How to Make Customers Your Strategic Inventory Acquisition Partners

Create an internal auction lane with your existing customers by using data mining

Many dealers think of customers as just that: customers. Top-performing dealers take it a step further and think of their customers as something more: strategic partners.

A dealership requires a wide network of partners to effectively conduct business. Parts suppliers, media outlets, payroll service providers, and many others are strategic necessities. Why not think of customers in the same way?

In addition to the customer being vital to business through purchasing and leasing vehicles, fixed ops, and aftermarket purchases, they can also serve as partners for inventory acquisition.

Business builders

With many forecasts predicting a slowdown in new car sales, the acquisition of desirable used vehicles for inventory becomes an increasingly important profit lever. In fact, the average total gross profit for used cars ($3,091) is 14% greater than for new cars ($2,717) across all lead sources.

Additionally, data shows that used car leads take fewer days to close than new cars (44 days compared to 56, respectively) and generally deliver a significantly higher average ROI.

Leading dealers ensure they have solid “core” inventory. Core vehicles are the models that sell fastest, most consistently, and most profitably at a dealership. To acquire desirable inventory for remarketing, one frequently overlooked alternative to traditional auctions is a dealership’s current customer base.

Most dealerships acquire their used car inventory through auctions, despite the lengthy process, administrative costs, and fees. Consider, however, that the average dealership sells nearly 1,000 vehicles every year. With vehicle quality consistently rising and life spans lengthening, each of these cars represents an opportunity to acquire, at a much lower cost, quality vehicles that match the demographics of a store’s customer base.

Dealerships already have the information required to have proactive conversations with customers regarding trading in their current vehicle for an upgrade: transparency of sales and service history, contact information, DMS data, and more.

The average dealer brings in $250,000 in incremental revenue by utilizing its CRM to conduct campaigns, such as data mining, buy-list matches, and exchange-and-replace payment programs. Smart dealers utilize technology tools to identify inventory acquisition opportunities by leveraging readily available information.

Data mining as internal auction lane

One of the most efficient and effective ways to avoid auctions and acquire vehicles more cost-effectively is to use data mining technology to tap the wealth of valuable customer information stored in a dealership’s DMS.

An effective data mining platform constantly scans a store’s customer data and identifies people with vehicles that match current core inventory needs. It then feeds warm leads into a CRM for follow-up. Above all, mining the current book of business for these opportunities allows dealers to engage customers before competitors, keeping them top of mind.

DMS for inventory acquisition?

According to our company’s recent Dealership Action Report, data mining is in a class of its own in terms of its ability to generate actionable information. Although the DMS is traditionally considered a sales tool, it is also an unparalleled method for identifying vehicles—and the customers who own them—that a dealership wants on its lot for remarketing.

Any vehicle acquired from a customer through proactive outreach is not only a remarketing opportunity, but a new sales or lease opportunity. Analysis of dealerships using data mining solutions found that leads generated through this technology are more likely to result in action, and are converted more often and more effectively than any other source.

Data mining by the numbers

  • $424,000+: Data mining generates more than $424,000 in gross profits per dealership per year.
  • 90%: Leads identified through data mining lead to a closed sale nearly 90% of the time.
  • 84%: Calls made to leads generated through data mining result in appointments 84% of the time, compared to 25% for other lead sources.

Despite its performance, cost-effectiveness, and widespread adoption, data mining technology is still a largely underused weapon in the remarketing space. The availability of the technology, combined with an innovative mindset in using it as an inventory acquisition tool, makes it a must-use resource.

Surprisingly, only half of dealerships use data mining technology, and at those that do, only 17% percent of data mining leads generated are actually contacted. Considering the wealth of information available—as well as the likelihood that such leads will result not only in acquisition of core inventory, but sales—these numbers reveal a significant gap between opportunity and action.

Lucrative remarketing opportunities

The use of data mining to identify inventory acquisition opportunities through internal auction lanes rather than traditional auctions is undeniably profitable. Dealers ready to take advantage of anticipated increases in used car inventory will enjoy faster selling cycles, lower acquisition costs, and better margins.

Dealerships that consider their customers as long-term partners can quickly identify opportunities for acquiring inventory for remarketing, match those prospects with their next vehicles, and establish a virtuous cycle that creates a significant competitive advantage and fruitful revenue stream for the foreseeable future.

K.C. Loughlin is sales director for DealerSocket’s Inventory+. His automotive career spans more than 30 years, including parts, service, F&I, and used car inventory management. He specializes in inventory management solutions and best practices, and has been a featured speaker at conferences across the country.

Download DealerSocket’s 2016 Franchised and Independent Dealership Action Reports:

K.C. Loughlin


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