Data mining is one of the best ways for dealers to boost financial performance, but it can seem intimidating to many in the industry. Applied Concepts partnered with The AutoMiner to develop this Automotive Data Mining Playbook to help you understand the lay of the land and how to get started.
In simplest terms, data mining is analyzing your customer and prospect database and using that raw data for targeted marketing purposes. In other words, using your existing data to identify someone who is a good candidate for a sale.
The insight gleaned from data mining allows for messages to be far more personal and relevant to the consumer than can ever be achieved with most other types of marketing.
A simple example would be sending car anniversary cards or first service reminders. It can also take on more sophisticated forms such as leveraging social media and identifying customer retention strategies.
While there are an infinite number of ways in which a dealership can use data mining, here are five of the most common:
Quick Summary: Analyze your data to find past customers who own vehicles you want to acquire.
This is probably the number one reason dealerships are jumping into data mining. Having the correct contact information, avoiding customers who already sold their vehicle, being able to focus on certain models and cars of a certain age will help assure efficient prospecting for cars to buy from consumers.
Like it or not, inflation is once again rearing its ugly head. Consumers are feeling a major squeeze on their pocketbook and many of them will assume they can save money by taking their maintenance needs to non-dealership businesses. Using data mining to identify these customers and reaching out to them with highly targeted offers can keep them coming back to the dealership.
Quick Summary: Analyze your data to bring recalls in for service.
Safety recalls present an opportunity for dealerships. There are many modern data mining leverage tools that can help dealerships identify vehicles in need of recalls so owners can be contacted and encouraged to bring in their vehicle to have the necessary work completed.
Quick Summary: Analyze your data to identify and target customers that have drifted away from the dealership for their service needs can pay off in a big way.
It might have been several years since certain customers have brought in their vehicle, but a check engine light or worn wiper blade might just be the catalyst that prompts them to look at your communication and come in. Data mining with a clean and correct database enables the dealership to hit those customers that would be most inclined to accept an offer and to contact them in the right way.
Quick Summary: Analyze your data to identify candidates for pull-ahead lease offers.
Who doesn’t love a new car? Sending a key swap offer or leveraging data to spot prospective sales prospects in the service drive is a great way to shorten trade cycles and bring in trades.
"Many dealers wonder how to acquire enough new customers to stay profitable. But those dealers already have a gold mine of sales opportunities at their fingertips: their existing customers."
Dealer Marketing Magazine, "How Data Mining Creates Resale Opportunities With Existing Customers"
The obvious goal of data mining is to grow revenue and increase customer retention but there are a few other key benefits of correctly deploying a data mining strategy:
Acquiring a new customer is anywhere from 5 to 25 times more expensive than retaining an existing one. With data mining, that's in large part because you're able to:
Data Mining vs. Social Media: Dealerships can also see a large increase in the efficiency of their social media advertising by ensuring your ads are getting in front of the right eyeballs. Many companies can deliver in-market shoppers but it comes at a steep price. Dealerships are paying 15-300% mark-up on ads in return for access to the audience. With clean and appended data, dealerships can create super relevant ads targeted at the right audience.
A well ran strategy allows a dealership to market to those customers in hundreds of different ways using a variety of media to deliver messages. Regardless of what is going on with inventory levels, parts availability, or the economy, the dealership can react much faster, more efficiently and in a much more meaningful way.
The beauty of data mining is you can use it in very targeted and cost-effective ways.
Customers appreciate relevant messages and thoughtful follow-up. With a clean data mining operation, a dealership can stay in front of consumers with personalized messages that add value rather than create an annoyance. The end result is increased customer loyalty, increased revenue per customer, and building stronger dealership brand affinity.
"Selling to existing customers is six to seven times less expensive than selling to new ones. And it’s easier, too. According to a Marketing Metrics study, you have a 15% chance of selling to a new customer, but a 65% chance of selling to an existing one."
