, much higher than 50%. My guess is it will be closer to 80-90%. Remember, we have only collected information for about 3000 reservations of ~250k so far. So we are about 1% of the total market - the most enthusiastic 1%. A dealership should COVET our reservations because they are much more likely to convert.
Sales Growth
I have mentioned this a few times, but the Bronco is not out on these dealership lots right now. Hasn't been for 24 years. With a new product launch, comes new markets, new customers and access to new dollars. Now, there's likely to be cannibalization from other products in Ford's lineup, yada yada yada... The essential point is irrefutable: Ford had nothing to compete with the Wrangler until now. So these customers and sales all represent sales growth to Ford dealerships. Sales growth is one of the major performance indicators for any retail or product-driven business. I'd argue it's the king of KPIs, but that's for your MBA class, not this forum.
With the potential for 50 Bronco sales next year, with an average price of $50k - to keep the math simple - that means these dealerships are looking at an average of $2.5 million in sales growth, so long as the conversion ratio of reservations to orders holds up for them. One way to guarantee that would be to solicit those who are most likely to place their order to transfer their reservation.
Harnessing the Buzz
Without a doubt, this is the most talked-about car at the moment. The customer interest is going to be ridiculous over the coming years, especially if dealer allocations slip into 2022. Ford knows this and incentivizes dealerships to shoot for volume goals. Did you move the most Broncos in your state/area? Here's a financial incentive and some fancy marketing materials labeling you "Bronco HQ" or something else catchy. So it's in the dealerships own interests to move the most Broncos next year, not just for the increased sales volume, but to capture Ford's approval and the extra local marketing buzz.
And don't forget, Broncos are going to be scarce for a while... How many people have you talked to who have said, "Yeah, it looks really great, but I need to see it, sit in it, drive it before I'll decide." If people want to see the new Bronco before buying it, they're going to have to go to a dealership that has them on the lot. For the early weeks of the release at least, the only Broncos anyone will be able to see are ones that have been ordered through reservations. The more orders a dealership fills, the more Broncos roll on and off their property, the more attention they'll attract.
So those are my thoughts. I have no idea how much sense they make, but I'd be really interested to hear other peoples' ideas also, especially those of you who have experience in car sales. If you've read through this whole thing, congratulations... You're as big a nerd for this as I am!
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