Mining for Precious Profits

The Gold and Jewels are in Your Database if You Dig

Many dealers dig into reports that spell out how many units each salesperson sold, how many ROs the service department has written and how many ancillary products the F&I office has sold. As informative as the data in those reports are, they are all history reports and don’t do much to drive more traffic or sales. Today, many dealers are digging through their customer data, compiling specific lists and using them to generate traffic and increase sales. Database mining is one of the easiest ways (if not the easiest) to increase business.

Simply put, “[Data mining] is a great way to make the most of what you’ve got,” said Jonathan Ord, founder and CEO of DealerSocket. “The ways to use your own data are almost endless, but you have to have an easy way to mine your data for it to be used consistently in the dealership.”

The Importance of Data Mining

“I think a lot of dealers are going to be scaling back on their advertising … The nice thing about mining your own database is the only cost you have is the cost of a stamp if you’re mailing letters, e-mails are free, and [when] salespeople take time to make phone calls … they’re utilizing dead time,” said Shane Born, vice president of sales and training for ProMax Online.

In a market where money is tight and cutbacks abound, the ability to advertise cost-effectively is paramount. “I think [dealers are] finding that [data mining is] a more cost-efficient spend [and] that the traditional ways of reaching out and creating showroom traffic are stale. They are going to try to get more opportunity with customers they’ve already established relationships with,” said Richard Holland, vice president and general manager of DealerTrack Arkona DMS.

When compared to other forms of marketing, data mining takes a more proactive approach. Eric Grabowski, district sales manager at Autobase, Inc., said, ““Today, we really need to become more of a lion culture. We really need to go out and hunt. We have to do more than manage leads. We have to drive business to the service department as well as the sales department, and driving business means being able to look at our entire customer database and making sure we’re communicating with them.”

Matthew Davenport, practice development director for Reynolds Consulting Services, said, “Now is a tough time, so getting the business discipline to use the tools that you already have to mine information that’s already your property is really key.” Many DMS and CRM products have data mining features built in, while others have applications that can be added to existing software package(s).

How Dealers Are Mining their Data Today

The board, industry professionals agree that today’s dealers are more interested than ever in harnessing the data they have to create sales opportunities. “Dealers are getting smarter, so they’ve taken not only their existing database, but they’re reaching out to various data sources to enrich the data they have. For example, [some dealers are] working with their captives on their lease portfolio, getting that integrated with … their DMS,” said Jason Keith, chief technical officer at Wilson Technologies.

While every dealer wants more sales, several of them are also looking to drive more traffic to the service drive. Michael Esposito, president and CEO of Auto/Mate, said, “What I’ve noticed over the years is people calling and saying, ‘I need to get more information out of our service system because we need to find ways to bring more customers back into our service department.’”

Born said some ProMax Online dealers are cleverly using their adverse action notices to drive business to the service drive. “Since they have to send those letters anyway, rather than sending the eight-and-a-half by eleven [inch] legalese that has to be sent, they’re sending an eight-and-a-half by fourteen [inch letter]. And at the bottom of those, they’re including service coupons.”

Sometimes dealers can uncover a gem of a campaign when the timing is right. One unique campaign Wittenmyer said worked particularly well for a California dealer was one that targeted Toyota Tundra owners with an ad for the Toyota Camry. He said it’s a campaign that might not normally be successful because most Tundra owners aren’t typically in the market for a Camry, but since the campaign was executed when gas was above $4 per gallon, it produced surprisingly good results.

Even better is discovering a “big diamond.” Davenport said, “If you’re short on a particular model that would sell really well if you had it in stock, find all your customers who are currently driving those and target them to try to bring them in because [trade-ins] are you’re cheapest source of used vehicles … they’re the fastest, easiest way to get high-quality cars.” They’re also what Reynolds & Reynolds refers to as “big diamonds,” according to Davenport. “Big diamond cars are cars that we sold new; we know who’s driven it. We know how it’s been serviced. We like to say, ‘where the history is no mystery.’”

Many dealers are finding that campaigns targeting customers with negative equity work well on new vehicles with large incentives. Davenport said, “There is so much money on the table right now from the car companies that even if [customers are] one, two, three, four grand flipped, they can be your best candidates because they think there’s no way out for them. They think they’re stuck, and when you unstick them, they think you’re a hero.”  

Chuck Tilton, lead product marketing manager at Cobalt, said some of the most successful campaigns he’s seen are those done in conjunction with the OEM campaigns because dealers are reinforcing a campaign the OEM has spent major money to advertise. Additionally, Cobalt dealers have success with what Tilton called “lifecycle campaigns,” which include things like service reminder campaigns and warranty expiration campaigns.

