This article originally appeared in Fixed Ops Magazine.
At a time when increasingly-sophisticated tools and powerful new technologies make it possible to collect and leverage extraordinary volumes of data, a wide range of industries have embraced the fast-growing practice of data analytics.
Data analytics allows companies that take advantage to gain new insights, generate new efficiencies, operate with greater precision and unlock new opportunities. Brands and businesses are increasingly relying on “big data” and the ability of data analytics professionals to transform raw data into valuable business intelligence.
Over the last few years, growing numbers of automotive OEMs and dealer- ships have come to rely on data analytics to better understand themselves and their customers.
In the process, new and increasingly robust and comprehensive data-driven solutions have been developed that improve sales and profitability in Fixed Operations.
These solutions have made it possible to enhance services, create impactful promotions, optimize inventory and scheduling and develop and deploy highly-sophisticated sales and marketing strategies. The result is that dealer- ships that embrace data analytics operate more efficiently, better address customer preferences and priorities and, consequently, sell more Parts and convert more customers to repeat Service clients.
In an industry in which Fixed Operations accounts for 60 to 80 percent of the revenue stream for a dealership, the importance of boosting operational efficiencies and overcoming sales and marketing challenges is significant.
On the Service side, one of those challenges is securing repeat business from consumers who all too often come in for a first-time Service with a new vehicle and never return. The difficulty in converting those one-time, promotional or warranty Service customers into loyal repeat customers is a major obstacle for dealerships looking to boost their bottom line.
When it comes to the Parts Department, the wholesale side faces a similar dynamic. Converting prospects into active customers is an ongoing challenge. With respect to Parts and Accessories, inventory optimization is much more of an issue. Customers purchase the majority of Parts and Accessories in the first 30 days after buying a vehicle and having the right merchandise on-hand can make or break a sale.
For Parts and Service Departments, the standard industry solution has been to engage in heavy (and typically costly) marketing campaigns, with everything from calls and direct mailings to big promotional initiatives.
From an inventory standpoint, OEMs and dealerships are essentially forced to choose between the expense and inefficiency of overstocking and the cost and consequences of not having the right item in-stock when needed.
Underlying these challenges is a common denominator shared by each of these different revenue streams — a virtual blizzard of data.
From inventory, Service and wholesale Parts data to Accessories, pricing and extensive sales and customer-specific information, the sheer volume of data can create a kind of information over- load, in which the ability to collect data has surpassed the ability to leverage the data received. Automotive OEMs and dealerships are left wondering how to sort through this data and somehow make sense of it all.
The inherent complexity of the automotive industry (and the fact that a dealership is essentially operating three or more very different types of business all under one roof) makes that over- abundance of data feel even more overwhelming.
Ultimately, however, it’s that same complexity that makes big data and the use of data analytics such a powerful tool for those dealerships.
One of the most exciting aspects of data analytics is the ability to transform that complexity from a liability into an asset. The best solutions and most experienced data analytics partners can help OEMs and dealerships and order in the chaos and yield insights from previously inaccessible volumes of raw data.
The best data analytics solutions use comprehensive reporting tools that collect data from all dealerships and inventories: from detailed information about Parts and Service to operational details and customer-specific data.
With that data comes the ability to identify hidden patterns and valuable insights and the ability to drill down into key performance indicators (KPIs) and translate raw information to usable business intelligence using predictive analytics.
Predictive analytics can track detailed Service and Sales patterns with previously unheard of precision: breaking it down not just weekly, monthly and yearly, but also daily and even hourly. A deeper understanding of that data and those patterns allows dealerships to make more informed staffing, infrastructure and inventory decisions and even design incentive programs to promote improvement.
On the inventory side of the equation, these tools make it possible to track and optimize inventory at a granular level, ensuring not only that the right Parts are in stock at the right time, but also that stock overages do not result in wasted space or obsolete items.
These stock and inventory predictions can deliver forecasts that provide daily guidance months in advance. Model and commodity-specific data can provide valuable information about which cars are getting which Accessories and what Parts need to be in the supply chain pipeline at different times.
A deeper understanding of customer preferences, priorities and purchasing habits makes it easier to design customized marketing and promotions that are highly effective at getting customers in the door. These campaigns can be strategically timed to coincide with due dates for services and other vehicle milestones and can be precisely targeted to appeal to individual customers.
This newfound ability to leverage customer data not only makes it possible to design customized marketing, communications and promotions, but also can extend that same level of customization to the Service and Sales experience.
When dealerships have a deep understanding about customers and the vehicles they are bringing in to be serviced, they can use that customer-specific information to prepare and deliver a sales pitch or personalized Service offering designed to appeal to each individual customer.
In the process, an oil change might evolve into a more comprehensive Service opportunity and a one-time Service may instead be the first in an ongoing series of regular visits. Dealerships can also use this information to prompt a motivated buyer to consider additional items they may not have even known were available.
Platforms and Possibilities
So how do these programs work and what do they look like?
Although selecting the right program depends in part on the characteristics of the OEM and its dealers and systems, experienced data analytics providers with automotive industry experience are able to provide customized applications built for each OEM.
The best solutions are web-based turn-key platforms that provide retailers with detailed insights into all aspects of Fixed Operations and a focus on KPIs designed to translate into sustainable business performance.
These platforms aggregate a variety of dealer-specific DMS data feeds (including Parts sales, Parts inventory, Service repair orders and vehicle sales) from the retailer into a centralized and inte- grated system.
Data cleansing and auditing mechanisms proactively identify issues and resolutions, ensuring data integrity. The best providers use a centralized team that engages in continuous quality checking of the data.
Easy-to-access, web-based platforms come with a clear and intuitive dash- board that summarizes KPIs with metrics, analysis and reporting presented in a visually compelling manner. Dealerships can identify potential growth areas and opportunities by analyzing year-over-year trends and by comparing performance against established national, regional and market bench-marks.
A full suite of reporting modules allows users to drill down into categories such as Parts, sales, trends and metrics, which are organized by product categories such as Mechanical, Collision, Chemicals and Tires.
Then there are Parts Department inventory metrics, such as:
• Inventory turns and idle inventory
• Service data pertaining to customer retention, as well as repair order trends and workshop productivity by model year
• Wholesale Parts metrics to identify opportunities for growth
• Accessories metrics such as acces- sory per new unit retailed (PNVR), by model and by commodity
• Pricing intelligence such as average transaction price and margins by sales channel
• Parts loyalty data.
The real-world results of an effective data analytics solutions can be pro- found.
In one recent example, a major OEM saved close to $80 million simply by optimizing its port-installed Parts and Accessories inventory. With that kind of extraordinary bottom-line impact — achieved simply by leveraging data as- sets that OEMs already have on-hand — it’s easy to understand why automotive professionals are increasingly looking to enhance their data analytics capabilities.