If you are one of those rare dealerships that conducts competitor monitoring daily, you are ahead of more than 95 percent of the other dealers – an enormous tactical advantage.
Dealerships mostly continue to rely on personal experience, manual tracking, and gut feel to make critical operation decisions.
This approach is no longer practical or feasible in today’s intensely competitive, data-driven and highly dynamic market.
Other industries get this. Hotels, airlines, and e-commerce business today all use sophisticated competitive intelligence software. These tools gather information, spots trends, and develop insights so management can drive the most effective strategies and tactics to win more business.
As an automobile dealer, if you’re not outsmarting the competition, they’re outsmarting you. In this environment of shrinking margins, dealers can’t afford to leave opportunities undiscovered.
Dealers do have access to a basic level of competitive intelligence today. This is typically focused on new car volumes (via the regional and zone data your OEM provides) and is far less than real-time, lagging 30 to 45 days.
Pricing and inventory software tool for used vehicle management generalize at a “market” level. This view does not permit the scrutiny of individual competitor’s operations. These tools do help dealers stock and trade inventory and price their vehicles. Unfortunately, they cannot provide benchmarking insight into the specific tactical decisions being used by same-brand or other-brand top competitors in your local geography. Nor do they allow you to track operations at individual leading stores across the country.
Progressive, early-adopter dealers find ways to exploit data (and the insights they provide) to their advantage. A great industry example is CarMax, who early on learned to leverage data analytics to implement superior operational processes. The MIT Sloan Management Review noted, “CarMax’s business model relies upon a proprietary information system that captures, analyzes, interprets and disseminates data about the cars CarMax sells and buys.”
CarMax took a data-driven approach towards decision-making, and it has enabled them to grow into their position as the largest used car retailer in the U.S.
The Ideal Tool
The ideal competitive intelligence tool would allow dealers to:
- Define the specific competitive dealers they want to monitor.
- Compare one or more competitors’ metrics relating to:
- New/Used car inventory stocking
- Pricing strategy
- Website traffic and quality (bounce rate, time on site, pages viewed)
- Advertising (sources, organic keywords, paid keywords)
- Customize “push alerts” to notify them when competitors are improving across specific, targeted metrics.
- Provide a roadmap for how the dealer can close gaps between their performance and their competitors.
Such a tool would collect and process an enormous amount of data to identify complex patterns that are not obvious, distilling this complexity down to clear actionable priorities for the user.
To do this effectively with human intelligence alone would require substantial people resources. Competitive intelligence software enables a single user to deliver the equivalent output of an in-house team of data scientists.
One of the primary goals of a competitive intelligence tool is to ensure that you don’t miss any strategic insights from your competitive landscape. Examples might include:
- Calculating Optimal Pricing. It’s accepted that a dealership must have the right price on their vehicles for optimal sales and inventory turnover — but how does a retailer arrive at that ideal number? Sophisticated pricing intelligence provides insights gained as it analyzes the data and aids you in making tradeoffs between price and turnover calculations.
- Benchmarking. Benchmarking is the ability to compare your performance versus others on the main operating metrics to improve performance. Your competitive intelligence tool shows you how often your competitors’ stock new inventory, change prices or change their advertising strategy; and you can chart your progress against them.
- Knowing Competitors’ Inventory Cycle. How often do competitors cycle through their inventory? Have the intelligence to raise prices when competitors are out of stock on specifically equipped vehicles.
- Knowing Competitors’ Pricing Strategies. Sophisticated pricing intelligence gives insight into all of your competition’s prices. Collecting data on the most competitive price they offer allows you to react in real-time with a more attractive price to their consumers.
- Determining Most Efficient Marketing Spend. Sophisticated competitive intelligence helps dealers spend (not waste) their marketing dollars:
- Know to stop advertising when the demand for a particular vehicle is high, i.e. you’re likely to sell it without the advertising (avoid the pay per click fee).
- Know to stop advertising when your vehicles are priced higher than the competition (and get a signal to adjust your prices).
- Avoid advertising when a competitor is out of stock; reduce your search keyword bids.
- Feeding Competitive Pricing Data to Your Salespeople. Equipped with pricing data on other vehicles offered in your local market, your sales people are better prepared to help their customers and negotiate sales. Today’s customers know a lot about local market supply and prices. Providing salespeople with the local inventory at their fingertips enables them to diffuse tough conversations with consumers, handle objections in real time, and be better informed and prepared to close more deals.
- Plugging Competitive Data into Your Own Algorithms to Update Prices. Whatever your current pricing process for new and used vehicles, having all competitor inventory and pricing at your fingertips equips you to respond to market shifts and more attractively price for customers. Better pricing intelligence means more leads and the conversion of those leads into sales.
- Making Better Stocking Decisions for both New and Used Vehicles. Know what is selling quickest in your market, and which vehicles are being discounted most/least. Order and stock hotter vehicles that are likely to turn faster and deliver higher profit per unit.
- Sharing Better Intelligence with Your Marketing Personnel/Agency. Having visibility into each of your competitor’s monthly website visitors and engagement metrics (bounce rate, time on site, pages per visit) and keywords purchased to drive traffic, allows you to have a much more sophisticated conversation with your marketing personnel or agency.
In summary, a dealer’s use of advanced competitive intelligence solutions provides these advantages:
- Real-time access to data
- Information distilled down to actionable insights that drive business results
- Objective decision-making based on fact
- Valid, confident choices; not guesses
- Improved operational metrics
- Improved allocation of your employee resources
- A real edge over the competition
The accelerating pace of industry change means automotive dealerships are increasingly challenged to keep up. It can be challenging to stay on top of all your competitors, but it pays dividends to understand the moves they’re making.