Ord believes there are eight to 10 queries that every dealership should run every single month regardless of dealership size or products in use. “There are some dealers that are either too small, not efficient enough or don’t feel like they’re ready for a full CRM tool, but they still need to be communicating with their customers.” This is why DealerSocket developed their latest product, MoneyMaker, in addition to their full CRM product.  

Micro-Targeted Marketing

When mass mailing to the entire customer base, with either direct mail or e-mail, oftentimes the response rate is low. According to experts, the primary advantage of micro-targeted demographic campaigns pulled from a dealer’s database is that the campaigns are much smaller in scope and have higher response and close rates. Davenport said, on some campaigns, dealers will see 80 percent of appointments show and 50 to 65 percent of shows convert to sales.

The number of campaigns a dealer can create for past customers is almost endless. Some additional examples of campaigns target customers who:

1. Haven’t visited the service department within a specified timeframe
2. Have a warranty that has recently expired or is expiring soon
3. Purchased a specific vehicle (year, make, model)
4. Are near the end of their lease or finance term
5. Purchased during a specific time frame

These are usually set as automatic campaigns, but most systems allow ad hoc campaigns at any time. If a dealer wants to run a unique, one-time campaign (think special event or a campaign in conjunction with manufacturer incentives), the ad hoc campaigns are a better solution.

All campaigns require zeroing in on certain data. As Bill Wittenmyer, vice president of eLead CRM, said, “We’re narrowing it down like a sniper rifle ... We want to pick out 500, maybe 600 people … because the conversion ratios are so high and appointment ratios are so high.” Wittenmyer cautioned that dealers don’t want to waste the data and overload their staff  because they run the risk of losing the customers. Keep each campaign manageable and maximize the data.

“I think [dealers] have this concept that they’re going to be more effective if they try to contact more people at one time,” said Mark Noel, director of national sales for AVV. It doesn’t work that way. Narrowing down who the message goes to and personalizing it makes campaigns much more effective.

Where to Begin

Most experts suggest dealers identify their goals first and then start thinking about the campaigns to execute. Ord suggested, “Get creative. Look for unique ways to pull customer data … Targeting the right customer at the right time is a surefire way to get customers back in for trades, new car purchases and service drive business.”

Davenport took the “right message at the right time” mantra a few steps further: “[When we work with dealers], we start out by getting them to reframe their thinking. We talk a lot about the Law of Six Rights: If at the right time you make the right offer to the right customer using the right processes and the right tools, you’ll get the right results.” He added that to be more effective, campaigns must also be relevant and valuable to the customer.

There is a correlation between data integrity and accuracy and the success of any campaign, so it’s important to get a database ready for excavation. Bad, incomplete or even duplicate data will likely diminish a campaigns success. To eliminate duplicate entries and update potentially outdated customer information, dealers can partner with a company to cleanse and update their database. Several companies offering DMS and/or CRM products have the capabilities to do this. Ord stressed, “Make sure your data is clean. Start by sending it out for a data scrub and National Change of Address (NCOA) append. Once the data is cleaned up, then you can work with an e-mail append service to match up missing e-mails.”

The actual order of the steps it takes to set up and execute a campaign varies, depending on the tools used. The following steps appear to be a part of the processes of most tools. Decide which campaign to run and choose which filters to set. Then, a list is composed, and the campaign is executed with the preferred medium (e-mail, mail, phone or text).

That is a very basic explanation of setting up a campaign, as the process varies greatly from vendor to vendor. Most vendors have staff available to assist in the process of setting up a campaign (many even walk them through it step by step). Several providers have online demos to provide a visual when going through the steps. If dealers have an idea of what they want to accomplish, vendor representative can help with the setup of campaigns. Esposito of Auto/Mate said, “It really comes down to the people who are using the tool. If they really know what they want, the tools are there to give them that.”

While many of the programs run similar campaigns, they aren’t all set up the same. Some systems are much easier than others to use, requiring little to no technological expertise and take about 15 minutes. The easier-to-use systems have more automated aspects, which keeps the process brief. For example, when setting up an e-mail campaign, some programs automatically delete customers from the list who don’t have e-mail addresses or separate those people into another list and suggest mailers or phone calls to them, as opposed to having to manually separate them with Excel

Some of the easier-to-use systems have an application designed specifically for database mining. For example, the process begins by choosing which campaign to run, and based on which campaign is chosen, the system presents the user with campaign-specific options, allowing the user to drill down to a very specific segment of customers. Sometimes it’s as simple as specifying only a few filters before executing the campaign, depending on if the program automatically customizes the campaign template. That’s just one example of how easy data mining and executing a campaign can be when using an intuitive and partially automated system.