Dealer Marketing Magazine, "How Data Mining Creates Resale Opportunities With Existing Customers"
On the surface, data mining seems simple enough and most dealerships approach it with a lot of resources and initial results are very good. But over time the workload increases and, in many instances the results decrease. To prevent this from happening, it is important to understand the main reasons data mining often takes a crash landing at a dealership:
It seems obvious that to undertake proper data mining a dealership needs good clean data. The challenge most of the time is that the data is not entered correctly at the onset and the data that is entered correctly is not cleaned on a regular basis. In many instances not all data points are checked for accuracy and dealerships forget about their CRM.
Avoid This Pitfall By: Working with a technology partner to find and delete inaccurate or corrupt records in a set of data and replacing it with accurate records. You can also DIY this process, but it's much trickier.
Avoid This Pitfall By: Take a multi-channel marketing approach and, ideally, use marketing automation platforms to efficiently reach out to your target list. This will create hand-raisers that the best salespeople can focus their time and energy on.
Dealerships often invest in data mining software and assign someone to manage the workstream. Inevitably the dealership will find themselves shorthanded, and that dedicated data mining resources gets distracted or assigned to other work. That's when everything goes downhill.
Avoid This Pitfall By: A full-time and fully-dedicated data mining person might be appropriate for large dealerships or those with a demonstrated commitment to data mining. However, an alternative is working with a data mining partner like The AutoMiner that can do much of the upfront heavy lifting so dealership staff can focus on closing the newly mined prospects.
Starting anything new can be overwhelming, so here are a few key tips to get started:
What are you trying to achieve? As discussed, there are multiple use cases for data mining, so it's important to identify what your key objective is.
Avoid trying to "boil the ocean" and instead pick a few, well-defined areas to attack. Allocate your resources intelligently to achieve those objectives.
Option 1: Do-It-Yourself Data Mining
Yes, you can take a DIY approach to data mining. A successful DIY approach requires: data is already clean, an existing tool or skillset to mine that data and make it actionable, and a strong commitment to data mining so you don't get "part-time results", among other things.
Unless you or someone in your dealership has a demonstrated expertise in data mining, our advice to take partner with a technology platform or data mining partner.
Option 2: Work with a Technology Platform and/or Data Mining Partner
On the technology front, there's a whole array of options available for you. Some require a dedicated person to become a maestro of that system. Others are more hands-off and allow for flexibility.
Companies like The Autominer have taken a more modern approach by pairing their technology platform with turnkey account management so that dealerships don't have dedicate staff to the workflow. If a dealer wants to be more involved, however, their technology allows a dealership to dedicate BDC agents or other reps to manage the workflow.
When selecting the right partner, here are a few key questions that should be asked:
Whether working in-house with a data platform or an external technology partner, any solid data mining effort should begin with a set of data that has been cleaned and organized. Cleaning data is the process of finding and deleting inaccurate or corrupt records in a set of data and replacing it with accurate records.
A realistic conversation about dedicated team members is critical. Here are some key tips:
Once a dealership’s data mining system is operational, the clean data must then be mined according to the clearly defined objectives.
If, for examples, the dealership wants to focus on service needs, the data analysis can provide the insight necessary for identifying those customers who would be most predisposed to bring in their vehicles for service.
Data mining is not only about finding the right customers, but also gaining the insight needed to communicate with them in such a way that it will yield the desired result.
Data mining can help dealerships figure out the right channel to reach out to a customer (phone, email, text, social media) and how to craft the right message.
Things change, situations and challenges arise. The dealership’s leadership team should be reviewing the results of their data mining strategy by looking for new ways to use their clean data to match customers with services or vehicles.
Dealerships might see some quick wins, but don't forget that marketing is a fly-wheel. Data mining may result in a hand-raiser to change their oil, but it also builds brand loyalty and keeps you top of mind so you can mine that prospect again to pull-forward their lease.
Data mining is like a small snowball rolling down a hill, with results growing over time and feeding off momentum. Most dealerships don’t realize all the opportunities that exist right under their noses. The data is there. The insight is there. The answers are there. Dealerships just need to roll up their sleeves and they will not only see an incredible return on their investment but cost-savings as well.
That being said, data mining truly lives or dies based on the commitment, training and follow-through of dealership staff. Having one foot in and one foot out does not work; this is an all-or-nothing endeavor. But it is one that has proven its effectiveness time and time again.