Data Innovation That Drives Bottom Line Results
Monday April 10, 2023
By: Brad Phelps, Senior Director of Data Strategy
“Innovation is seeing what everyone has seen and thinking what no one has thought.”
-Dr. Albert Szent Gyorgyi, Nobel Prize winning biochemist.
Everyone knows that good data informs better decisions. In parts one and two of our DRiVEQ blog series, we described the difference between data that drives a single intelligent decision vs. repeated, industry leading decisions. In the automotive industry, truly innovative solutions leverage broad, deep, and current data to facilitate connections across typically unconnected areas. In doing so, these data-driven solutions lead to increased sales, increased profits on each sale, or reduced business risk.
In part three of our DRiVEQ blog series, we will explore several examples that highlight how Cox Automotive’s Relentless Innovation with data is leading to truly remarkable results for the automotive industry.
Delivering personalized online car buying
80% of consumers now think it’s a good or great idea to buy a vehicle entirely online1, and the automotive industry has exploded with various tools to assist dealerships in digital retailing. However, many of these tools only enable consumers to start their purchase online — consumers must still go to a dealership to review/sign a large stack of papers before completing the process. Cox Automotive determined that buyers who completed most of their purchase process online still spend 2 hours and 25 minutes in the dealership.2 Further, key opportunities for the dealer to match a consumer to the best financing or after-market opportunities aren’t optimized in most of these digital retailing solutions. Dealerships still rely on F&I Managers to help consumers navigate financing solutions – and the best F&I profit opportunity for the dealership.
To help solve these problems, Cox Automotive created Esntial Commerce solution, which uses Artificial Intelligence and Machine Learning to enable the first end-to-end consumer car buying experience. For example, Esntial Commerce leverages personalization to help consumers find the right vehicle for them. It leverages millions of potential payment calculations and reviews tens of thousands of financing offers to tailor payment terms for each consumer. And its AI model examines hundreds of thousands of after-market transactions to offer customized options for specific consumer, vehicle, and deal structure combinations. Esntial Commerce also offers tremendous benefits to dealers by creating labor efficiencies, increasing deal profitability, and enhancing the overall online car buying experience for customers.
Since its release, 98% of consumer reviews have rated dealer ecommerce sites powered by Esntial Commerce as 4.9/5 stars, indicating enthusiastic consumer satisfaction.3
Maximizing profitability from trade-ins without the risk
Historically, the automotive wholesale auction and consumer-facing retail markets have been quite distinct. While many dealers actively worked in both markets by accepting trade-ins from consumers and buying/selling vehicles at auction, the two markets operated separately, and technology solutions were almost always focused on serving customers in one market or the other. Also, it was important to manage risk when playing in both markets because prices don’t always move in tandem, meaning dealers could get caught when prices dramatically dropped in one market, but not the other. To address this risk to dealers, Cox Automotive created a ground-breaking, data-driven innovation called Upside.
Backed by deep Cox Automotive data science and a portfolio-based approach to managing risks and returns, Upside provides dealers the baseline wholesale value for a vehicle based on Cox Automotive data when they acquire it. Upside then guarantees dealers a minimum profit above the Kelley Blue Book Instant Cash Offer when they use the solution to sell the vehicle. If a vehicle’s sale at auction achieves more than the minimum guaranteed amount, dealers get the lion’s share of the upside. If a vehicle’s sale does not achieve additional profit, Upside covers the loss. This low-risk solution is made possible because Cox Automotive has real-time, industry-leading market data from all corners of the wholesale and retail markets.
“The power of Upside is that it solves the biggest pain points at every step of the process—from trade-in to wholesale disposition for sellers, and from bidding to purchasing for buyers,” added Zach Hallowell, senior vice president, Manheim Digital. “It’s the industry’s only actual win-win for both sides of the wholesale transaction.”
Creating more confidence in electric vehicles
As electric vehicles begin to comprise a meaningful and rapidly growing percentage of the vehicles on the road, it is important to understand differences between these vehicles and traditional ones and to provide solutions that support their unique characteristics. A key aspect of electric vehicles is that their battery health is fundamental to proper maintenance and residual value, and thus to successful fleet management.
Based upon Cox Automotive’s vast reach in the automotive industry, we are collecting robust amounts of battery data, even as electric vehicles still represent a small but rapidly increasing percentage of vehicles on US roads. This includes intelligence from Manheim, the largest wholesale network in the US, from Autotrader and Kelley Blue Book, leading consumer listings and valuation sites, and from Spiers New Technologies, the leading end-to-end provider for battery lifecycle management.
This data combined with industry-leading battery diagnostic capabilities are enabling Cox Automotive to embed electric vehicle specific information into our wide portfolio of products and services. For example, we are enhancing our valuations suite of solutions so that our values for electric vehicles leverage this deep battery health expertise and set the foundation for the industry standard in EV valuations. In the future, a fleet owner transitioning to an increasingly electric fleet could know the optimal time to replace current vehicles with newer ones that have healthier battery packs. An OEM transitioning to electric vehicle production could predict EV model residual values, which depend substantially on battery deterioration.
In summary, the automotive industry is advancing at an accelerated pace, from electrification to over-the-air vehicle upgrades to an increase in mobility through shared vehicles and expanded fleet ownership. Nearly all these changes include enhanced digitization, leading to tremendous opportunity for those companies that can effectively utilize the new data generated. Developing significant innovations requires the ability to leverage broad, deep, and current data and to connect data from traditionally un-connected areas. It’s not easy. However, it can lead to highly valuable solutions that power continuous decision-making and real bottom-line business results. With our data intelligence engine, DRiVEQ, Cox Automotive is leading the way with in-market innovations like Esntial Commerce and Upside as well as other innovations on the horizon, such as a market-leading Battery Health Score. Connecting our data in new ways allows us to innovate for the future of the industry and the continued success of our clients.
Learn more about DRiVEQ and how Cox Automotive’s ecosystem of solutions utilize DRiVEQ to create efficiencies across the automotive vertical, delivering bottom-line benefits to our clients – from OEMs and lenders to dealer groups, technology partners and consumers.
Sources:
- 2022 Cox Automotive Digitization of End-to-End Retail
- 2022 Cox Automotive Car Buyer Journey
- Consumer Reviews posted to Google, Facebook and Autotrader from consumers that purchased from a retailer’s ecommerce site. March 1 – November 8, 2022.
About Brad Phelps
Working within the Cox Automotive Data Solutions center of excellence as a Senior Director of Strategy, Brad’s focus is utilizing his 25 years of Operations and Strategy experience to advise senior leaders on the most strategic ways to leverage our data assets. Brad’s teams provide industry-leading blueprints for licensing Cox Automotive’s data to clients and partners, acquiring data from other industry partners and building innovative solutions. Brad holds a Bachelor of Science in Civil/Environmental Engineering from Duke University and currently resides in Atlanta, GA with his wife and two kids.