Adam Pavkov, Chief Product Officer with Affinitiv, spends some time with us discussing first-party data and the customer experience.

How does modern technology help dealers capitalize on their data?

Yeah, absolutely. And you're correct. We are seeing this resurgence, I think, recently around the topic of data and more importantly, the importance of first-party data.

So, yes, this idea of I as a business owner, our data specifically sits on a wealth of information, a wealth of data about the business, about the consumers, or the inventory. And having that data is one thing. Understanding, interpreting, and mining that data right is certainly another. I think a lot about this recently because again it seems like whether we're at Digital Dealer or NADA or some of these 20 groups, certainly this concept around customer data platforms has really sort of risen to the top And CDPs are not necessarily new to the ad tech space, but they certainly seem to be new to sort of the automotive industry.

I think a lot of this is coming from, again, this resurgence of focus on first-party data. And of course, that is coming from what I'll call this evolving ads ecosystem, which for the last few years, whether it's regulatory changes, like if you're a dealer in California, certainly you've been navigating that the California Consumer Privacy Act rates, CCPA. And if you're an advertiser who's been on some of the social platforms like Meta, you certainly navigate some of the tracking and targeting changes that come about from from from Apple and iOS updates. Now we're moving on to the next big change in our industry, on the advertising side, specifically this deprecation of third-party cookies, which according to Google will start here in January.

The good consumer data that you sit on, as dealers is incredibly important now, especially facing these headwinds of the ad ecosystem changes that that we're navigating.

How does a dealer leverage a Customer Data Platform?

Again, CDP, customer data platforms, are not new to ad tech. We've taken a pretty strategic and deliberate approach to how we help dealers use sentiment and activate their data. There are a few steps in that process. One is getting access to it, right? How do we how do we have to bring together these parts of that as it exists?

We have a wealth of data that lives in a DMS, and how to get access to that data first and foremost. Then we sort of have to clear it up. We call it data hygiene, we might call it data validation, but there's an opportunity there to both check the data as well as we can so we have a real clean and usable customer record.

Then the magic really starts. On the Affinitiv side, we take a lot of pride that one of our core competencies is the intelligence behind segmentation. And that's both using the data points of the variable as well as using the emerging technologies available to us. Doing some of this predictive segmentation, understanding when someone might be impacting the market, understanding when someone might be up to trading in their vehicle. These predictive elements are incredibly important.

And the last part about that flow is the activations piece, right? So now we've got the customer record, we interpret it as segmented and now we have to activate it. So now it's a relevant, personalized messaging using all the data that we have access to to deliver something across multiple channels that is incredibly relevant and helpful to the end consumer.

How do you clean up the data?

If we talk to dealers, they might throw a stat out that up to 50% of that data from the DMS might be questionable. There's a series of steps that we go through on our flow. There is ownership cleansing, looking at who the current owner is and matching that against other external databases of ownership data.

Then we have all the PIR, the personal information, that we have to validate as well. Is this a valid address? Is this a valid email address? Is this a valid phone number to text to? So there's a sort of upfront cleansing that we have to do before we actually start the activation process.

Then there's all this sort of feedback from the market. We'll get feedback back from vendors. What was actually deliverable, this physical direct mail piece as well as an email piece? Did this text message go through? Then we have an entire engine built around understanding, interpreting that feedback and then making decisions around that customer record, how we want to communicate it, moving forward. Are there things that we need to update the customer record? So yeah, it's a complicated piece.

I like to think about sort of the customer lifecycle marketing piece that's sort of like an iceberg right above the water. We see that small channel execution of communication. We're sending out service reminders, we're sending out the client service, we're sending out appointment reminders. We all imagine all those important touchpoints that we have. But below the surface, an incredibly complicated and complex engine of configurable events of when we send it, who we send it to. We talk about both the data hygiene and that a clean up piece that happens a little bit below the surface as well. I love to talk about that stuff. It gets complicated quickly, right?

What is the value of first party data?

It is an incredibly valuable asset, especially when you put a dollar amount on what customer acquisition cost looks like. The talk track is that no one knows more about the customer at any one point than the dealership, because they went through that sales process and hopefully we're going through the service process as part of this lifecycle loop.

We think about what it costs to get someone in the door, to work the lead to convert the lead, to manage it from the ownership side.

