Bank robber, Willie Sutton when asked why he robbed banks stated flatly,

“Because that’s where the money is.” Good answer. The car business has forever been changed by the Internet. The customer has the invoice, trim levels, and can even quote sales word tracks. On any new car the customer comes with a wealth of information and the strategy to sell and satisfy this customer has brought a revolution in how car dealers do business. Generally selling new cars is not so much about profit than making manufacturer defined sales goals and the associated bonus structure.

Profit Center

Pre-owned vehicles are a different animal. The customer may still have information but not specifically. The buyer doesn’t know how much profit there is in the individual car, and this fact levels the information playing field a bit. Pre-owned inventory is a profit center for the dealership. Is every deal a home run? Hardly, but in the aggregate the pre-owned inventory provides the dealership and the sales team the opportunity for profit. The pre-owned sale is not bounded by customer service surveys or volume goals. This is the sale in its truest form: a car, a customer, and a salesman

The Art

A great Used Car Manager is worth his weight in gold. They have mastered the art of pricing, inventory, and finance. They know what the customer is looking for and the "sweet spot" price that will bring them in and get the deal financed. This is the essence of business intelligence: multi-variate analysis to understand and control markets. What the great Used Car Manager does can be approximated in the main by Business Intelligence. 

The Method

In any metropolitan area there are markets where a Honda will sell better than a Toyota and vice versa. Where white economy cars with less than 30K miles stay on a lot for 7.6 days. This is the game: miles, brand, color, price, competitor's inventory, and time on the lot. These are the factors that data mining and other Business Intelligence tools use to understand the market. 

The Example

Our Great Used Car Manager knows that June is high school and college graduate month. He realizes that if he mirrors the new car inventory that sells; i.e., economy cars with great gas mileage that mom and dad think are practical he can switch from new to used easily. This mirroring allows him to get a sale with more profitable units. Business Intelligence extends his ability to take a good idea, mirroring the new car inventory with pre-owned, and strengthen the model using definable metrics. If our Used Car Manager knows what new cars will "switch" to a used and what are the first, second, and third choices of the customer he can build an inventory that grows profit and successfully wins business from competitors.

To continue with our example, a customer comes in on a new Volkswagen GTI for his son.  Unfortunately the price he is looking for is not available on any new GTI. Business Intelligence tells the Used Car Manager that new GTI customers will switch to a used Mini Cooper S with less than 30K miles with a high probability if a pre-owned GTI with the same price and miles is not available. The Used Car Manager buys the right number of pre-owned GTI's but also includes a few Mini Cooper S models that have a high switch probability. He does this with all his pre-owned inventory and the average time on lot decreases by 3 days per unit. He develops a decision tree for each new car switch and his profit increases by 20%. 

Break The Bank

What does the customer want? Our great Used Car Manager has twenty years of experience to answer that question. That's a lot of years to answer a question. Business Intelligence builds a model based on the Used Car Manager's experience and method. Build the model and break the bank.

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