Dealers whose primary market areas are revised should challenge results that are contrary to their interests.
The results of the 2010 federal census finally are making their way into some auto makers’ primary-market-area descriptions for dealers. This could affect the measurement of a store’s sales efficiency.
The make-up of your PMA (or other terms depending on the franchisor) can be the key factor in how individual sales efficiency is measured. Generally, it is based on what the franchisor expects a dealer will sell in a PMA, based on sales of all same-make dealers in a state or region.
If the sales by dealers of your make are 10% of all new-car sales in your region, manufacturer statisticians assume you should sell at that rate in your PMA. Exceed that, and you are a star. Fall short of that, and you are not.
Generally, if your PMA is too large, that will make your job more difficult because you will be responsible for sales in areas in which you probably do not have a competitive advantage.
The same is true if you are assigned areas that are separated from you by mountains or rivers that make it difficult for customers to get to you.
On the other hand, you do not want a PMA that is too small. If areas where you should have an advantage are assigned to others, customers in those areas may be directed to competing dealers by manufacturer locators on the Internet, you may not receive manufacturer leads from those areas and you may not be able to engage in offsite sales or displays there.
So what does the census have to do with this, you ask? If your franchisor defines your primary market area based on census tracts, the recent people-count could have a significant impact. Census tracts are adjusted based on such results.
As the manufacturers’ consultants process the new census-tract information, you may receive a letter advising you of a PMA change. It is important you review that notice, just as you should carefully review any PMA notice that you receive.
So what should you do? First, compare the new PMA with your old one. Also, if you have a manufacturer report on where your customers live, or you prepare your own, compare that with the area you have been assigned. Here is what you should look for:
- Are there areas in your new PMA that are too distant geographically to give you an advantage? Manufacturers generally assign geographic areas under the assumption that customers will go somewhere to buy the make you sell. However, if it is too far to go, they simply may buy a competitive make from a closer dealer.
- Are there areas in your PMA that are closer to other dealers? If so, those dealers will have an advantage.
- Are there areas that are separated by geographic obstacles that make it more difficult for customers to travel to your store?
- Are there areas that, because of the flow of traffic, will make other dealers more convenient to customers in those areas? You may be closer geographically, but a dealership on a major interstate may have an advantage.
- Based on where your present customers live, are there areas that should be yours that are not assigned to you, thus preventing you being identified as the most convenient dealer on the franchisor’s Internet locator and from getting manufacturer leads for potential buyers who live in those areas?
If you receive a notice about your PMA, carefully analyze the new assigned area. If it is contrary to your interests, contact your manufacturer and challenge it.
Michael Charapp is a lawyer who represents auto dealers. Based in McLean, VA, he is at (703) 564-0220 or firstname.lastname@example.org.