It is an incredibly expensive part and we should be leveraging the assets that are relevant for us to provide personalized messaging. It's important for us to use some relevant messaging. I think we get into a space sometimes in advertising where we're looking for scalability. We're talking about conquest. We want to focus on growing our market share. So we certainly focus on the conquest audience.

When we think about the profitability of a dealership and how much of the fixed ops or parts and service really drive that, we think about how loyalty is still lagging in our space. That's probably tied to inventory shortages. When we see all these sorts of challenges that we're facing, we go back to really how important our own first-party data is as a dealership. We certainly should be activating it on social channels. You should be activating as part of your lifecycle communication So again, any any sort of channel that you can you can reach so on and we should be activating or activating that data.

How first-party data and conquest work together.

If we zoom even out of the auto industry, it's the same idea. We could sell as much as we want over but if we're churning we've got a whole bucket. We've got to plug that bucket to really enjoy the fruits of that labor.

I do tend to agree that those things tend to work in tandem. If we don't have that really strong retention program in play where we are hitting those incredibly important touchpoints like first service, second service, this first 2 to 3-year window where we see defection sort of blossom or balloon pretty quickly. If we don't have that piece in place, then all the conquesting is going to lead to defection.

They work in tandem. Having that data-driven intelligence retention cycle communication piece in place is incredibly important, because it just feeds its own cycle.

What is stopping dealers from fully optimizing their first-party data?

Yeah, I think the short answer is it can be difficult. When we think about where this first party lives across the dealership, it could be in multiple pieces of software across multiple vendors. So we've got we've got customer data. And the thing about the DMS and the CRM, we've got all this incoming traffic, whether it's call tracking or walk-ins or the anonymous traffic we're seeing on the website, it's got the behavioral sort of engagement traffic inside some of the vendors who are using our site. Maybe a chatbot, for example. So we have we have all this data living in lots of different places.

So one part of it is, hey, how do I sort of aggregate this too? The second part is, as we've sort of seen in the industry, there are potentially some costs associated with actually being able to use your own data. Three is, if you talk to dealers they'll question the value of the accuracy of this data.

So we have that integrated lots of different silos. We had concerns over the accuracy of this current set of data. And then you have to get that out of the systems that are at at at your store into these other systems where you can activate against it, maybe get to a third party provider or maybe it's directly to some of these platforms, but there are quite a few steps here.

Any one of those steps could add some friction be the point where they go ahead and sort of ask "is this working for us?" So to think about why we don't see more utilization of action in our first-party data, I think it's just those series of challenges.

But ultimately those that are to extract those audiences and those segments out of those systems and use them to create incredibly timely and relevant marketing and advertising messages, we see some impressive results.

Do I need a CDP?

I might buck the trend here a little bit. If I checked out the dealer and they asked why they need a CDP, I don't know yet, right? Maybe not, but I do think there are components of a CDP that make an awful lot of sense. Does a dealer need to go and make an investment in this incremental piece of software? That's a larger conversation around what the current setup looks like. How many rooftops do they have? What's their overall sort of sense of the accuracy of the data that lives in some of these systems?

I think you could all agree that the reason why the CDP conversation is relevant today is because I think we could agree that there's probably an opportunity to clean the data currently sitting in our system. Certainly, an opportunity to mine that data segment that an intelligent way.

So we're going a step beyond some of that really generic communication. So we're doing some little more tactful stuff on the outreach space and like I said, it can be difficult to get something like that out of some of those business systems, out of the DMS, out of the CRM, and into the whole platform.

So does a dealership need a CDP? I would say that's a much bigger conversation. Are there CDP-like functions that a majority of dealers probably could leverage? The answer is yes. Again, that ties back to the idea that they've got a data hygiene process cleaning up the data, segmenting that data, and then helping them activate against that data.

What can a dealer do to have cleaner data?

To simplify this, in my mind, there are probably just two sides of this coin. There's the input and then there is the opportunity to clean up the input, and that obviously gets complicated. We get feedback, we activate against that input, we learn from it, did it actually deliver, did it bounce? But it starts with the input.

