Data-Driven Marketing Drives Profit and a Better Customer Experience
In the past few months I’ve had the opportunity to speak with dozens of dealers at industry events, advisory panels, and on their showroom floors. In these discussions, two topics typically emerge—profit and the customer experience.
In regard to profit, the discussion often revolves around the great run we’ve seen in our industry the past few years, followed by the immediate mention of how transparency has put pressure on profit per deal. As a result, the discussion often transitions to the customer experience and how dealerships position themselves to differentiate in a highly competitive and information-rich selling environment.
The Limitations of Traditional Marketing
These numerous discussions reminded me how traditional ways of marketing, including online, often struggle to deliver both profits and a better customer experience. Even when the online experience is favorable, many times consumers experience disconnect when they visit the brick-and-mortar dealership.
These observations appear validated in a recent study. Roland Berger Strategy Consultants notes that sales from dealer website leads can mean in-store margin erosion of 20% to 30%. Lead erosion from aggregator websites can be as high as 90%. Another report, this one from Automotive Ventures, notes that just 1.9% of vehicle shoppers complete online forms to contact dealers.
So how can we solve for profit and a better customer experience? The answer is data-driven marketing. By utilizing data to engage consumers with relevant and timely marketing messages, we can cut through the noise and the competition. In fact, we can engage consumers before they even enter the market, resulting in higher gross and a better customer experience.
Regarding gross, the dealers I spoke with who are effectively using data-driven marketing tell me their cost of sale is less than $200 per vehicle sold, and their gross profit is up more than 20% compared to deals driven by other marketing channels. Some dealers reported data-driven marketing accounts for 25% of their new car sales.
Advantages of Data-Driven Marketing
The following are three characteristics that make data-driven marketing different:
- The opportunities it creates are exclusive to your dealership, because competitors aren’t likely to be marketing to your customers yet.
- These are warm leads who are your customers already.
- They close at a 32% rate, on average.
Consumer feedback also supports data-driven engagement by customers for numerous reasons:
- It eliminates much of the deal negotiation, so consumers find the process more comfortable.
- It makes vehicle choice and comparison simpler, and provides clarity into a new model’s advantages over their current vehicle, including technology, fuel economy, safety features, and operating costs.
- It empowers them to drive a new model at the same (or lower) monthly payment, with little or no money out of pocket.
Unlike traditional marketing, data-driven marketing succeeds at inviting your customers to buy again and earlier than they would otherwise. Therefore, your “at bat” often occurs months or more before competitors, banks, or finance companies will solicit your customers’ repurchase business.
Traditional ups and Internet leads will continue providing dealers with prospects, but data-driven marketing rewards them with higher gross, better-quality trades, and a strategic way to deliver the kind of car-buying experience customers look for today.
Brian Skutta is CEO of AutoAlert, Inc., North America’s premier data mining, lead generation, and sales opportunity provider. Skutta brings to AutoAlert more than a decade of leadership in helping auto dealerships sell more vehicles and retain more customers. He has a proven history of successfully managing innovation and growth, most recently at VinSolutions and Autotrader.com’s Trade-In Marketplace. Reach him at email@example.com or visit www.autoalert.com.