Track These Data Points to Future Proof Your Dealership
If you want to future proof your business, you absolutely have to be leveraging your data.
The more you can track, the better informed you will be.
Ideally, you should be tracking everything. But that’s not realistic. And frankly, it can cause more harm than good in less informed hands. So, let’s focus on the most important and actionable data points.
Specifically, we want to track the data points you can control.
Short on time?
Key Takeaways at a Glance: Dealers often make monthly sales projections and marketing decisions using the wrong data, or worse, guessing without any using data. Right off the bat, I’m going to tell you the nine data points you need to be tracking in order to make smarter marketing decisions. Want the more details? Then keep reading.
#1 Product: Your Inventory Levels – Know your historic inventory levels and what contributed to past results in order to more accurately predict future sales.
#2 Price: Your Prices Affect Your Volume – Track your average selling prices by vehicle and vehicle type, and compare to relevant competitors.
#3 Profit: Know Your LTVV – Profit margin will impact total sales. Determine the Lifetime Value of the Vehicle to help find balance between gross and volume.
#4 Process: Find the Bottlenecks – Start with your total sales goal in mind and work your way backwards, highlighting the steps and metrics to determine what needs to happen (and in what quantities) to reach your goals.
#5 People: Do You have Enough Resources – The Car business is still very much a people and relationship business. How many people do you need to reach your goals?
#6 Prospect: Inspect What You Expect – How is your team prospecting for new customers? Determine the activities, set minimum standards and track it.
#7 Purpose: The Greater Purpose of Your Dealership – Make sure everyone on your team knows the greater purpose and unique selling point of your dealership.
#8 Patrons: Know Your Customers – Segment and map out your customers. The more you know about them, the better you can communicate with them and find new growth opportunities.
#9 Promotion: Never Waste Another Dollar – Use all the data you have collected to this point to make smart, targeted, tactical marketing decisions. Don’t guess. Test!
How To Track 9 Essential Data Points to Optimize your Business
#1: The Product
If I asked you how many vehicles you had on the ground this time last year, you could probably find out, but is it at your fingertips, and are you using it to make current and future decisions?
I’ve seen way too many dealers make arbitrary sales predictions based on past results, all without understanding what contributed to those results. If you don’t know what your historical inventory levels have been, how can you effectively compare past results with present expectations?
What data do we track?
- Total inventory – every make, model and trim. Where did you start the month and where did you end the month?
- Market share by model for new cars. We want to understand if you are over performing or under performing compared to the market.
A significant key to understanding where you are going, is to know where you have been. Knowing how much product you have, especially when compared to current market share by vehicle, will tell you a lot about what is about to happen with sales. The more detail, the better the insights.
#2: The Price
You should not only be tracking the price of your products, but also your competitors’ prices. Let’s be honest, you are going to compare your unit sales numbers to others in the market; the least you could do is know if price is a contributing factor.
Even just understanding the average price of your inventory by model or segment could go a long way in helping you make projections and spending decisions.
Simply put, if your vehicles are overpriced, you aren’t going to hit the sales numbers you’ve projected, and there’s no amount of marketing that can fix that.
If you want to understand why your inventory is, or is not turning effectively, price is going to be a major contributing factor.
If you want to take it a step further, you could track your sales price versus your transaction price.
#3: The Profit
While profit and price are interdependent, we want to track them separately. If you really want to maximize your dealership for revenue efficiency, you need to understand all of your profit-centers individually, and how they contribute to the whole.
We do this with the Lifetime Value of the Vehicle (LTVV). This is different from Lifetime Value of the Customer, which is a little bit more complicated for dealerships to track due to the life cycle of customers.
With LTVV, we can track the individual vehicles and focus on the expenses and profit potential of every car sold, thus bringing into account all profit-centers and revenue.
Once you know this, you can begin to find balance between holding costs, units in operation (UIO), front end gross and total revenue. Moreover, you can test different sales and service models to see which brings you the most revenue efficiency.
There is a mindset change that needs to happen. Dealers need to get out of the business of selling cars and get into the business of maximizing revenue efficiency. In other words, learn how to make the most amount of money with the least amount of resources.
#4: The Process
By process, we mean the path or series of steps your prospects have to take in order to become paying customers. No matter if you are an online retailer selling shoe laces, or a brick and mortar dealership selling tractor trailers, your customers have a “typical” journey they take before they buy from you.
The best way to determine the process is to start at the end and work your way backwards, and that will look something like this:
- What do I need to sell 100 cars? 200 In-Store Visits.
- What do I need to get 200 In-store visits? 400 Appointments.
- What do I need to get 400 appointments? 800 Leads.
- What do I need to get 800 leads? 10,000 Website Visits.
- What do I need…You get the point.
Keep in mind, everyone’s numbers will be different, and the math doesn’t have to be perfect. You just need a place to start, a baseline. As time, and testing progresses, you will adjust your baselines.
If you are not currently tracking this data, you will have almost no idea where your problems or inefficiencies exist (and you do have them). Remember marketing is just fuel for the fire. So whatever dollar you are spending will only serve to intensify the current issues.
