Equity Data Mining – Why Should You Care?
The terms Equity Mining or Data Mining are sometimes thrown about as the silver bullet to solve all the problems a dealership has. The truth of the matter is that maximizing customer retention efforts make for smart business decisions. According to the 2018 NADA’s Annual Financial Profile of America’s Franchised New-Car Dealership study, dealers spent an average of $624 per vehicle retailed in advertising expense. Meanwhile, the cost of retaining our current ones is $0. So, why is it that very few dealerships capitalize on this potential gold mine effectively?
It starts the way many good ideas start, with the best of intentions. However, it tends to fail many times due to a lack of thorough planning and realistic objectives. If it were as simple as saying “today we are going to start Equity/Data Mining” we would all be doing it. Unfortunately, it takes having a process in place and working the process consistently.
Start simple! Segment customer lists into smaller campaigns that allow for a more personalized message to a small section of customers. It could be a certain model with high pre-owned demand or likely prospects of a vehicle with a high day supply with good incentives. Many stores already have access to this information from their CRM, DMS, or other third party data mining tools. You might decide to start with the customers who are in your store every day or customers that purchased from you who are already expected to spend money. Of course, I am referring to the customers in the Service department. Customers in for service already are comfortable with the store because they have elected to have their vehicle serviced there and they are expecting, albeit they may not like it, to spend money. The biggest thing to remember when approaching customers in Service, and where many dealerships fail, is they are not there to be sold.
When we approach the service customer we need to do so from a position of wanting to buy their vehicle, not sell them ours. This sounds easy, but as so many of us are from sales, we tend to fall into a sales mode. This situation is all about wanting to buy their vehicle and if they are not interested, it’s okay. We want them to feel comfortable returning for service again without feeling like they are going to be pressured every time, hence we risk losing them forever.
One area we caution dealerships on is looking solely for customers in an equity position to target. The reason is simple, how many deals are delivered every month to customers who were in a positive equity position? Most dealerships tell us that it is a minimum of the total sales. Customers with negative equity are more likely to consider an opportunity if it makes sense payment wise than a customer with positive equity who knows they can trade. Show them how they can get something newer without a big change in payment and most will consider it.
Whether you start with a list of desired vehicles or with customers in for service, having an outlined process for your team is key. Making sure everyone knows what is expected and what the steps they should follow is important to ensuring good execution time after time. Your process needs to include what are the word tracks your team will use with the customer both in face to face conversations, as well as through other mediums such as mail and email. A conversation centered on thanking them for their continued patronage, service history etc. and not a sales message will go a long way. The other component to your process that is crucial is follow up. Very few of the customers you will engage with will make a decision on the spot, especially if this is the first time you have broached the subject with them. Your team needs to look at this initial conversation as planting the seed. The follow up is the cultivating it takes to bear fruit. Look at customer mining as farming and not hunting.
This may sound like work, but the benefits if executed correctly will outweigh the effort. Many dealerships who begin with the low hanging fruit, the Service customers who are already in the store, can realize, once the process is up and running for a couple of months, up to 1%-2% of its monthly Customer Pay R.O. volume convert to a sale. For a store that averages 1,000 Customer Pay R.Os. per month can see an additional 10 – 20 incremental sales just from the Service Lounge.
Other benefits to consider are increased customer retention, increased market share, quicker turn of used vehicles and direct access to front line quality vehicles without having to pay auction and transportation fees. A continuous collaboration with your Pre-Owned Manager will ensure you are targeting the right buyers, with the right cars and mileage.
Equity/Data Mining is a great way to add incremental sales to your overall volume every month while retaining your customer base you worked hard to get in the first place. It can be done and it does work when done properly. Happy selling!