One of the most crucial metrics to monitor in the RV industry is market share.
What is Market Share? Market Share refers to the portion of the market that a specific company or product controls. Within the RV market, this can be further divided into: Unit Market Share and Revenue Market Share.
Why is Market Share Important? Market share holds significant importance in the RV industry. It remains impartial, treating all companies equally regardless of perspective. By analyzing market share, you can gain valuable insights into your growth relative to the overall market. While a rising tide may affect dealerships differently, this metric precisely reveals how well you are capitalizing on market trends. Moreover, market share serves as a vital indicator of market competitiveness within the RV industry.
Let’s consider an example to understand the significance of market share in the context of your RV dealership.
Imagine that your historical growth rate has been 7%. However, in the past year, your performance surged to 15%, indicating exceptional progress within the scope of your operations. But now, let’s introduce an additional factor: market growth. What if your competitors experienced a remarkable 20% growth? Suddenly, when viewed in the broader market context, your growth appears slower compared to your peer group. Consequently, you have unquestionably lost market share.
This scenario highlights how market share can provide invaluable context to evaluate the performance of your dealership within the local RV market.
Now, let’s delve into your sales trends over the past 5 years.
The year 2022 proved to be an outstanding period for your dealership, with remarkable dominance. However, when considering the sales trends of your addressable market during the same period, it becomes evident that the overall market also experienced robust growth.
The key question now arises: What was your market share in each of those years? Surprisingly, despite having a highly successful year from 2021 to 2022, your market share actually declined.
You might be inclined to wonder, “I achieved exceptional results according to my individual metrics. What does this market share figure truly signify?”
Now, let’s explore the tangible consequences of identifying the financial impact of the market share loss.
In the given example, let’s consider the years 2021 and 2022. In 2021, your market share stood at 6.9 percentage points, but it dropped to 5.9 points in 2022, indicating a 1% loss in market share within your addressable market, which is valued at $600 million.
As a result of this share loss, your dealership missed out on generating $6 million in revenue. That’s a substantial amount of real money left on the table. Had you maintained the same market share level as in 2021, at 6.9%, your dealer revenue would have increased from $35.4 million to $41.4 million, representing a noteworthy 16.9% growth.
Although this example is fictional, dealers across North America can apply similar calculations to determine their growth relative to the market and assess the impact of share gains or losses on their bottom line.
Identifying the Reasons behind Market Share Changes
Market share analysis allows you to discern what strategies are effective, what needs improvement, and what market dynamics are evolving within the RV industry. Conducting a root cause analysis is crucial to uncover the underlying factors behind changes in your market share. In the given example scenario, the key question you should seek to answer is:
Why did my RV dealership’s market share decrease?
Uncovering the Root Causes To understand the root causes, it is essential to pose relevant questions that guide your analysis. Here are some examples:
Is this shift in market share temporary or indicative of a larger trend?
For instance, in 2021, many dealers are engaged in conversations about inventory allocations and the challenges of obtaining products. Is your share loss a temporary setback driven by current supply chain disruptions, or does it indicate a broader trend? Is inventory availability just one aspect influencing your long-term market share gain or loss?
What is the potential financial impact if this share trend continues?
If you anticipate a sales event within the next 6 to 12 months, it is crucial to assess the potential impact on your business’s valuation. Understanding the financial consequences of ongoing share trends can help you make informed decisions and strategize effectively.
What insights can be gleaned from local market share shifts?
Examining local market share shifts can offer valuable lessons. By analyzing changes in market segmentation, particularly in terms of geography and license requirements (Class B vs. Class C), you can identify untapped opportunities. For instance, focusing solely on RVs requiring Class C licenses might limit your market reach, so considering the potential of Class B license-required RVs could expand your customer base.
Understanding these root causes and market dynamics is essential for making informed decisions, adapting strategies, and maximizing your dealership’s success within the RV industry.
Defining Your Local RV Market
To effectively analyze your local market in the RV industry, it is important to consider the following three approaches:
Total Addressable Market (TAM): The TAM represents the entire potential market for your offerings. While this can be expansive, most RV dealers tend to focus on a state-level view or, if near state borders, a regional multi-state perspective.
Serviceable and Addressable Market: This refers to the customers you can realistically serve and reach. Geography plays a vital role in determining your serviceable and addressable market. It helps define the boundaries of your market reach.
Service Attainable Market (SAM): SAM is the part of the market that you can capture with your product and service offerings. For RV dealers, the primary constraint is often geographical proximity. Dealers typically estimate their SAM based on a 100-mile radius. However, a more accurate measure could be the extent of the market within a two hour drive time, divided into 30-minute intervals.
Key Strategic Questions Addressed by Market Share Analysis
By examining your market share within the local RV market, you can gain valuable insights into your dealership’s performance and strategic positioning. Some key questions that market share analysis can answer include:
How large is your local market, and what is your market share within it?
Are you gaining market share, losing market share, or maintaining parity with your local market?
In which specific categories or segments are you experiencing gains or losses?
What is the financial impact of your market share movement on your dealership’s revenue?
What trends are emerging within your local market? Are there shifts in product preferences or new competitors entering the market?
Answering these strategic questions through market share analysis empowers RV dealers to make informed decisions, identify growth opportunities, and align their strategies with the dynamics of the local RV market.
Understanding Your RV Dealership’s Repair Event Cycle Time (RECT)
Measuring the Repair Event Cycle Time (RECT) of your RV dealership provides valuable insights into identifying bottlenecks within your service department. RECT is determined by the time elapsed between the start and completion dates of each Work Order, specifically the duration it takes to repair a unit at your facility. This timeframe includes key milestones such as the First Labor, Parts Ordered, Parts Received, and Last Labor dates.
Several factors influence your dealership’s RECT, including:
Availability of Parts and Warranty Coverage: The availability of parts and warranty coverage significantly impacts your repair cycle. Out-of-stock parts or delays in receiving necessary components can prolong RECT.
Identifying Top Work Order Bottlenecks: Analyzing the top Work Orders that frequently experience bottlenecks helps pinpoint specific areas in your service department that require attention and improvement.
RECT Analysis by Brand: Examining the RECT times for your top brands allows you to identify any variations or inefficiencies across different RV manufacturers.
Delivery or Lead Times from Vendors: The delivery or lead times of your key vendors can influence your RECT. Timely and reliable vendor deliveries contribute to smoother and more efficient repair processes.
Average RECT per Service Advisor: Comparing the average RECT for each Service Advisor on your team can highlight individual performance variations and help identify areas for improvement or additional training.
By actively tracking your dealership’s RECT and comparing it with other dealers in the region, you can gain valuable insights into factors that may be impacting your market share. Rectifying bottlenecks and streamlining the repair process can enhance customer satisfaction, increase efficiency, and contribute to a stronger market presence within the RV industry.
In conclusion, through understanding and leveraging market share, conducting root cause analysis, defining your local RV market, and monitoring Repair Event Cycle Time (RECT), you can make informed decisions to enhance your dealership’s performance and market presence. Analyzing market share provides valuable insights, while root cause analysis helps uncover reasons for share changes. Defining your local market and optimizing RECT helps identify growth opportunities and improve service efficiency. Implementing these strategies positions your dealership for success in the competitive RV market. As the next step in growing your dealership, we recommend exploring RV dealership software, which can further streamline operations, enhance customer experience, and drive continued growth.