This is a transcript of MM Podcast Episode 020: Using Technology To Increase Profit On Used Car Sales With Mike Williams.
Welcome to episode 20 of the Motorcar Marketing podcast. In this episode’s main segment I’m going to be talking with Mike Williams from Black Book. Black Book collects data on the automotive industry and uses that data to power a variety of applications. It’s got some really interesting things to say on the used automotive market and offers some great tips for how dealers can make more profit from their used car sales so stay tuned for that.
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A couple of quick notes. Any websites or links that I mention in the podcast can be found on the website in the show notes. I also publish a transcript of every episode in case you’d rather read a show or looking for something later on. You can find all the podcast show notes at www.motorcarmarketing.com/podcasts and then just look for episode 20.
We recently put together a free guide for car dealers called The Quick Start Automotive Dealer Marketing Guide. You can get it by going to motorcarmarketing.com/guide. It’s completely free. You just put in your email address and the lessons will be emailed to you over the course of the next few days. We try to concentrate on the high-leverage things you can do with each marketing channel so you get the maximum results in the shortest amount of time. We’ll be adding more lessons to this guide in the future, but to start out, we’ll show you how to increase your ROI and sell more cars on craigslist, how to quickly set up a Google Pay Per Click campaign, how to begin generating leads from local search engine optimization and how to effectively use email marketing to generate leads and correspond with your past customers. Again, this guide is completely free. Just go to motorcarmarketing.com/guide. So now let’s get into the main segment today. I’ll be talking with Mike Williams from Black Book. Here is the interview.
Ashley: Welcome, Mike, to the Motorcar marketing podcast. I really appreciate you coming on the show.
Mike: Well, I appreciate you having me.
Ashley: So to start out, I wonder if you can give us a quick overview of your career and how you got into the automotive business.
Mike: I started out at the auction level when I came to the States from Japan in 2001 and got involved with online sales, grew in that role with a former company and we went from a good 8,000-unit to 80,000 units in a couple of years so it really showed there is a lot of opportunity in technology and remarketing. I really started to feel that was my calling, started to get into more of the analytic side of it and that eventually brought me over to Black Book. Really that’s a pretty concise statement but one where I had the joy of interacting with a lot of the auction industry, a lot of the manufacturers and across-the-board dealers.
Ashley: Do you have some sort of a background in statistics because it seems like that’s kind of at sort of the core of what Black Book does.
Mike: My forte is really with the technology and we have great teams here at Black Book headed up by Anil Khalil doing some amazing work with the statistics. I personally have been a part of in the past, but my passion is really the technology and trying to find new ways to leverage it.
Ashley: I found you after reading an article that you wrote about ways for dealers to sell more pre-owned cars so let’s start out by talking about some specific ways that dealers can earn more from their pre-owned sales and I think that will segue nicely into what your company does. So first, maybe you can just tell us where do you see the health of the pre-owned car right now?
Mike: Well, it came back to the statement of when I started it online. There are a lot of comparisons to the past, the present, and where we’re going. I’ve seen our current state being almost referred to as an opportunity similar to what the Internet was just starting out with dealerships and starting to sell online. We now have a whole different view that’s parallel to that in the actual pre-owned inventory and starting to leverage some of that as opportunity. The transparency that we have now also on the consumer side and the dealer side in wholesale is something we’ve never had before to this level. So to really push this retail unit and this news unit, it’s getting harder and harder to make the profits that you used to. Whereas, as we went along cars became scarce on the use side and that was the biggest challenge and now we’ve got leases coming back. You know, I think 900,000 leases coming back this year. So now inventory is now a problem. The problem is more matching the inventory with the demand and the location. So I like to say that dealers are more informed than ever just as customers are. The dealers have an amazing wealth of information at their disposal. I don’t know that all of that has been realized yet.
Ashley: You know you talk about the transparency end for buyers on new cars. Do you think that same transparency will eventually catch up to the used market as well where the buyers will have a better understanding of how much these dealers paid for the cars?
Definitely. I mean, it goes hand in hand with the notion of how such information is and how important that is. Going back ten years ago you could get away with having information on values and vehicles that was a month old whereas now exchanging daily, sales results are impacting it quickly and those markets are much thinner than they used to be so whoever’s got the right information at the right time tends to be the one that’s maximizing.
Ashley: So let’s talk about just some sort of tips for dealers to increase profits on pre-owned cars. Maybe you could outline a solid strategy for dealers to drive more profit through their pre-owned inventory.
