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Why It’s Time for Variable Management

A look at the universal truth of needing to balance turn and gross, how Velocity once gave dealers a one-size-fits-all solution, and why it is no longer the solution we need moving forward.


Today's discussion will challenge many of our industry's current practices. But let's start with one universal truth that won't be challenged. The best outcomes occur when dealers optimize between turn and gross. This remains true. Yet over the years, how to optimize that balance has changed many times and now is one of those times. To explain why, let's start with how it's changed in the past. Historically, I think we can all agree the balance looked like this. Dealers put the emphasis on gross, pushing gross up high at the expense of turn. But then this guy, Dale Pollock, comes along with a crazy idea. The idea that if you flip that emphasis and you do it with discipline on every car in every situation, really pushing up on turn, moving all your inventory faster and faster, something interesting happens. Other factors come into play and the one for one trade off is broken. Pushing turn up high enough, consistently enough would actually increase gross as well. Well, total gross, that is. An important part of his idea was recognizing that total gross is the true endgame and that with enough turn, total gross will rise even as average gross dips. This is the idea we called Velocity, and this is where we were for a good run. Velocity had proven itself as a one-size-fits-all solution, and the industry accepted the norm that total gross is what should be focused on. That is, until it wasn't. Over time, Velocity worked so well that it wasn't just one-size-fits-all for every car. It became the one-size-fits-all methodology for every competing software solution and the one-size-fits-all best practice for every dealership. So, the race to the bottom began ever-faster turn and ever-shrinking margins threw off the equilibrium. It became clear that there was a point at which average gross could dip too low and begin to pull down total gross in a way that more turn cannot overcome. Around mid 2017, Dale began to recognize this condition and, as you might imagine, began obsessing about developing a solution. And while a solution was developed, by 2020, it seemed much less necessary. The pandemic delivered a reprieve from the challenges of margin compression and the race to the bottom. It was not because Velocity worked again. It was because suddenly, anything worked. New car production halted. Month after month, supply shrunk and demand grew. Used vehicle values skyrocketed and dealership profitability was unprecedented. But if there's a lesson to be learned, it's not that anything works will always continue. It's how unpredictable it all was and how unfamiliar these new times have become. Unprecedented, unpredictable, unfamiliar. These are probably the most lasting effects on our times. Change is the only constant. Market conditions that were once easy to follow are now fragmented and volatile. Different vehicle segments, different price points, different categories all move in different directions. There really is no one used car market anymore, but many markets that move dynamically day to day, week to week, month to month. Velocity had passed its prime before the pandemic, but now, as the pandemic recedes and we enter the new normal of constant change, Velocity is no match for the challenges ahead. No one-size-fits-all method can be, and for this reason, now is the time for change. Now is the time to move beyond Velocity management to a method we call Variable Management. Variable Management still believes there's an ideal number of days for a car to sell, but that number is not the same for every car. As a result of unmatched data science, Variable Management understands every vehicle's unique profit potential and recommends actions tailored to each unit of inventory to optimize its ROI. It factors in the specifics of your market and the specifics of your dealership at every moment of decision. Where velocity management was a blanket one-size-fits-all approach, Variable Management is dynamic, responsive and precise. Variable Management sees in every car when it's time to turn and when it's time to earn, and every shade in between.

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What was the primary focus of Velocity management?

Why doesn’t Velocity management work as well as it did in the past?

What makes Variable Management a better strategy than Velocity?

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Why Velocity Alone No Longer Works

Understand how the events of the recent years have hidden the once concerning trend of margin compression and why the underlying factors that caused it never really went away.