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From: Jared Hamilton
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Ed Brooks

Ed Brooks Automotive Digital Marketer

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Do Car Dealers Really Need "Big Data"?

Last week futurist Daniel Burris, in a blog post, asked folks to visualize a five-drawer filing cabinet.

Then he asked you to think of a room filled with 60 million five-drawer file cabinets.

He states that is the amount of data that Walmart compiles EVERY HOUR.

Wow. So do car dealers NEED that much data? Is it even possible? Let’s start by looking at the QUANTITY of the data. Walmart does well north of a half million transactions a minute. This is made up by mostly fairly cheap transactions by lots of folks buying multiple items… and doing it very often – sometimes every week, or daily or even sometimes multiple times in the same day. 

Let’s contrast this with the car business. Most dealers sell a relatively small number of cars. Forget looking at sales figures by the minute, they are often compiled monthly. A car is one of the very largest and most important purchases made by most folks and they do it rarely – often years pass between purchases. This is the complete opposite of Walmart!

It's not the size that matters; it's what you do with it that counts (and, yes, I’m still talking about data).  Any military intelligence officer will tell you that information gathering is just the start of the job. Analysis and packaging of the intelligence so that is clear, concise and usable by commanders in their decision making is vital. Huge amounts of data aren't the trick; the trick is to turn it into something useful!

I don’t think concept of big or small is important; so let’s put the big idea of “Big Data” away for a moment. What sort of data does a car dealer need to make important decisions that affect his business? I believe the test of data – and its analysis – is threefold; it needs to be Timely, Relevant and Actionable. If it fails any of these criteria, it is nothing but a distraction.  Dealers don’t need bad data (or a poor analysis) muddying the waters. Data that isn’t timely, relevant or actionable blurs the picture. And the last thing a dealer needs is more (bigger) old, irrelevant or useless data.

Burris tells the story of two Canadian electronics retailers.

“They noticed that in all of their stores a purchasing shift had taken place; several specific upscale electronics items that started at about $650 were selling a lot more than the lower price models, which were in the $150 price range. So they started filling the shelves with more of the higher-priced merchandise and greatly reduced the number of lower priced models. Sales in the categories that they made those changes in surged 40% in a very short amount of time.”

“A 40% surge is not bad. And thanks to the real-time data, they were able to know exactly which products they needed more of. There was no guessing involved. They could zero right in on a shift in purchasing and make the changes pay off immediately.”

“Of course, retailers have been doing this for a long time—deciding which products to remove from inventory and which to increase. But it wasn’t done in real-time. It wasn’t done with the pinpoint accuracy that we have today. Thanks to the data that we’re getting in from various sources, retailers can make better decisions faster and increase their bottom line.”

Data (big or small) and its analysis can make a world of difference for any business. This is especially true for car dealers that operate on fairly small margins compared to most retail businesses. The days of a dealer operating with a good “gut” and lots of heart are sadly, over. But the days of relying on your experience, your knowledge AND great data are just beginning! 

Adam Grossman
In general, the point about big data is that it is increasingly available to everyone: big box retailers and car dealers alike. Outside of transactional data are all kinds of customer touches (web visits, email, phone, store (showroom, service), etc.) that can be recorded and stored. This data amasses quickly and grows beyond the ability for a person to analyze without analytical tools. With the tools though, the data can tell a story about the consumers mindset and intent. So as you pointed out, analysis is the key. Tools are reaching the market at price points that are reasonable so the question becomes: how do you do the most with the data that you have? As time ticks by, competitive forces will force every industry to harness the power of their data...to what end though? In my opinion, the true superpower of big (or small) data is to provide an amazing experience to the customer. Consumers are coming to expect extremely relevant, timely, and individualized service to win their business. The ability to anticipate a customers desires and service them before being asked will win customers and their loyalty. Product mix is an element of that equation but it doesn't even come close to ending there.
Jack Phillips
Not only are "Consumers coming to expect extremely relevant, timely, and individualized service to win their business" as Adam says, but they also enjoy the timely and individualized service that a good document management system can bring to a dealership. Analyzing big data at your dealership can be enhanced by quick access to your electronic documents such as RO's, work orders, receipts, and history of customer interactions. Here's 4 questions you can ask to evaluate your own document management system: http://www.scan123.com/blog/index.cfm/2013/5/14/Four-questions-you-can-use-to-evaluate-your-document-management-system
Bill Playford
Just don't ignore what's under your nose.
Ed Brooks
"Just don't ignore what's under your nose." Great advice Bill. I think you'll find that when you focus on data and analysis that fits the "Timely, Relevant and Actionable" test, you'll be focused on the important, not on the fluff.
Dennis Galbraith
Great article Ed. The challenge is that what was not timely nor relevant for the past six months may very well be today. I think we agree that things don't need to be tested unless the are timely, relevant, and actionable, yet some things need to be monitored periodicly. Going over traffic quality metrics like bounce rate, pages per visits, or duration on site may not lead to any action until suddenly they spike in the wrong direction, Part of the user experience data providers are building into their systems today is in an effort to make monitoring as automated as possible, with warning systems and such. Increasingly, much of the benefit from big data will be process and systems monitoring, so the dealer only needs to look at when something is called up as abnormal. Even then, only when the abnormality is timely, relevant, and actionable. Big Data certainly shouldn't mean humans spending more time scanning over more data. Generally, it will mean far more machine monitoring across far more data points with human time focused only on those timely, relevant, actionable items that are surfaced to the screen. In the short run, stores have an advantage when someone has the data structured in a way that facilitates quick human scanning for problems and opportunities by someone who knows how to quickly do that.

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