That's training and or a business rule you put in place in terms of making sure that there are complete, accurate thought-out records that are being entered. And then on the backside of that is you have a process in place, whether it's a third party or the vendor to help clean it up, because inevitably, even if it's entered correctly, we all know that certainly email addresses change. Names could change through marriage. So there are elements beyond just inaccurate inputs that require some sort of update to discuss the records. But that to me, to me, it starts with valuing the completeness and the accuracy of the input. And then it's having a process in place or a partner to help with the cleanup.

And it is difficult. Again, as these records are constantly, email addresses are changing, and vehicles are going to be disposed. Ownership data is constantly changing, If you don't have a line of sight to that through the service department. They are defecting in some way. So there is there is a pretty big need, I would say, for these tools to bring in a partner or at least help with the data validation piece.

What questions can I ask to make sure a potential vendor helps me maximize my first-party data?

One, on the product side, right, we're product-obsessed. So the first thing I would say is we're not product-obsessed, we're trying to solve problems. Does this new piece of software actually solve an active problem in terms of mapping it back to data?

I think the question you have to dig into is around transparency. Am I going to have more perspective or any perspective into what I gave you? What data is owned by that third-party vendor versus what is shared with me and what is actually capable of writing back to any of my internal systems? So any engagement with what happens there is actually additive to what I'm already collecting.

As it pertains to specifics, depending on what this vendor is and what we're trying to accomplish, I think dealers' perspective is want to make sure that we understand what we're tracking visibility into. If there is engagement, especially around customer records, or PII, it is writing back appropriately so I can work that lead and I can work that piece of information.

How do you decide to build an additional product for dealers?

That is a good question. Because we start thinking about the customer lifecycle, the amount of touchpoints we have. Well, one, we've got multiple profit centers we're talking about, But really in the case of Affinitiv, we're really touching both the sales and the server side of the house. So how do we approach it? Well, I think we think about it in a couple of different ways.

So we have a suite of solutions that are packaged to be really solutions-oriented. We've got our service technologies packages. They're going to help dealers with online scheduling and booking appointments. We've got a check-in software, we've got multipoint inspection software. We've got messaging and video software that allows technicians to communicate back from the service drive to the consumer. That obviously adds value and drives ROI. We build individual products that sort of package together to solve these individual problems.

On the sales side, we have trade-in and we've got data mining solutions. But the way I like to think about it is really due to the the customer lifecycle marketing. Our platform is really the flywheel here. It's the thing that adds inertia to the business. If that thing's running appropriately, then we're moving a consumer right through this cycle. Then we add these appropriate software experiences at these different touchpoints that we can then hopefully delight the consumer with. From the first touch point of thank you for buying from us, if you have any questions that sort of after-sales communication really kicks off this flywheel.

Then we have some really important milestones. We've got first-serve or second-service. We've got that ongoing service. So due for service, we got the scheduled service communication. That piece is really what we know run drives loyalty. We see that when someone services their vehicle at the dealership are 67% more likely to actually buy the car from that dealership.

So we use that flywheel to then drive that person through our service layer technology software. So that supports that part of the ownership piece. And then hopefully that customer ends up in a positive equity position, for example, where they're getting to a point where they are there in the market and we can start to help again with value when they're trading or understanding if there's an opportunity for them to trade and trade up similar payments or through our data mining and equity mining solution.

So again, you've got this flywheel driving that person to that next engagement piece. And hopefully, we get back to the sales piece again where we have the agency services that get where we're conquesting and we're driving retention, we're exposing the market to inventory price and branding type messaging so that we can complete that sale and that kicks off that flywheel again.

That's what I like to think about it, and really the flywheel here is that lifecycle marketing communication. And then we build bundles of solutions that dealers can tack on that address those individual touchpoints.

What are successful dealers doing?

That's a fairly easy answer. They built a process around the software that they've invested in. There is onboarding software, there's training people on software. That's all part of it. But building an operational process in the dealership around how they're actually going to use the software, how it's going to fit in, how they're going to work that customer list, whether on a daily basis, who's responsible, what parts of it, how they're going to move that communication right throughout the operational flow that's that makes all the difference.

The partners that are leveraging the software and using it, have built a process around using it, so it doesn't matter what day of the week it is, or who's on staff that day, they understand there's an expectation. Those are the ones that are seeing the most success. The ones that have onboarded the software and trained on it but have not built the process around it to really encourage engagement, that's where we start to see some of the performance jump off.

How does Affinitiv support their dealers?

