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What’s the Big Deal with Data Anyways? – Part One

This blog is the first in a series I plan based around how to better use dealer data in marketing to customers.

There is a reason that ‘Big Data’ has been a hot topic in the automotive industry for the last few years. Many retailers in other industries are using it quite successfully to target their marketing and offers to their customers based on transactional and behavioral data. Aside from some off-lease marketing, most dealers aren’t even paying attention to the data they have, much less using it in combination with outside data. It is very difficult, if not impossible, to create customer loyalty by utilizing a shotgun approach in your marketing communications for your entire customer base.

 

However, this is what many dealers still do and what many vendors are still advocating. A perfect example of this “old school” mentality and outdated approach is in the continued use of service reminders. For example, I continually get service reminders from my local Ford dealer regarding a vehicle I have not owned in almost 5 years. Not only is it a waste of the dealer’s marketing dollars -- as I am sure I am not the only customer in his database that no longer owns the vehicle -- but it is also a contrary practice to building lasting customer retention though the use of meaningful interactions. It is proven that relevant messages to highly targeted groups of customers converts into more sales, while building significantly increased customer loyalty. Impressing upon your customers that you are paying attention to their specific needs and wants is far more effective than sending them a bunch of communications that don’t pertain to their individual circumstances.

 

Most major retailers track their customer’s behavior through the use of loyalty programs and other internal SKU tracking methods. Take Costco and Sam’s Club, for example. They track everything their customers buy from them. Through skewing and product codes, they know exactly what their customers have purchased and what they are likely to repurchase from them in the future. They also have the ability to calculate a profit margin for each customer, and to track their customer lifetime value to the dealership.

 

Why is this important? In the event you lose a long time customer with a high lifetime value, it may require the acquisition of many “smaller” customers to make up the revenue and profit loss of the one higher value customer. Most retail manufacturers know this. They work cooperatively with retailers to deliver relevant coupons and offers tailored for specific customers based on their past purchase behavior. Dealers have the same ability to utilize this data using parts numbers and labor operation codes to generate relevant offers for their customers. For example, with the recent increase in vehicle recalls, dealers should be segregating their recall customers from non-recall customers and communicating with them utilizing a different message. 

 

On the vehicle sales side, NADA publishes their formula as to how to identify what customers, based upon a number of factors that can be easily pulled from your DMS, are “in market” for a new vehicle. But surprisingly, many aren’t using the data. Even many of the vendors that dealers hire, which claim to use the dealers’ data, aren’t using it effectively. This is evidenced by the low ROI these communications generate. Vehicle OEM’s are notorious for using saturation marketing such as that utilized during the current NBA playoffs. This is being sent to audiences that are much less tolerant today than they were even five years ago.  Marketing needs to be about communicating useful information that is memorable and meaningful, not about the repetition of a non-relevant offer (remember your service reminders here).

Blasting a generic sales message to a list of customers that have not brought a car in the last few years will most likely only result in a couple of sales. And you risk the opportunity of alienating that customer for a lifetime.

 

A much better approach is to use predictive analysis – look at what the customer has purchased, the type of vehicle they own and the mileage on those vehicles, so that you may come up with a targeted, accurate analysis of when and what action the customer is pre-disposed to take. Through the use of transactional data dealers already have, they could instead create a more specific list of customers that would have a much higher propensity to respond. Such a list of segmented customers could be those who own a specific model with 90,000 miles or more, who have also spent more than $5,000 in maintenance costs, and are approaching a major service interval. A targeted mailer sent to this precise list will produce dramatically better results than the aforementioned blast to your entire customer base. The message delivered is more relevant, more meaningful and will generate a higher ROI.

 

In my next few blogs I plan a series to more fully cover why dealers aren’t using the data they have, show dealers how to get the data they already possess, what to do with it when they have it and how to measure the results after they’ve used it. Using your own customer data to target your message to the most relevant customer segment will produce better results, increase the likelihood that your customers pay attention to your message and take action. 

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Tags: analytics, automotive, behavior, consumer, data, dealerships, marketing, security

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Comment by Mike Gorun on May 16, 2014 at 6:00am

Thanks for the kind words, Brent and Neil! 

Comment by Brent Albrecht on May 6, 2014 at 7:03am

Mike, looking forward to the rest this series.  That lifetime customer value is also an important number dealers should know when evaluation the ROI on any of their advertising.  Some advertising might seem like it doesn't generate the response needed to justify the expense, but when looking at the Lifetime customer value it paints a different picture.  Businesses can also see that different advertising tends to generate different "quality" of customers, and the advertising that generates more profitable customers is more valuable, but you can't determine this without first understanding your data

Comment by neil okun on May 6, 2014 at 6:00am
Heed
Comment by neil okun on May 6, 2014 at 6:00am
Take head in this message. This is the shape of things to come. All industries should learn these practices and insure the information they have in their CRM systems is the best and most accurate possible. Reward employees for collecting good information.

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