Digital Dealer: The Engine of Opportunity: Data Analytics and the Automotive Revolution

Wed. 9 Aug 2017

Digital Dealer | NITS Solutions

This article originally appeared in Digital Dealer.

“Big Data”—and the rapidly evolving tools and technologies we use to gather, manage and analyze that data—continues to become an increasingly prominent feature of the business landscape. While our ability to gather that data has largely outpaced our ability to make sense and make use of it, the exploding field of data analytics is altering that equation. Today, organizations in nearly every industry are turning to data analytics providers to help leverage data and produce new insights and new efficiencies.

In the automotive industry, data analytics is sparking a kind of data-driven revolution. In the years since the recession of the late 2000s, forward-thinking OEMs and dealerships have become increasingly reliant on data analytics, including a range of industry-specific tools and techniques, to not only understand their data, but also to better understand their customers (and themselves!).

That understanding leads directly to strategies and solutions that unlock new operational efficiencies, inform the design and deployment of marketing, communications and promotional campaigns, and ultimately deliver a significant boost to the bottom line for fixed operations. Given the fact that fixed operations accounts for up to 80 percent of the revenue stream for many dealerships, that boost can quite literally be a difference-maker.

For automotive professionals, data-driven solutions can be the key to overcoming familiar fixed operations challenges, like turning first-time service trips into regular visits from repeat customers; resolving inventory inefficiencies and making sure that the right parts are on hand when a customer is ready to buy; and sifting through vast volumes of parts, service and customer data to try and find key metrics and meaningful relationships between data points. The very complexity of the automotive industry is perhaps the biggest challenge of all. A dealership is really the integration of multiple businesses under one roof, with new vehicles sales, parts and services each demanding its own business model. That complexity is what makes data analytics such an important and potentially transformative tool: an asset instead of a liability. The most experienced and capable data analytics professionals understand how to help OEMs and dealerships find order in the information chaos, identify hidden patterns, and generate valuable insights from formerly indecipherable quantities of raw data.

Data: driven

The most effective fixed operations data analytics solutions are essentially made up of two pillars: data collection and reporting (collecting and compiling data about parts, services, customers and operational details), and data management and analysis. That second piece is where the real magic happens—where the science of predictive analytics uses insights and information gleaned from past data to provide strategic guidance about tactics and programs that will optimize efficiencies and enhance profitability in the future.

Predictive analytics identifies and focuses in on key performance indicators (KPIs), precisely tracking and modeling service and sales patterns with remarkable accuracy. As a result, predictive analytics provides OEMs and dealerships with information that allows them to make smarter and more strategic decisions about staffing, scheduling, inventory and infrastructure. The ability to track and optimize inventory at a previously unheard of level of granularity means that decision-makers can minimize wasted space, reduce losses from age and obsolescence, and go a long way toward ensuring that the correct parts are in the right place at the right time. Because most parts and accessories are purchased in the first 30 days after a new vehicle is sold, having the right parts on-site when the customer is ready to buy can make all the difference. And because these forecasts are so precise (delivering daily guidance many months in advance) it makes it possible to introduce strategic new efficiencies throughout the supply chain.

One of the most important pieces of the data analytics puzzle is customer data. Translating vast amounts of purchasing information into a detailed picture of customer preferences and priorities allows OEMs and dealerships not only to optimize inventory, but to design precisely targeted (and strategically timed) marketing and promotional campaigns. A customer receiving a service coupon in the mail or in their inbox the same week their vehicle alerts them that it’s time for an oil change can be an incredibly effective way to build brand loyalty and generate repeat service business.

That same level of customization also extends through to the service and sales experience. Dealerships can use that vehicle- and/or customer-specific information to offer personalized sales and service offerings. Together with in-house incentive programs that track and reward sales and service professionals, this can translate into a potentially lucrative boost in expanded service opportunities and additional parts and accessories sales.

Strategic solutions

While the details vary from program to program, and every dealership has its own operational nuances and market-specific characteristics, the best data analytics providers (ideally with demonstrated automotive industry experience and expertise) will be able to create truly customized turnkey solutions that deliver detailed insights into all aspects of fixed operations. Intuitive and accessible web-based platforms present KPIs on a virtual dashboard that seamlessly combines metrics, analysis and reporting. Decision-makers can, at a glance, identify strengths, weaknesses and opportunities, and can easily examine trends and compare performance against relevant benchmarks.

As with any such system, the conclusions are only as good as the data itself. Which is why the best providers not only direct a wide range of DMS data feeds (including parts sales, parts inventory, service repair orders and vehicle sales) into a single integrated system, but also apply sophisticated data cleansing and auditing procedures (including a dedicated quality control team) to ensure data integrity at all times.

Detailed reporting allows users to view a wide range of metrics, including sales trends in individual product categories (like Mechanical, Collision, Chemicals and Tires); inventory metrics like inventory turns and idle inventory; customer loyalty and retention metrics; service data like repair order trends and workshop productivity by model year;?wholesale parts information; accessories metrics like accessory per new unit retailed by model and by commodity; and pricing intelligence such as average transaction price and sales-channel-specific margins.

The bottom-line impact of an effective data analytics solution can be significant. A large OEM recently saved approximately $80 million just by reducing waste and redundancies in its port-installed parts and accessories inventory. That is the kind of jaw-dropping ability to turn existing data into sustainable and significant business performance and profitability that is continuing to make data analytics a bigger part of the fixed operations formula for OEMs and dealerships­–both across the country and around the world.