How Car Dealers Can Avoid Data Pitfalls

LOS ANGELES – Modern car dealers depend on data, and the National Automobile Dealers Assn.’s Eric Dreisbach is all for that. But he warns of pitfalls.

“What do we use data for?” he says. “To make better decisions.” But keep an open mind and be on the lookout for misleading information issues, says the NADA Academy instructor.

One of them is quantification bias, or valuing the measurable over the unmeasurable, even though the latter may be more important, consisting of such vagaries as human feelings.

“No data sources can quantify emotions, but emotions trump logic,” Dreisbach says at the Thought Leadership Summits’ Auto CX Analytics & AI Summit here.

“How’s this relate to car dealerships?” he asks. “Dealership employee turnover on average is about 80% for salespeople and 49% for service advisers. For parts managers it is 15%; they stick around. That is great data, but it points us into asking why.”

Dreisbach, the son of a dealer, speaks of another information trap to avoid: confirmation bias.

That’s the tendency to interpret new evidence to confirm existing beliefs. He cites this example, “If you believe left-handed people are more creative, and you meet a left-handed creative person, it confirms your opinion.”

Progressive dealers use Big-Data-driven predictive analytics software that forecasts the likelihood of someone purchasing a vehicle, and when. That’s useful, but Dreisbach says, “Human decisions evolve, algorithms may not,” unless machine learning and artificial intelligence are involved.

He advises distinguishing between real metrics and so-called vanity metrics. The latter are measurements such as the number of website visits or sales leads. He says they don’t necessarily correlate to what really matters: the cost of getting new customers, lead conversions and ultimately profits.

“One dealer’s vanity metric is another dealer’s actionable metric,” he says.

He points to the flaw of tracking leads-to-sales conversions without also tracking the cost of leads and the number of “ups,” or customer traffic in general. “It’s not just sales conversions.”  

The sheer vastness of data in a typical dealer’s customer-relationship-management system “can be overwhelming,” he says.

“Look at stuff that’s not adding value, and remove it,” he advises. “Concentrate on what adds value.”