Driving dealer profitability with data

Auto dealers’ margins are under more pressure so the need for good information to control business performance has never been higher. Conall Lavery, CEO & Co-founder at Real World Analytics reveals how dealers can benefit from a cloud based business intelligence solution.

Why do you think that the interests in finding a data analytics solution have recently come to the fore?

The automotive dealership business is going through one of its greatest periods of change. Buyers have become savvier through the use of the internet, but sales and marketing costs have not come down accordingly. The manufacturer expects the same or more investment in showrooms which has put the squeeze on profitability. The last two to three years have been challenging for new car sales and the COVID-19 emergency is going to change many things in the automotive industry forever.

Auto dealers’ margins are under more pressure so the need for good information to control business performance has never been higher. Good information is one of the key tools employed by management. The standard reports from the DMS fall short of dealers’ needs. They have been pressurising their DMS supplier to improve their reporting for many years and most have given up and resorted to building their own. They spend a great deal of time generating their own reports from the DMS. These have improved things but still fall short of their requirements, often due to not been able to bring in third party application data.

Business Intelligence (BI) solutions promised to be the answer, but previous approaches have underdelivered. However, with the advent of Big Data tools coinciding with new disruptive internet technologies has enabled software companies to build cloud solutions. Progressive dealers have discovered Cloud solutions to be cost effective, work out of the box, and are quick and easy to install. They have found that they continue to grow with their changing needs.

What are the challenges you have seen for dealers to get business insights out of their own data from DMS?

Most dealers generate reports from their DMS systems, and many of these are useful but they don’t provide all the answers. They generally attempt to build their own solutions with spreadsheets. The first challenge is about extracting the data from their own DMS, some suppliers charge more than the customer likes to pay and they can be slow to provide the service. Once they have the data it requires a big collation effort from a number of people in the business from the sales, aftersales and the accounting functions. If someone is missing due to holidays or illness there can be gaps in the reporting. Spreadsheets are not reliable; it is easy for a link to get broken or for an Excel formula to get corrupted. Sometimes the reports don’t agree with each other because they are measuring slightly different things which is not appreciated. All these issues cause a lack of trust in the reports and decision making is delayed or some decisions don’t get taken at all.

We occasionally see a slightly better solutions whereby the dealer has set up automated extracts from their DMS to a database and have built reports using automated queries. These do a good job of overcoming the shortfall of the DMS, but they typically do not automatically import important data from other applications such as Showroom, CRM, VHC etc. So, they attempt to do these reports in spreadsheets which brings them back to square one – reports with gaps that can’t be fully trusted.

It is very difficult for dealers to bring all their information from multiple sources into visualised, easy to read executive dashboards that are drillable to all levels. The tools that do this are complex and the skills difficult to acquire. But this is what they need to improve their operational efficiency and business performance.

On that note, what’s the typical solution?

If dealers bring the problems mentioned above to a BI consultancy supplier, they will suggest a traditional on-premises BI solution. However, these solutions normally require a six figure to seven figure sum level of investment. They require substantial senior management time and internal IT resources to manage and support the project. So, most dealers cannot afford these on-premises BI solutions, perhaps it is only for those with annual sales in excess of £1B.

The delivery for an on premises BI solution is measure in many months and it is not unusual to see them take up to two years to fully deliver. They are very costly to maintain as future changes and improvements involve management time and more development costs from the supplier.

How does your solution work?

We have built a traditional BI solution, but we have put it in the cloud. This takes away the cost and complexity of building your own. We pull data nightly or more often from multiple sources; DMS, budget sheets and other third party data into visualised dashboards with KPIs and actionable insights. These dashboards are drillable by outlet, franchise, new cars, used cars, parts & service, and the information can be accessed anytime, anywhere, on any device. We know it is very important that each team member at each level within the business has the right information at the right time to do their job. Real World Analytics’ (RWA) solution automatically delivers report packs to each person’s inbox to enable them to take timely actions.

It works out of the box and is installed in a matter of two to three weeks. It takes up very little of the customer’s management time and only a little of their IT resources.

What tips you would give to dealers when choosing
their BI solutions?

There are several fundamental requirements we believe are critical when dealers evaluate their potential reporting solutions. Firstly, they have to be able to integrate with third party applications, not just the DMS. Secondly, the best solutions will also need to be co-developed with the dealer based on their own business needs and requirements.

Thirdly, many solutions provide dashboards and KPIs to give an overview of the performance. These are important; however, the dashboards should be drillable by job function so that each person at each level can get the right information to do their job. Not everyone will need a login, but they need to receive information at the right time in the correct format. The reports need to be tailor made for each user and the delivery needs to be automated, people are often too busy to go looking for information.

Finally, the solution needs to be secure. It needs to be designed in a way that protects personal data and commercially sensitive information. A data privacy breach can come with a fine of up to €20m or 4% of global annual sales, whichever is the larger. Ideally, the service provider will be ISO 27001 certified. Theses suppliers will have policies, processes and technology to handle your company’s personal and commercially sensitive data. You shouldn’t take their word for it either, you should ask hard questions and build into the agreement that you have the right to audit their solution
at any time.

What prevents people from tackling this problem?

Some of the barriers we have seen come from the perception of traditional BI solutions. For instance, dealers believe a BI project will take up a lot of their time and internal resources. Some dealers would have the perception that the cost of implementing a BI solution is very expensive and carries a high risk of failure.

However, with an agile solution built and delivered in the cloud, these challenges are met. RWA’s customers only pay for it as they go along so it’s not a big capital cost, which reduces the risk and delivers a faster return on investment. RWA do all the hard work for their customers from the start and work with them as the needs grow and evolve.

What are the benefits your customers usually see after adopting your solutions?

The first thing they mention is transparency. Without transparency there is a lack of accountability, and stuff just does not get done on time and properly. RWA’s solution delivers transparency and accountability. It’s a cliché, but like most clichés it is true; “What gets measured, gets done”. The next thing they mention is that they get rid of the time and hassle of producing their own reports. They also like that the information is accurate and consistent across each role and levels – RWA call this “One Version of the Truth”. Customers like the way RWA are so keen to help them to continuously improve their reporting. The return to the bottom line is many times the multiple of its cost.

Once a customer has installed your solution, how are new ideas from the customers handled by your product management team?

Each customer has a Customer Success Manager (CSM) appointed to them. The CSM’s job is to help the auto dealer become more successful. RWA’s customer success managers also fulfil the role of product manager. As they work with the customer on a daily basis, they already understand the customers’ business, so their new requirements are clearly understood and accurately fed back to the development team. RWA’s solution is built on agile tools; there isn’t a need for intensive software development which means new reports and modules are turned around in days and weeks,
not months.

As this is effectively a community system these new ideas are delivered to the other customers. This means best practices across the industry are collated into the solution which in turn increases the return on investment for each customer.

Pictured (l to r) Real World Analytics co-founders John Hogan, chief data scientist and Conall Lavery, CEO