The traditional dealership model is shifting in dramatic ways. Consider Tesla’s shakeup to the time-honored showroom selling process, the pandemic shutdowns forcing a hard pivot to digital retailing, the overall consumer shift toward self-service and on-demand solutions. The good news is with change comes opportunity.
There’s no need to stand still and watch revenue dwindle. In fact, that isn’t even an option. This is the moment to open our eyes, and our minds, to new ways of doing business. As our industry continues its somewhat lagging advance into the digital age, let’s take a close look at a revenue opportunity that is sitting right at our fingertips, but is often overlooked by dealers, F&I managers and sales teams: customer data.
That data — such as a customer’s name, address, email, phone number, VIN and purchase price — holds incredible value. It provides a treasure trove of insight into that individual as a consumer, and creates an opportunity for direct communication with them for continued engagement. With attentive management of this data, a dealership has the ability to enter the incredibly lucrative aftermarket space and gain control over revenue streams that are otherwise walking out the door with customers who decline to buy a service contract at the point of sale.
Some might construe the use of customer data as a potential violation of customers’ privacy, akin to selling off their information to the highest bidders. That is not what we are in any way advocating. There is a significant difference between selling customer data and monetizing it through your own marketing efforts.
The fact, which may be a shock to many, is that there is a vast industry of third-party entities that are already making use of the very data dealerships collect. On a daily basis, we are handing this information over — to the DMV, for example — and setting off a chain reaction in which that customer information is used by others for financial gain. That revenue stream, built on data that originates from a dealer’s DMS, excludes that dealer entirely. When dealers supply required customer data following a sale, they are unknowingly feeding that revenue source and, in turn, the profits generated for the entities that purchase that data.
According to a nationwide research report by the Interactive Advertising Bureau (IAB), U.S. marketers and other users spent more than $11 billion on third-party audience data in 2019. The companies that buy information include address-registry and consumer-report publications, banks, auto parts suppliers, insurers, car-rental agencies and car dealers. In some states, buyers may also include commercial data brokers, collection agencies, private billing companies, security companies, targeted advertising firms and bulk marketers.
One example of how customer data may be used is by competitors who employ marketing tactics to invade a dealer’s PMA to sell vehicles and extended service contracts. The obvious question to pose in response to these facts is: Can dealers take back control of this revenue opportunity without harming their customer relationships or risking privacy violations? The answer is yes.
Examine your internal resources carefully. If you have the bandwidth, and the knowledgeable personnel, to devote some targeted effort toward direct marketing, outline a strategic plan for outreach to customers who can still benefit from purchasing a service contract or other F&I product. In tandem, you’ll need to establish a process for executing aftermarket sales for these prospects.
Another option, should your resources be more limited in this regard, is to work with a reputable partner that can generate a branded marketing program on your behalf. With a white-labeled marketing program, you unlock the opportunity to offer existing customers access to valuable vehicle protection and bring business right back into your service center, closing the loop on your positive customer relationship.
Selling data is exactly that: purposely providing customer information to a third party in exchange for financial compensation. Monetizing data differs in that you are making use of customer information for the purpose of direct marketing to your own customers, not sharing or exposing customer information to any third party for its own use. In the case of partnering with a service provider, your customer data is used only with your permission and only for the purposes of marketing to those customers under your brand name. Your sales opportunities are extended without added burden to your BDC or F&I department. And as the pipeline for post-sale VSCs replenishes continually (as factory warranties expire), it’s easy to see the impressive potential in this model.
With F&I being the key source of revenue in building dealer wealth and ensuring resilience during these turbulent times, the ability to leverage your data through internal efforts or reliable dealer-branded automated marketing programs is crucial. Let 2021 be the year you take big steps forward into the future of auto retailing that’s already here. Tapping into the value of your own data is an excellent place to start.