Having this data will instantly let you know where the bottlenecks are and where to focus your attention.
#5: The People
It takes a certain number of people to facilitate the process of customer acquisition. If you don’t have the right number of the right people to serve your customers, you can get by temporarily, but over time, you will regress to the mean. Understand where you need people and train them accordingly.
The most useful things we have learned from hiring, training and growing teams is to understand the capabilities and more importantly the limitations of people.
If your team works an 8 hour day, and you are projecting based on 8 hours of work, you will not reach your goals. Plan and project as if your team works a 5 – 6 hour day. This way you are more likely to overcome any productivity issues, you won’t burn your people out, and you will do a better job of planning for future hiring needs.
Also, don’t make the mistake of expecting everyone to operate at the same level – averages are just that. Expect some people to do less and some people to do more. Try to provide incentive plans based on production, then you can bonus based on results.
The reality is that people operate at varying levels. Some will produce more than others. That’s ok. Help everyone find their own personal sweet spot and settle in. A lot of trial and error went in to figuring this out and it caused employee retention to skyrocket as a result.
#6: The Prospecting
When not actively engaged with customers, how are your people prospecting? Going back to the Purpose, if everyone on your team understands why the dealership exists, (the problem you are trying to solve and for whom), then it makes it very easy to track prospecting activity.
Are your team members actively connecting with potential customers? Are they effectively conveying how you business will help them now and in the future? How are they planning and executing this activity? Who is tracking it?
A simple key to future proofing your dealership is prospecting.
If everyone on your team had one meaningful conversation with a potential customer everyday, how much could that exponentially improve your pipeline?
#7: The Purpose
This sounds counter intuitive. How can a “purpose” be considered data, and how the hell are you supposed to measure it?
Do you know the purpose of your dealership? More importantly, do your people know the purpose of your dealership? Can they communicate it, clearly, confidently, consistently and in less than 30 seconds? If not, you have work to do.
Strive to get 100% of your team bought in on who you serve and how you help them.
This is one of the most basic and overlooked elements of dealership success. Leadership often does a sorry job of effectively communicating the greater purpose of being in business.
This means your people don’t know who they should be serving, why they should be talking to them, and how they can help them. You know, your unique selling proposition.
This should be a big, audacious goal. It should be inspiring, give people goosebumps, and bring tears to the eyes when you say it. Seriously, getting this right will help you expand your business beyond the bounds of new car market share and makes gaining customers and employees easier.
#8: The Patrons
Who are your customers and where can you find them?
Far too many dealerships don’t do enough research into understanding who and where their customers are. This may be one of the biggest contributors to wasted marketing dollars.
If you don’t know who your customers are, you are bound to waste your money talking to the wrong people.
Step 1: Map out your customers and segment them using multiple variables; product, product type, LTVV, service retention, profit, etc.
Step 2: Create a persona for each statistically relevant customer segment. Working in generalities, you need to try and answer the following questions:
- Who are they?
- Where are they?
- What do they do?
- Why do they do it?
Better understanding your customers and identifying current and specific customer segments will not only help you craft and test more effective, targeted messages, but it will help you to find new, profitable growth opportunities.
Over time, you can track and remap your customers to determine how they are changing, which ultimately creates an opportunity to predict how to grow next.
#9: The Promotion
Finally…we can get to marketing.
This is the last data point because the reality is, if you don’t have data and baselines for the previous 8 data points, you are wasting money guessing on your marketing.
But, if we assume you have collected all the data indicated here, hope is not your marketing strategy. No longer are you guessing, you are testing. You will never waste another dollar on marketing and advertising.
You are learning with every experiment. A true investment where nothing is wasted.
Your new marketing strategy can be efficient and precise. You can track every dollar you spend and fully understand the positive, negative or neutral effect it has on your business, because you have control of your first party data.
You Know the Data Points to Track. What Now?
Where should you start? Of course you should call us.
But if you do decide to go it alone, here is what we recommend:
First Step: Think about how you want to visualize the data after you have collected it. Now more than ever there are a lot of reporting dashboard choices for pulling in multiple sources of data. We prefer Data Studio for its flexibility, but it does require a lot of manual setup.
Second Step: After you know what system you are going to use to view your data, you will need to identify how and in what format that system needs to receive the data.
Third Step: Identify each data point you want to track and figure out where you are going to get the information you need, how it’s served and in what intervals. Some data connections may be seamless and others might require you to enter information by hand.
The key is to set a baseline or an average for each data point you plan to track and update the current numbers as they happen. Compare them to your baseline to know how you are trending.
It’s important to break every data point down into the smallest possible time frame – preferably by day. If you can keep a daily average, you will be able to see trends before they become a problem.
Keep all your historical numbers for reference and make sure to reset your baselines for new normal every 6 months or so.
Easy enough right? Not really. Tracking data, and the right data at that, takes time, effort and consistent dedication. But if you make the commitment, it’s only a matter of time before you’ll see the payoff, and there’s no doubt about that.