Introduction
Have you ever wondered about the gaps that cost you money in the automotive industry?
A report by Automotive Training Network suggests that 23.5% of dealer leads miss 24-hour follow-up, and 13.3% fail to enter the CRM. These negligences risk a loss of 37% of potential leads.
One must have said it right that bad indulgences cost badly. If you work in the automotive industry, you should think twice before investing in leveling up your dealership.
Here, the main problem is late follow-ups.
Let’s see how late follow-ups end up scoring more losses than leads.
In the Automotive industry, most dealerships rely on an In-house BDC or Virtual BDC services model. Both models work differently, thus offering different automotive dealership conversion rates. In-house BDC services can provide direct communication and quicker responses, but misalignments or a lack of integration with the sales teams can cost you higher lead losses. Virtual BDC Services, on the other hand, provide you with more consistent follow-ups with the help of automation and centralized systems. The consistent and 24/7 availability of Virtual BDC teams results in higher conversion rates and maximum profitability.
The Problem at Hand: Profitability in Automotive Dealerships
In the world of automotive sales, profitability is the ultimate goal. Yet, many dealerships struggle to keep up with rising operational costs, increasing competition, and evolving customer expectations. As dealers look to boost their bottom line, one department that stands at the crossroads of success or failure is the Business Development Center (BDC).
A well-managed BDC is essential to lead generation, follow-up, customer service, and conversion, which are the critical aspects that directly impact revenue. But as dealerships evaluate their operational costs and efficiency, the question remains: should they stick with the traditional in-house BDC or opt for the virtual BDC services model, which has gained traction in recent years?
Read More: Sales BDC vs Traditional Sales: Which Delivers Better Results for Car Dealerships?
What is a Business Development Center (BDC)?
A Business Development Center (BDC) in the automotive industry is a team dedicated to fostering relationships with leads, existing customers, and potential buyers. Their job is to drive sales by handling customer inquiries, following up with leads, managing service appointments, and ensuring overall customer satisfaction.
There are two primary types of BDCs:
- In-House BDC: An internal team working on-site, directly within the dealership, that handles all communication, calls, emails, and follow-ups.
- Virtual BDC: A remote team that operates from outside the dealership, often outsourced, and handles the same responsibilities, typically through digital tools and software.
In-House BDC: The Traditional Approach
Benefits
● Personalized Customer Experience
In-house BDCs are physically located within the dealership, which allows them to have a personal understanding of the brand, products, and customer needs. This connection can lead to more tailored interactions, improving customer experience and trust.
● Better Control
With an in-house team, dealerships maintain direct oversight of their operations, ensuring that customer service meets expectations and that the team is aligned with dealership goals.
Drawbacks
● Higher Overhead Costs
An in-house BDC requires investment in salaries, office space, technology, training, and infrastructure. For smaller dealerships, these costs can be prohibitive.
● Limited Scalability
As business needs fluctuate, adjusting the size of an in-house team can be challenging. For dealerships experiencing seasonal demand spikes, managing the team size can become a logistical issue.
Virtual BDC: A Growing Trend
Definition
A Virtual BDC operates remotely, outsourcing the work to third-party vendors who handle calls, follow-ups, and customer relationship management. Virtual BDC services use cloud-based software or updated CRMs to track leads and maintain communications.
Benefits
● Cost Savings
Virtual BDC services generally incur fewer overhead costs. Dealers don’t need to invest in office space, equipment, or hiring full-time staff. A report from McKinsey & Company estimates that virtual operations can reduce labor costs by up to 30% over traditional models.
● Scalability
Virtual BDC services can scale quickly to handle increased lead volume, making them an attractive option for growing dealerships. They can easily ramp up during high-demand periods without the need to hire additional permanent staff.
● Broader Reach
Virtual BDC services can serve customers across broader geographic areas, potentially reaching markets that may have been previously inaccessible.
Challenges
● Less Personal Interaction
With virtual teams, the personal connection between customers and the dealership may suffer. Some customers prefer dealing with a familiar face, which could impact trust and conversions.
● Miscommunication
Remote teams may experience communication lapses due to time zone differences, limited access to on-site product knowledge, or technology issues.
Learn About: Virtual BDCs Revolutionizing Customer Experience
Which Model Delivers Higher Profitability?
When it comes to determining which model provides higher profitability, we need to consider several Key Performance Indicators (KPIs) used to measure the effectiveness of BDCs:
● Lead Conversion Rate
In-house BDCs typically provide higher automotive dealership conversion rates because of the personal touch and familiarity they offer customers. According to a study by Automotive News, in-house teams convert 15-20% more leads into sales compared to their virtual counterparts. But Virtual BDCs are seen to be improving their automotive dealership conversion rates, and the future solely lies in the hands of Virtual BDC services.
● Cost Efficiency
On the other hand, Virtual BDCs are significantly more cost-effective. Research from Harvard Business Review shows that companies switching to virtual teams reduced overhead by nearly 40%, which is particularly beneficial for dealerships trying to reduce operational costs.
● Customer Satisfaction
In-house BDCs usually lag in receiving higher customer satisfaction scores because virtual BDC services utilize technology to enhance personalized experiences, coupled with consistent, familiar interactions remotely.
Factors to Consider When Choosing Between Virtual and In-House BDC
Choosing the right BDC model isn’t just about profitability; it is also about aligning with the dealership’s goals and resources. Key factors include:
● Dealership Size
Larger dealerships may find virtual BDCs advantageous due to their ability to handle high volumes of leads efficiently. Small-to-mid-sized dealerships might prefer in-house BDCs for more hands-on management, but switching to virtual BDC services can also prove to be highly effective and help you increase your dealership size, too.
● Market Conditions
Dealerships in competitive urban markets might prefer to enhance the customer’s interaction with virtual BDC services, where consistent, on-time follow-ups help to boost customer satisfaction and enhance trust in the dealership. On the other hand, in-house BDC might not be able to handle leads effectively because of the burnout due to high workloads and limited staff.
● Technology
Virtual BDCs thrive on advanced CRM systems and communication tools. If a dealership has the necessary infrastructure to support these tools, a virtual BDC could be more effective.
Read More: How Can Car BDC Dealership Boost Your Sales with Strategic Lead Follow-Up Techniques?
Final Thoughts
While both virtual and In-house BDCs have their merits, the answer to which one drives higher profitability isn’t straightforward. For larger dealerships or those looking to scale quickly, virtual BDC services can provide significant cost savings and scalability. However, for dealerships that opt for on-hand experiences, in-house BDC services might be a better option.
Ultimately, profitability hinges on the specific needs of the dealership, and dealers should carefully evaluate their goals, resources, and customer preferences before making a decision. What works for one dealership may not work for another, but a well-executed BDC, regardless of its structure, can drive meaningful improvements to the bottom line.
