Certified pre-owned (CPO) vehicles continue to be big moneymakers for dealers. As reported in Manheim’s recent 2016 Used Car Market Report, CPO sales totaled a record 2.55 million units in 2015. That’s the fifth straight year in which sales reached a new high. According to NADA, the average used car sale delivers almost twice the gross profit as new – so it makes sense to keep those units flying off your lot. Yet as every dealer knows, CPO inventory is more unique and less commoditized than new. As such, you need a different strategy to attack the market and source, merchandise, and sell, the right vehicle to the right customer before your competition.
“The key is to take your own customer data and profile it against the market to uncover those "needle in a haystack" customer segments and get to them ahead of your competitors.”
A winning strategy is all about data. When you leverage the abundance of industry data and combine it with your own sales and inventory intelligence, you can create a hyper-personalized, hyper-targeted strategy for your dealership, your market, and your customers, to keep those CPO units moving off your lot. How do you get there? Start with the following steps:
- Dig into your buyer dynamics
“Spray and pray” blanket marketing campaigns are never going to work to sell more CPO units. The inventory is simply too unique and potential buyers too diverse. To prove this point, we recently profiled 100,000 new and used BMW and Hyundai buyers in four different markets (to remove any geographic bias). The results were eye opening. Among BMW buyers, men were more likely to buy used then women, and pre-owned buyers were younger than new buyers by an average of five years. Unsurprisingly, pre-owned buyers were less affluent, but their incomes were more highly concentrated, especially around the $35,000 – $100,000 range. Overall, BMW pre-owned buyers were far more demographically diverse than new buyers.
In contrast to BMW buyers, Hyundai pre-owned buyers looked very similar to new buyers, with some caveats. For example, on average used buyers were 5-10 years younger than new buyers. Used buyers were also more likely to be married and were more ethnically diverse. It’s important to note there were differences between the markets we studied for each vehicle make, even within new and used populations. This underscores the need for a tailored game plan for each dealership. The key is to take your own customer data and profile it against the market to uncover those “needle in a haystack” customer segments and get to them ahead of your competitors.
- Mine shopper intent
Once you have a handle on your overall market dynamics, the strategy shifts to a VIN-by-VIN battle plan: what to stock, how to price, and how to advertise. Because companies like vAuto have done a great job with data-driven stocking and pricing, we won’t spend time on those areas. Instead, let’s jump to shopper intent and how it influences advertising strategy. As most dealers know, a person’s interest or intent doesn’t necessarily match reality. A person with financing constraints may covet a new vehicle, but that doesn’t mean it’s going to happen. To get a true picture of your market, look online at search behavior at both a broad level (DMA) and an individual level (your dealership website). Mine full-text search data for insights into what vehicles are most in-demand and use that information to drive your stocking strategy.
- Create micro-targeted campaigns
Of course it’s not just about stocking the right vehicles – you have to make sure people can find them! Generally we see two kinds of advertising to spread the word: pull or push. Pull advertising is where most automotive digital advertising resides today. Pay-per-click and third party classified sites buy keywords on search engines, or run re-targeting ads based on some shopper intent, such as a Google search for “Used BMW X5 Boston.” Depending on a number of factors such as who’s bidding on that keyword, your ad may appear for someone to click. This advertising is only triggered when a shopper gives some sort of signal or “pull” for information, so it’s a bit more passive on your part. However, you’re likely to catch people who are “in market” because they are actively searching for a particular vehicle.
In contrast, push advertising defines most traditional advertising where a company is “pushing” an ad to a prospect whether they are interested or not. Push advertising can be very wasteful when you saturate a market because most people you reach don’t want to receive your message (just think of all the commercials on TV that you ignore because they don’t apply to you at all).
However, what people do respond to is personalized advertising where the message is very specific and relevant to their unique needs. In fact, the 2016 version of Deloitte’s New Digital Divide report found that 48% of shoppers and 58% of Millennials willingly share personal details to acquire better service or perks, or to receive more personalized emails with offers and recommendations. It pays to understand your market and tailor your advertising so people want to give you information. The key is to take the data you already have and turn it into personalized advertising to attract the right kind of shopper –then you will capture both sides of the push and pull coin.
CPO vehicles are hot and there’s no downturn in sight. With a data-driven mentality, your dealership can attack the market and beat out your competition. Success depends on uncovering buyer dynamics and customer intent to create a hyper-personalized, hyper-targeted strategy for your dealership that reaches the right customer, with the right vehicle, faster and more effectively than your competition.
