By Nate Allphin, Eide Bailly LLP
When you look at the industry as a whole, the pressures facing dealerships are coming from multiple angles. The main sources? New technologies and industry disruptors like Carvana and Vroom are moving the market online and away from your showroom. Coupled with more educated and digitally savvy buyers, dealerships’ reach and margins are steadily shrinking.
In fact, McKinsey & Co. 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.
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, depending on your current relationship with your business data, but it is achievable. 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.
Steps to become a data-driven dealership
- DATA STRATEGY
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 that relate to the dealership industry. This may include:
Internal Data Sources
- Dealer Management System (DMS)
- Google Analytics and AdWords
- Customer Relationship Management (CRM) system
- Social Media and Marketing Campaigns
Outside Data Sources
- National Motor Vehicle Title Information System
Understand your market share based on titles in your dealership locations
- U.S. Census Data
Understand how market and socioeconomic factors like average annual income and population density affect your dealership performance
Next, you need to set your data goals. This is best done by simply asking what questions – if answered – could help you increase your revenue or decrease your costs. For dealers 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 all that data usable.
- DATA WAREHOUSE
A data warehouse is 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 this various information in a meaningful way to gain deeper insights into your performance and business results. Unfortunately, most organizations skip this step when going down the path to become “data-driven.” 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.
- DATA VISUALIZATION
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 robust and useful. The key for data visualization on your path to becoming a data-driven dealership is finding the reports and key performance indicators (KPIs) that will help you 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 so you know how your inventory is doing across various 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 output would include lead reporting and scoring metrics, daily financials, and F&I attachment rates.
3 key focus areas for data-driven dealerships
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.
- IN-DEPTH PERFORMANCE TRACKING
You’ll be amazed 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 a better sales engine. This is also where a data warehouse solution becomes 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.
- DIGITAL LEAD MANAGEMENT
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.
- PERSONALIZED SALES AND MARKETING
With all 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 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 to make better decisions and improve the buyer experience. All of this is made easier with a data warehousing solution and a CRM to digitize the in-dealership process.
Nate Allphin is a principal at CPA firm Eide Bailly LLP. He can be reached at 1 801-655-4822 or email@example.com.
Eide Bailly Technology Consulting believes in a better way of doing business. Our team likes to think of ourselves as advisors first and technology providers second. We understand that we only succeed when our clients succeed, and that’s why our driving force, every day, is to help our clients find the best way forward. We bring our knowledge, passion, and experience to transform the way that organizations do business and deliver lasting results. We are a four-time NetSuite Partner of the Year, Salesforce Gold Consulting Partner, Top 5 Global NetSuite Solution Provider, and Microsoft Gold Cloud Partner.