It's an area that Affinitiv certainly prides itself on, which is really our fields and customer support teams. When we go through the process of onboarding a new client on a piece of software, there's a dedicated team there to ensure they're up to speed in terms of training There is always a team that's checking in on utilization and there to respond to any concerns or questions they might have.

There are certainly in software opportunities to ask questions or continue to to see about new developments. But if we're being honest with ourselves, it's it's really back to that customer support team that really drives the engagement that drives the value for our ongoing customers.

What challenges are dealers facing today?

So we talked a little bit about defection. I think there are a couple of challenges we have where some of these customer lifecycle marketing problems fit really well. I kind of think of them as the convergence of a lot of these issues. We have economic headwinds, right? We're certainly all tracking to that.

We understand the really the incredible importance of the fixed side of the business in terms of just the gross profit. We've got royalty issues. So we are seeing defection on both the sales side as well as on the service side, I believe I read somewhere recently that that dealer market share of appointments is down 35% since 2021. About 30% of consumers service their vehicle at the dealership. The other 70% obviously are doing some of those independent shops. So we're seeing loyalty lagging at both the sales side as well as the service side. That rolls up to the overall loyalty issue that we're having. Of course, inventory is driving this.

We're also seeing incentives come back, which is also complicating it, because all of a sudden now you're potentially fighting for market share over what the OEM is pushing out in terms of incentives Loyalty is an issue.

And then this other sort of thing I see alliances are to be able to offer an experience economy. This idea that consumers are really prioritizing the experience they get from a brand at the same level or even above what the product or service they would receive from them is. So when we ask consumers who recently bought a car why they bought my dealership, would they buy again, some of the trends that sort of bubble up or all around how easy was the purchase? Did I feel respected? Was my time respected? Did I get all my questions answered? Certainly price bubbles up in the top five, but it's not the top three. The top three are all around the overall experience. The dealers are facing economic headwinds. We've got loyalty headwinds and we've got this external economy that we have to compete in.

If you come to me and say, hey, I'm battling all three of those things, again, the convergence of those headwinds feels like a really strong customer lifecycle marketing solution. We want to make sure that from the moment that the sales cycle is done, that they feel like they're appreciated and then we're sending relevant, timely, and helpful communications to boost the overall experience. If we do that appropriately, we see we've got some strong numbers around retention and pressure on that first service, which we know is really important. And now all of a sudden we've got the loyalty piece ticked off there. So yes, those three challenges are the ones I hear an awful lot from the market. And if I really think about how we sort of try to sell both, that all comes back to that plan that we talked about, which is which is the customer lifecycle marketing strategy.

Why are we still talking about the customer experience?

Yeah, you know what? I think it's interesting. This is my talk track around experience, because I think sometimes we forget this. And Affinitiv is certainly in the service technology space. We've goto nline scheduling and booking software. So this is sort of the example I use. But if you're a dealership, and you've got consumers, booking their service online, certainly a huge indicator or contributor of their overall life perspective of the brand, their experience, they're not comparing you to the service scheduler capabilities of the dealership down the street. We don't live in a vacuum. They're comparing you to any sort of reservation or booking software that they've engaged with. When we think about driving a driving experience, it's not what the rest of the industry doing.

The bar is when that person booked their Airbnb, for the vacation rental. What did that process like when that person reserved the table at a local restaurant through Open Table. What was that experience like? The rest of the rest of the ecosystem. They're the ones setting the bar for what digital experiences should look like. So that's what we have to chase. If we're comparing ourselves to suggest within our industry, I think that's the wrong bar for us to try to reach.

Experience directly ties to loyalty.

I always say any engagement with the dealership is either adding or detracting from their overall perspective of the brand. You have the sales cycle. Great. Let's say it goes well. We know that's a huge indicator that they're likely to come back for service. Every time they're there, the opportunity is to either be additive or detract from the perspective of what the overall experience. And experience directly channels the loyalty.

It's a waterfall for sure. So we just have to make sure that all of those touchpoints are meeting some level of expectation. And it's easier said than done for sure. But that's where we have to think about it, right? We have to think about ourselves of what the consumer expectation looks like in the rest of the rest of the the other competitive categories. The other industries are going to drag us kicking and screaming. Right? If they make advanced bets on some of these other fronts, we have to be aware of that piece.