The Buzz Behind Big Data

Each year, the industry stumbles across “the next big thing,” and 2012 was no different. January 1st ushered in the notion of big data and how it was destined to change the automotive retail industry. But what was considered the newest buzzword for our line of work had already changed organizations all across the world for the better. And by better, I mean more profitable. Dealerships and other automotive professionals spent that year trying to tackle this obscure concept and understand the operational benefits it could provide.

For obvious reasons, “Big Data” was the topic of conversation at the 4th annual DrivingSales Executive Summit (DSES). It was time to take all the ebb and flow out of Big Data and begin to nail down the application to business in general and dealerships in particular. To this endeavor, DSES brought in the General Manager of the Oakland A’s, Billy Beane. Famed for his “moneyball” methods of baseball management, Billy expressed how he was able to use data to find assets that were previously undervalued to help them succeed in a competitive environment.

This couldn’t ring more true from dealers. Just as baseball was rooted in a convention of gut-feelings, instinct, and romantic recruiting stories, dealerships have a long-standing association with operating on hunches. The old adage of “50% of my marketing works, I just don’t know which half,” has driven too many million-dollar decisions in automotive retail. Counting everything from marketing decisions to identifying the walk-ups who are “really ready to buy,” emotion has championed the decision making process, leaving no room for data.

Until now.

In baseball, Billy Beane understood that in order to stay competitive in a market that had way more spending dollars than he did, he needed to find assets that were traditionally undervalued that he could capitalize on. Shifting the importance he placed on certain player statistics, Billy and his statisticians made objective decisions about who made the team and who batted in which order, leading them to secure a 20 game win streak in the middle of the 2002 season and a race in the playoffs. No small market team had ever been so successful and it was all because of data.

Florian Zettelmeyer, J. L. and Helen Kellogg Professor of Marketing at the Kellogg School of Management at Northwestern University, described in his keynote on Day 2 of the DrivingSales Executive Summit a dealership case study example of Big Data in action. In his study, he found that when invoice pricing was disclosed at the beginning of a negotiation, the dealership made more money on the deal – an average of $1500 more. Conversely, when the invoice price was conveyed toward the end of the conversation, the dealership reeled in negative numbers in gross (over $2000 worth). This is only one example of how data can be used to challenge one of many long-standing conceptions (that transparency upfront hurts a dealer’s gross) and generate awareness of consumer behaviors that dealers can capitalize on.

Thanks to the emphasis on data in our own industry, there are mounds of it to be had. Every product you use, every process in place, all produce transformative data that can help dealers understand their customers better and leverage that for success. But as Professor Zettelmeyer pointed out in his keynote the tremendous potential in Big Data, he also recognized the inherent frustration with it.

From a similar perspective, Dennis Galbraith, Director of the Data Division at DrivingSales, stated in his DSES keynote that the industry is on its way to greater profitability with data; however, he continued that the secret isn’t in the data itself, but in the analysis. Understanding the application of Big Data is necessary not only because of how highly profitable it can prove to be when used effectively, but how overwhelmingly frustrating it can be when sitting there with unseen function.

Take, for example, SEO. Search Engine Optimization provides an endless cavern of data points and consumer insights on how people are searching for your store, learning about your store, and ultimately viewing your virtual store online. Rand Fishkin, SEO guru and CEO of SEOmoz, energized DSES attendees with his actionable takeaways regarding search engine optimization theory and practice, all from data. He relayed the importance for businesses to have an understanding of the basics of SEO, like content and keywords, to make good decisions and understand the data well. His advice to dealers who want to win at search, for example, was to ignore the big keyword topics.

What?! Ignore the most prominent keyword topics? Well, that doesn’t feel right.

But, maybe it is. When looking at the data, Fiskin declared that Google owns all the top keywords. Instead, dealers should go for the middle or the tail end of the keyword popularity scale because that’s where no one can take it from you. Others aren’t there because they’re all still fighting Google for the top 3 or 4 spots – because that “feels right”.

It’s information like this that can be applied directly to a marketing or sales perspective to garner greater profitability for the dealership. These are the takeaways that dealers need to be able to implement Big Data action items into their operations successfully with limited frustrations. It’s the very reason why dealers attend the DrivingSales Executive Summit – to learn how to apply these real world topics that are impacting businesses of all kinds to their own business in automotive retail.

Billy Beane was right when he said that more data leads to better decision making, but with the context surrounding the Big Data discussion, I would amend the statement: More data leads to better decision making, if you know what to do with it. Thankfully, you don’t have to do it all by yourself if you don’t want to. Chances are you have a stellar leadership team that can rally around this profit gold mine and gain the right education to know how to apply it to your business. Perhaps you already have a great relationship with your solution providers that can help support you in this endeavor as well. Either way, for your dealership to capitalize on today’s opportunities, the difference is in the data, and the profit is in understanding and operationalizing it.

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