“Location plays a significant role in profitability”
For car dealerships, customer location plays a significant role in profitability. While the internet has made it easier to reach buyers from across the country, focusing on local customers remains a more profitable and sustainable strategy. Here’s why local buyers often yield higher returns compared to those from far away.
1. Lower Marketing and Acquisition Costs
Reaching local customers is less expensive than targeting distant buyers. Instead of spending budgets and resources to cast a wide net for low profit transactions, focusing on local customers who are already familiar with your name and brand is more cost effective and has greater probability of resulting in a larger profit margins. Dealerships can also leverage awareness from community-specific marketing strategies, such as sponsorships of local events. These efforts tend to cost less than expansive online campaigns aimed at attracting buyers from other states or regions.
2. Greater Likelihood of Repeat Business
Local customers are more likely to return to the dealership for routine maintenance, repairs, or future vehicle purchases. Building this kind of long-term relationship with a distant buyer is challenging since they may not consider driving hours for a service appointment or their next purchase.
By maintaining relationships with local buyers, dealerships create a reliable stream of income from parts and services, which typically offer higher margins than vehicle sales alone.
3. Stronger Community Connections and Brand Loyalty
Local buyers tend to feel a stronger sense of loyalty to businesses that are part of their community. They’re more likely to support a dealership they recognize as a contributor to local causes, such as sponsoring high school sports teams or participating in charity events.
This emotional connection translates into better retention rates, referrals, and positive reviews, all of which contribute to increased profitability. Distant buyers lack this same personal connection, making it harder to build long-term loyalty.
4. Reduced Operational Costs
Selling to distant buyers often comes with additional expenses, such as arranging vehicle transportation, extended warranties, or detailed inspections required by out-of-state customers. These costs can eat into the profit margin, especially for smaller dealerships that lack the resources to absorb these expenses.
In contrast, local sales are simpler and more cost-efficient. Buyers can visit the dealership, inspect the car, and complete the transaction without requiring extra logistics.
5. Faster Sales Cycle
Local customers are typically closer to the dealership, allowing them to easily schedule test drives or visit for consultations. This reduces the time and effort needed to convert a lead into a sale.
Distant buyers may require additional phone calls, emails, and negotiations, which can lengthen the sales cycle. A slower sales process ties up resources and limits the dealership’s ability to handle more leads.
6. Higher Conversion Rates
Proximity often leads to higher conversion rates. Local customers can interact with dealership staff directly, which builds trust and increases the likelihood of a purchase.
On the other hand, buyers from afar might hesitate due to the logistical challenges of long-distance car purchases. These hesitations lower conversion rates and increase the chance that a potential sale falls through.
7. Compliance with Local Laws and Taxes
Selling to distant buyers sometimes requires navigating different state laws, taxes, and registration processes. These complexities not only add time and expense but also increase the risk of errors that could affect the dealership’s reputation.
Selling locally avoids these complications, streamlining the transaction and ensuring compliance with minimal effort.
8. Boosts Local Reputation and Referrals
Happy local customers are more likely to recommend your dealership to friends, family, and coworkers in the same area. These referrals generate high-quality leads that are more likely to convert into sales.
Distant buyers, however satisfied, are less likely to refer others who live in your area, limiting their impact on your dealership’s growth.
So WHY Focus on LOCAL Shoppers?
While distant buyers may occasionally bring in large transactions for niche vehicles, local customers offer consistent, long-term profitability. Their proximity makes them easier and less costly to acquire, more likely to return for future services, and more loyal to the dealership’s brand. By focusing on serving the local community, car dealerships can build a sustainable business model rooted in repeat business, referrals, and strong community ties.
For dealerships, success isn’t just about selling cars—it’s about building relationships. And the strongest, most profitable relationships often begin right in your own backyard.