Mike: I think it really comes down to which type of dealer and the scale. You’ve seen a lot of new car dealers start to get into used space more and more. I think the ones that are, are utilizing probably some of the best strategies right now. They’re identifying what the demand is in a given region that they play in and they’re identifying units based on that. One of the biggest tricks in handling the trade-ins first is acquiring inventory so in the past dealers were just left with whatever came in and was traded in. They would try to unload it. They have a time frame that they were working within, and if they couldn’t, then they would send it off to auction and hope that [inaudible 0:07:35.3]. Now we’re at the point where there are a lot more people looking for those used cars and the technology is allowing them to reach out and have a wider map. So if I can just outline the strategy per se, the first one is identify the best place to buy the car. In this case if you’re going to auction, know which auctions are hot, which are not. Where can you get that inventory for the best value at that moment. Take advantage of the technology. All of the platforms that are out there now are allowing buyers to access more inventory than ever, and as we used to say, it’s a white Torus model. They’ve gotten very good at describing and giving condition reports on these vehicles so more times than not, what the description is saying about that car it is the real description so you can have some faith in it. In this case though, every opportunity in every dealing with somebody that you’re acquiring the unit from online gives us an opportunity of building that relationship of trust the same way dealers used to in the lanes. So in this case as they build up that trust or if they’re going to have access to more and more inventory, it becomes a social aspect to the dealer. It’s really then a new version of the old where they’re meeting up, they’re talking. They’re cutting deals in the parking lot. In this case, though, this yields the ability to take advantage of some of the virtual inventory, things like that so I’ve seen dealers now that will actually post inventory on their site and it’s not even theirs yet, with the opportunity to sell it. So some platforms are allowing that already where you can show inventory to a potential buyer, match them up to a given vehicle and then behind the scenes take advantage of it with the other dealer and sell it. The biggest thing you have to keep an eye on, those numbers can swing 200 or 300 dollars on a given day depending on how big the sales are on that day so that cuts into things a lot. Once you have an inventory, you also have to be cognizant of all those related expenses, transportation, etc. so having something in hand that gives you almost like calculations is pretty important.
Ashley: So what you’re talking about is listing cars on your dealer website that you may not have an inventory but the store across town who you have a relationship with has, is that what you’re talking about or are you talking about maybe services that are pooling these inventories and then you can draw the inventory out of this database?
Mike: No, actually there are services out there but you can also have trade network where you are sharing inventory through services, and you can present inventory whether it be like an LVE or something like that. There are retail views that you can show vehicles that aren’t yours yet. They have an opportunity to get the car but also to sell the car and really lock in a deal that they own the car.
Ashley: So let’s talk about you said for dealers to figure out where the best place to buy cars are, let’s kind of dig into that and talk specifically about what that means. How do dealers figure out where the best place is, where are the hot auctions? What are the auctions they should be attending. How can they actually get that information?
Mike: I always say information and opportunity go hand in hand and planning is number one. In this case having the tolls like a demand index or something that tells you what date the turn is on a given vehicle goes a long way so that now we can use those national or regional catalogs to look through, find the price point that you need on the vehicle that batches and go after it. So a lot of it, just like traditional wholesalers, it really is about planning and doing your homework. In this case you need to identify either the location or the vehicle and then match them up to the right place at the right time. I think that’s one of the challenges. Obviously we have some tools to help with that, but I think knowing what’s going on in different regions, knowing which cars are selling the fastest right now makes a big difference. Turn a car in 30 days vs. 60 days, that’s important.
Ashley: And then, I mean, don’t be afraid to talk specifically about some of your services because I would be curious to hear what is your service that actually does that?
Mike: I mentioned the demand index is a good example. The demand index actually assigns a score to a vehicle for a given area so in that case if I’m looking at whatever—2009, I can actually through the app look at different areas and see how fast they’re selling in different areas. So in this case a Ford in Georgia is not the best car in the world to move, but in California it is. That’s an extreme example but probably a good example would be all-wheel drives vs. non-all-wheel drives, if you’re trying to sell an all-wheel drive in Florida, you’re not getting the same dollars you will in West Virginia. Again, to market to those areas you have to start to leverage those nontraditional networks.
Ashley: So one of those things—I kind of went to your site and was looking at some of the various services you guys offer—one of the things that occurred to me was there is probably since you guys are—you know—collecting all this data, there have got to be some stats that sort of stand out to you and maybe if the dealers knew these stats, it could really help them. A couple of examples is like what are the best areas? Where are people getting the most for cars. I mean, Southern California is a big market. I’d just be curious to know if there wasn’t some standout markets that prices are very depressed and prices are very elevated.