It’s also important to note that products with a more drawn-out process aren’t too difficult to do in-house. Someone with even limited technological know-how who understands the basics of database mining could handle it if the provider just shines a little light on how to properly set up a campaign. In reality, the difference in the time it takes to complete a campaign with a longer process could be only 30 to 90 minutes.

Here’s an example of a product that allows database mining and can assist in executing a campaign but takes a little more time to complete. The program user would begin by picking the department to work with. For example, to run a campaign that targets service customers who haven’t been in the service drive in a year, the user starts by choosing the fixed ops or service department. From there, he/she’d choose the option to extract data and then set parameters on the data.

Once the user digs up this group of past customers he/she wants back in the service drive, the system compiles a list. Some systems allow the list to be sorted and sifted while still in the program, while others export it to Microsoft Excel. If the list is for a phone campaign and the program doesn’t automatically sift out customers without phone numbers, the user would most likely sort the list by people with phone numbers and either delete the ones without a number or work to get phone numbers for them. Once the list is completed, the user might send it to the BDC or split it up between salespeople.

Most systems offer several templates that can are customizable to the dealership and particular campaign, so once the list is pulled in, the user just has to fill in a few specific pieces of data (if the program doesn’t automatically do it for the user) to personalize the campaign. After all that, the campaign is ready to be e-mailed out or sent to a printer if it’s a mail campaign.

These two examples – one outlining what the process might be when creating a campaign with an easy-to-use system and the other outlining how a user might create a campaign with a system that isn’t as intuitive – of setting up a campaign represent the extremes. There are several programs that have processes that are somewhere in-between. It’s highly recommended that dealers do a demo with multiple providers before settling on one system. Also, ask for dealer references who have been using the product for more than a year to learn more about each product.

Selecting and Managing Campaigns

As for which medium to choose to run campaigns on, e-mail seems to be favored over mail due to the cost savings and better response rates. For dealers looking to capture more customer e-mail addresses, the service drive is the best place to get e-mails.

Some industry experts claim a two- and three-pronged approach often works better than a one-pronged campaign. For example, if e-mailing a batch of customers to invite them to a private event, the campaign is more likely to get a higher show rate each customer receives a follow-up phone call. For a three-pronged campaign, the dealership might first send out a mailer, then e-mail and schedule follow-up calls. Depending on the size of a campaign, the setup and availability of staff, the multi-pronged approach may be better suited for larger dealerships with access to a BDC. If calling, however, don’t forget to comply with the Do-Not-Call list.

In larger dealerships or dealer groups, typically the in-house BDC handles database-mined campaigns, sometimes with guidance from a marketing or e-commerce manager. In smaller dealerships, oftentimes the Internet managers and service managers are the primary people mining the database to generate business.

Ord of DealerSocket said sales management previously used CRM products the most; however, over the past 12 months, more and more upper management has been getting involved, along with service managers. He’s seeing more pressure from the top down to use the tools to generate more business.

Keith of Wilson Technologies added that in some dealerships finance managers are working with data mining tools as well. He added, “It’s pretty much a dealership-wide operation of who has access to what data.”

Building on the idea that database mining is turning into a dealership-wide effort, Steve Lausch, marketing manager at Autobase, Inc, said, “It often depends on how the dealership interacts with the data, but bottom line: it must be quick and easy for everyone to find opportunities to make money, whether it be the general manager, general sales manager, Internet manager, BDC manager, even the salesperson himself."

While the experts made it clear that smaller, more focused campaigns have higher success rates, they also warned against bombarding customers with too many campaigns. More than two or three campaigns a month is risky and spikes opt-outs in the e-mail campaigns. Some of the product tools used to send out campaigns allow the recipients to be filtered by the last point of contact to help avoid over-marketing to customers.

Wittenmyer of eLead CRM said, “There’s no sense in going after the same customer over and over again … All we’re going to do is upset the customer.” He suggests no more than one marketing campaign every 90 days for most customers.

Another aspect of managing campaigns involves monitoring them. Today most, if not all, products offer reporting, so dealers can track the effectiveness of their campaigns. The intricacy of the reporting varies by provider, with many allowing dealers to pinpoint very specific details about campaigns. E-mail campaigns allow for several factors to be measured—how many were opened and forwarded, bounced back, resulted in click-throughs to the dealership Web site, etc. With phone campaigns, appointments set, kept and sold can be tracked, and mailers that include unique 800 numbers are trackable as well.

Through tracking, dealers can calculate exactly how much money a campaign generated. For example, one dealer ran an e-mail campaign last year designed to generate vehicle sales, and after looking at the campaign reporting, he realized there was an unexpected $33,089 in service revenue in addition to the $155,000 in sales revenue the campaign generated. And those are figures from a single campaign; imagine running just a few successful campaigns like that each year.

Vol. 6, Issue 3