An car dealership sought assistence in its search for a suitable additional location. GfK GeoMarketing performed analyses and test scenarios to gauge the turnover potential of existing and prospective locations. The results provided a strategic roadmap for how the dealership should approach an important business decision.

Automobile industry upper management usually devise five-year plans as part of their strategic approach to optimally outfit and structure their regional sales centers. The owner of a sports car dealership received a directive from upper management to downscale the existing location and open a new location in order to better tap into exisitng potential in the local market. However, upon approaching a bank to discuss financing, the owner was told that he needed to provide more assurances than simply the strategic plan generated by upper management before the bank would agree to provide a loan. The dealership owner therefore decided to arrange for an analysis of the economic sustainability of the proposal. He wanted an objective assessment of how much sales would increase with a second location.

This is the scenario with which GfK GeoMarketing was presented. GfK GeoMarketing’s task was to demonstrate through detailed analyses of the relevant criteria the overall viability of the new location proposal. The goal of the study was to establish the maximum possible turnover potential for new cars resulting from an additional car dealership location and the associated greater market coverage.

In order to illustrate the turnover density by region and the corresponding customer origins, the car sales reported by the German Federal Motor Transport Authority and their corresponding postcodes were compared against the turnover data of the car dealership. This led to some initial insights. Next, in order to determine the extent to which the car dealership was tapping into the available potential of the region, the sales numbers were compared with the total number of new cars on the market. This made it possible to visually identify the core sales region and, more importantly, the postcode districts in which elevated numbers of new cars had entered the market despite no increase in purchases from the car dealership under study. 

The next step was to establish the extent to which car dealerships outside of the core sales area were affecting sales within the sales area. Using its in-house sales territory planning software RegioGraph, GfK GeoMarketing then analyzed the sales reach of neighboring car dealerships, revealing areas of overlap with regard to the boundaries of the sales area under study. Using drive-time analyses of the various postcode areas under review, GfK GeoMarketing determined that the residents of some regions of the sales area could more quickly and inexpensively access competitor car dealerships. Additionally, a GfK survey revealed that loyalty to local vendors plays an important role in consumers’ choices and that the purchase of sports cars over the Internet is a growing phenomenon.

The next step was to establish the potential for sports car purchases in the region in question and the various factors affecting decisions to buy. In addition to locating particularly affluent households, postcode districts with a high number of luxury-class automobiles were identified and illustrated on a map of the sales region. With the help of RegioGraph, it was possible to then reveal the precise postcode areas in which a high number of potential sports car buyers resided.

The often-used marketing tool of the portfolio analysis was then employed to illustrate the postcode areas with the highest untapped turnover potential.  A two-dimensional model was generated in order to compare the turnover density and turnover potential – i.e., the so-called target group index – and reveal the current market situation. 

A concrete identification of the potential turnover level could not be determined with the portfolio analysis alone: while the analysis made it possible to locate suitable target regions, it did not show how much turnover could be expected from these areas. Consequently, a technique of analyzing turnover potential based using the methods of a specialized regression analysis was developed. This approach identified the postcode areas with both high and low sales potential. The sales area was then split in order to make it possible to associate the correct turnover potential with each of the two sales locations. This division was carried out in a way that ensured that the sales area locations minimized customer travel distance. Using this information, catchment areas for the prospective locations were generated, each of whose travel accessibility could be visualized and optimized in RegioGraph by calculating drive-time zones.

GfK GeoMarketing consultants then provided market penetration predictions for each location based on numerous factors, including customer loyalty to local businesses, the existing level of market penetration and anticipated future turnover increases due to the forthcoming introduction of a new car model.

The resulting annual projected turnover volume for each location was lower than that predicted by the upper management, which called into question the soundness of the proposal to open a new location and resulted in advising the client to re-examine the merits of this directive. It did however emerge as feasible for upper management to financially subsidize the dealership owner for the purpose of pushing the local competition out of the market.

Thanks to the thorough analysis provided by GfK GeoMarketing, the bank, upper management and car dealership owner were able to make an informed business decision that was in everyone's best interests.