Mike: You know, in all honesty, you can’t pick out number one and the last but every region has their standout units. That’s where we try to help and partner with those dealers, both individually and through our various software to find out what’s hitting in each region and to branch out a little bit. Maybe a Formatic is $550. Ben’s maybe doing great in Pennsylvania and is doing terribly in Florida. Time of year, seasonality, this is where the way I say it is, we have an editorial team of guys who do all the work that the dealer would if he had the time. They’re doing the homework to help figure out what is and what isn’t at any given moment, but we’ve been through some turbulent times the past couple of years with it. Now I think it’s stabilizing as a whole, and to be honest, it is a pretty wild picture. Like we should probably develop a map for one of these next articles to actually show which vehicles are hitting the most in each area.
Ashley: I think that would be just good information for dealers to have and certainly would be with the data you have you could probably supply something like that. So let’s talk specifically about Black Book. Maybe you can give us just the two-minute elevator pitch on what you guys do and highlight some of the actual services that you offer.
Mike: Really, as a high-level overview what are we doing as a whole? [inaudible 0:15:50.4] trying to do insight vs. information? In this case it’s all well and good to know what the price of a car is, but what can I do with it? Where can I do that? And how can I do it faster. As I like to say, we didn’t invent the calculator; we just made it so that you could use it faster. If they’re lucky to do things on the fly and you’re out and about and leverage that in real time, that’s kind of I think a boon to dealers in the past couple of years. For us in the mobile place, an example is when I’m at an auction, I can pull up in and I will have literally ten to fifteen pages of information about that vehicle—everything from specs on the car to trending on that present vehicle vs. other segments—wholesale, retail, trade-in values, and I can do this all the way back to 1981 vehicles. That’s an amazing amount of information to have at your disposal. On the go to have that, that’s like having the biggest automotive library in your pocket.
Ashley: I’m curious. How do you guys collect your data and keep all of your information fresh?
Mike: Well, you know, it’s a combination. I already mentioned the editorial [inaudible 0:17:15.0] and that’s one of our secret sauces. We’ve got experts in this phase that are constantly reviewing trend action data from upstream sales, auctions, a variety of sources that way. Really probably the simplest way of saying it is we have a tremendous amount of transactional data that comes in. We filter it—again, there’s always garbage in, garbage out when you look in your data. That will skew the averages, and we’re making adjustments to it on a daily basis.
Ashley: I wonder if you could give us one last tip before we go. With all of this information, it won’t be long before essentially every dealer that’s at auction has this app and is using this information. When that happens—and it’s probably already happening at certain auctions, how can you get ahead of the competition. What’s sort of the next step one step ahead once everybody has access to all of this great data?
Mike: Again, somewhat where we’re going is communication, team communication from the field to home base but also aiding in doing that homework ahead of time because you never want those auction buys to be an impulse buy or a passion buy. Auctions are built on emotion and when you’re able to take that emotion out of the game and to come into it with a clear concise plan on your day, you’re going to come out ahead. So that’s probably the biggest thing. For us we’re constantly looking for efficiency. Sometimes efficiency is not the most utilitarian aspect of any design. A good example in this case is when you’re at auction, now every outlet has a Venn scanner on it. You have eight different guys trying to scan one bin, they’re bumping into each other, the cards are moving, it’s not only a dangerous prospect but it’s also a bit cumbersome and by the time you get your information, you may have missed the vehicle completely given the average 40 seconds. In this case we’re looking at opportunities there where we can mimic the information that you would get scanning the vehicle coming in. So more or less we’re a big part of that. Having that information and being able to schedule out your day ahead of time and comparatively shop for vehicles, that’s going to be a big one.
Ashley: That’s a great tip for sure. Mike, this has been really informative. I appreciate your coming on the show. What’s the best way for people to keep up with you and potentially contact you if they want to learn more about your service?
Mike: I’ll definitely go to blackbookmodel.com. There is good information there and all the contacts are on there. We’d love to hear from everyone.
Ashley: Perfect. I will link that up in the show notes. Once again, Mike, you’ve been very generous with your time. I really appreciate this. This has been very informative.
Mike: Thanks for your time.
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On the next episode of the motorcar marketing podcast, I’m going to be talking with Glenn Pasch. Glenn is the CEO over at PCG Digital Marketing, and they offer a variety of marketing services to auto dealers. We’re going to be talking about leadership in automotive dealerships. PCG Digital Marketing offers a host of training services to all the different positions in an auto dealership so we’ll be discussing the various training materials as well as offering us some specific advice for pretty much every position in an auto dealership. So keep an eye out for that in the next episode.
That’s our show. I hope you got some value out of it.. It can help you grow your business. Thank you for listening.