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March 22, 2019
Predictive Behavior Modeling in Low Inventory Automotive Markets
Dealers know the next few years are going to be lean for the automotive sales marketplace. They’re seeing it now: Automotive News reports 2019’s light-vehicle sales are off to their slowest annual start since 2014, and the 2.9 percent decline in the first two months of 2019 was the worst year-to-date sales slump over that time in a decade.
In addition to decreased sales forecasts, dealers are also facing new challenges in getting even the most eager customers into the vehicles they want at a price they can afford. With retail prices hitting an all-time high, monthly payments regularly breaking $1,000 and loan terms stretching to five years and beyond, the F&I component of the sales process has taken on a new complexity for dealers.
But with those predictions in hand and the memories of the Great Recession all too fresh on showroom floors, what can forward-looking dealers do? When every customer is critical, dealers must find an edge over competition, they must be more efficient and effective in their marketing, while getting better at closing sales on the prospects marketing creates. Now is the time for dealers to find a way of doing a better job at retaining their existing loyalty buyers, converting service-only customers and protecting that key foundation against competitors’ conquest efforts, while at the same time being more effective at their own conquest campaigns.
How Predictive Behavior Analytics Solve for a Slowing Automotive Market
Fortunately, there’s a strategy to accomplish those objectives that wasn’t available yet for dealers during the last downward cycle. These are all areas in which cutting-edge predictive behavior modeling can transform a dealer’s marketing and sales efforts and allow them to accomplish all those strategic objectives – and more.
Predictive modeling takes the guesswork out of car sales prospecting and marketing by identifying the information that matters about potential customers, analyzing it to determine what’s most likely to change consumer behavior at that particular point in the sales cycle and then putting those insights into a useful context that empowers a dealer’s marketing efforts and sales team to confidently reach out to targeted potential buyers.
While some dealers are inherently skeptical about any new technology that promises to change their business, predictive modeling is different – and even more important is the datasets that go into them. Sales has always been based on an instinctive form of predictive modeling that salespeople engage in through personal experience: Knowing what you do about the prospect, how do you think they’ll respond to this tactic or that offer? What’s the most likely thing you can do to get them to make a decision?
That’s a key reason why a predictive modeling sales platform is such a powerful tool for auto dealers: Rather than metaphorically tearing out the showroom floor and starting from scratch, predictive modeling is the next evolutionary stage of sales best practices that dealers have been developing for more than a century. It removes inefficiencies and automates costly and wasteful processes. Rather than replacing salespeople, it empowers them, giving them not just more information, but better information, along with suggestions on how to use it most effectively as part of their sales process to sell more cars every month.
Most importantly, in addition to making dealers more effective at conquest marketing and retaining the customers they already know about, big-data’s power in predictive modeling massively expands the pool of potential customers through analytics and artificial intelligence algorithms rather than costly and ineffective “spray and pray” marketing efforts. During times when fewer people are buying cars, it’s incredibly powerful for a dealer to be able to expand its prospecting through automated tools to identify and communicate with potential customers they’d never otherwise have found.
This all works because predictive modeling involves combining what we know about an individual to what we know about the behavior of people who are in similar circumstances. The more we know about the general wants, needs and behavior of the aggregate group, the better we’re able to predict what the individual is likely do to next in their buyer journey and what they’re likely to respond to.
How a Predictive Analytics Solution Helps Dealerships Succeed in a Flat Marketplace
Consider a bird hunting analogy: If you observe one bird on its own, your ability to predict what it will do and where it will go is limited, even if you’re an experienced hunter. If you expand your perspective so you’re watching a flock of birds, you’ll have much more information about where the group is generally headed and be able to predict any individual bird’s future path with more success. If you combine that real-time observation with research about what that breed of bird generally eats, where it nests and what its responses are to stimuli, you’ll have a high ability to predict any one bird’s behavior in the future even if you don’t know anything more about it than you would had you been watching it fly along by itself. With data-driven predictive modeling, you can plan for how to use your existing resources to successfully conclude your hunt – possibly by waiting where it’s likely to land, or by using the right decoy to lure it to you – with a higher expectation of success and with less wasted effort than otherwise.
Now, imagine you’re hunting to put food on the table, there are lots of other hunters in the woods and it’s starting to get dark and cold. That’s the analogy to where the automotive marketplace is right now, and that’s why forward-looking dealers are taking that next evolutionary step into predictive modeling.
If you’re making plans to compete and succeed in a flat marketplace and are interested in what the predictive modeling power of our new Market EyeQ sales platform could do to help your dealership evolve to meet those challenges, contact us to setup a sales platform demo today.
