PSA: Digitalization is coming for the dealership industry.
Are you and your data prepared?
Dealerships today are facing changing customer expectations and decreasing profits. What was a “fat and happy” industry back in the ’90s is beginning to feel the strains of competition. And the dealerships that don’t start making moves to innovate with the market face significant risk looking ahead.
The industry as a whole is facing pressure from multiple different sources. Mainly, new technology and industry disruptors like Carvana and Vroom are moving the buyers online and away from your showroom. Combine that with a generally more-educated buyer, and dealerships’ reach and margins are steadily shrinking.
In fact, industry research predicts that 10-25% of new vehicle purchases will be made online by 2030, with that figure doubling for used vehicle sales.
These numbers underscore the need for dealership organizations to digitize to save their profit lines – including finance and insurance (F&I) offerings which threaten to leave the dealership with an increase in online vehicle purchases.
So, what’s a dealership to do?
To remain relevant and protect profits, innovative dealers must take strides to improve both their operational efficiency and better understand their customer base. This begins and ends with your data.
A data-driven dealership is any dealer that gathers and applies data to reach their business goals.
This may sound like a lofty definition, but it is achievable.
We doubt there is a dealer today that doesn’t want better insight into their current sales and margins. And who wouldn’t want real-time reporting on daily operations? The key is to develop a strategy for your data, determine how to bring all your data together, and then design valuable reports and dashboards to support your goals.
Developing a data strategy can sound daunting, but it doesn’t need to be complicated!
A data strategy simply involves understanding your systems, data sources, and priority goals. It’s the vision for how your data will help you be more profitable in a changing marketplace.
To start, you need to audit all your various data sources. This includes both your internal dealership and marketing systems as well as external information sources related to the industry.
Next, you need to set your data goals.
This is best done by asking what questions – if answered – could help increase your revenue or decrease your costs. For dealers today, your data goals should be tied to improving your bottom line profits. Whether that’s improving your sales and marketing efficiency, expanding in the right geographies, or increasing your omnichannel presence.
Once you have three to five high-value questions, you need to identify the data sources needed to answer them. Then, you need to make the data usable.
This is where a data warehouse comes into play.
A data warehouse is really just a fancy term for centralizing your business data.
Your highest-value business questions will be answered by multiple sources of data. To become a data-driven dealership, you’ll need to effectively gather and combine all of this information in a meaningful way. This will help you gain deeper insights into your performance and business results.
Unfortunately, most organizations skip this step on their data journey. But the truth is, you cannot leave your data spread out and expect to be able to make well-informed, timely decisions about what’s happening in your business.
A data warehouse solves that problem by bringing your data together to see the full picture.
This is what most people think of when they hear “data-driven” or “data analytics.” It’s the output of your business data in a digestible, graphic way. Think charts and graphs, and those dynamic dashboards and reports used to talk about BI.
There is no shortage of options for data visualization. When your data warehouse is clean and sturdily built, you can gain value from almost any reporting tool of choice. Even your Excel spreadsheets will become more useful.
The key is to find the reports and key performance indicators (KPIs) that will help your dealership push the needle.
For example, if you want better insight into your sales and margins across locations, you’ll want reporting that shows you each location’s sales by vehicle make, model, and year. This will help you better understand how your inventory is doing across your multiple geographies. From that, you can start narrowing in on stock that moves off the lot and make smarter choices about inventory placement across your multiple dealership locations.
Or, let’s say you want to get a better grasp on your operations. Your data visualization would include lead reporting and scoring metrics, daily financials, and F&I attachment rates.
Based on market research and what we’ve seen in the industry with our clients, we’ve identified three key focus areas for dealerships looking to become data-driven.
You’ll be amazed at what happens when you equip your sales and floor staff with the information they need to do their jobs well. We’ve helped multi-location dealerships drill down into specific sales rep performance to have more “data-driven” performance conversations. This helps to make your team more effective, identify challenges in your sales funnel, and develop better a better sales engine.
This is also where a data warehouse is essential in your data journey. It makes the key information and numbers available to your team so they can see and understand their daily results.
Improving your marketing and digital performance should be top of mind for dealerships today. The more you can understand where your buyers are coming from and how they want to purchase vehicles, the better you can respond and sell to them.
With an extensive marketing dashboard and robust reporting, your dealership locations can understand how they are managing leads and utilizing their marketing spend. With visibility across all your omnichannel traffic metrics, you can see how each location is performing based on their marketing campaigns, lead quality, and conversion rates by channel.
This arms your dealership to identify and repeat what’s working and cut what is not. With better benchmarking, forecasting, and decision-making, you can improve your marketing budget effectiveness and overall lead utilization.
With all of your customer data in one place – combined with sales and marketing metrics – you can enter into smarter selling. Removing friction in the buying cycle is absolutely essential for any business today. With vehicle sales moving online, buyers today expect ease and immediacy in their buying experience.
Your dealership can respond to this trend by putting the right data in the hands of your management team. With the right info, they can make better decisions and improve your customers’ experience. All of this is made easier with a data warehousing solution and a CRM to digitize the in-dealership process.
Feeling overwhelmed by the COVID-19 coronavirus outbreak? We don’t blame you. Between all of the cancellations, the tumultuous market, and the constant barrage of headlines and news, it’s been a lot. And not to add another thing to worry about, but there is a lesser-discussed threat to your business security that needs to be addressed.
As COVID-19 continues its spread around the world, impacting global economies and stock markets, cybercriminals are starting to use the situation to their advantage. Preying on basic human weakness, they are counting on fear and panic to make us do dumb things – like visiting sites and links we normally wouldn’t trust. And with more businesses moving to remote workforces, your security will be tested in new ways, leaving some organizations vulnerable to cyberattacks.
Ready to start your journey to becoming a data-driven dealership?