Predicting success with data

Leverage opportunities within data warehouses and your DMS systems

Modern businesses know the power of data.

If used right, it can give your organization a real competitive advantage. Using data as a predictive tool, rather than a backwards looking one, can really improve your dealership’s ability to make decisions and drive profits. This idea is not automotive specific. All dealer groups are focused on leveraging data to run a more efficient and more cost-effective business.

Here are some things to consider:

Data Warehouses

A data warehouse is an accumulation of data, gathered from multiple sources, organized in a logical manner, used by enterprises for reporting, data analysis and decision making.

The data warehouse is the core element of business intelligence. There are a few different types of databases but by far the most useful one for dealer groups are relational databases.

Relational databases organize data in one or more tables of columns and rows which make it easy for users to understand how different data sets relate to each other. When data is related, you can build reports that connect one type of data to another to draw conclusions.

DMS Systems

Some major players in the retail automotive space are CDK and Reynolds. There are many others of course. Some, like newcomer Tekion, have embedded cloud-based technologies so that dealers can leverage their data better.

Access to the data is the key differentiator in the automotive space. Traditional DMS systems made it very hard to gather and manipulate information but this is now becoming a conversation piece when looking at your systems. These systems embed accounting, operational and customer-oriented information into one system.

Sounds technical, I know, but it’s actually very simple.

Since your DMS system holds key information about your business and customers, you should extract that data, on a daily basis, and build a data warehouse with it.

Here is an example of what this could look like:

  • Create two tables: 1) customer data: name, gender, age, occupation, income level, vehicle details and 2) vehicles coming off lease: make, model, trimline, kms and colour. Now imagine combining these two. You can arrive at a list of targeted vehicles your used car manager should focus on buying that, based on your historical data, your female customers, with a specific occupation and income level, aged 30 to 35, are likely to buy;
  • Create two tables: 1) employee data: age, occupation, education level and 2) Sales data: sales and gross profit generated by employee by month. By combining these two data sets you can refine your hiring practice to focus on recruiting the right age and education of staff that will generate the maximum profits for your dealership in the spring, summer, fall or winter.

Data is powerful

If leveraged correctly, you should be able to narrow down the exact type of car, with colour and trimline your female professional customers (as an example) are likely to buy on a rainy Tuesday in November. Yes, you can get that granular!

You can slice and dice data as needed to arrive at predictive conclusions that will help your business make smarter decisions. And, of course, smarter, more efficient companies will generate higher profits in the future.

Not only is data powerful, it is profit generating.

Using your data, the right way, will yield healthy and sustainable profits. The automotive industry is heavily focused on this concept and, as the industry evolves, it will continue to play a major role for leading dealer groups.

About Robert Arena

Robert Arena, CPA, CA is an automotive and transportation executive and a long standing faculty member in the Automotive Business School of Canada. He can be reached by email at rob.arena@outlook.com

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