The concept of equity mining isn’t new, as dealerships have been using the practice as far back as 2015. If your dealership doesn’t employ this practice, it’s time to consider its potential benefits. How should you create a strategy for equity mining and use it to your advantage for your fixed operations and service departments?
What Is Equity Mining?
First of all, what is equity mining? Data mining is the practice of using artificial intelligence to analyze gathered information to identify potential customers. Equity mining is a subsection of data mining. For a dealership to practice equity mining, it needs accurate records of existing customers with positive equity in their vehicles. These are customers who are in a solid position to trade their vehicle in for a new car. Dealerships target these owners because they can offer attractive financing terms while also generating a profit from the trade-in.
Benefits of Equity Mining
The most significant benefit of equity mining is the potential to increase profits in multiple dealership departments from a single sale. For example, converting a single previous customer could benefit the retail, leasing, used car, service department, and/or finance departments. This translates to increased sales across the board departmentally from a single re-engagement initiative.
Additionally, equity mining generates leads from an existing customer database. This generates a significantly better ROI than generating leads from new customers. It can cost up to five times more to convert a new customer versus retaining an existing one.
Finally, contacting existing customers qualifies as a personal touch point. Vehicle owners appreciate the customized experience. They also appreciate the thought of getting a special rate or deal that isn’t available to everyone. This leads to a better overall experience, which can help boost the dealership’s CSI score.
Limits of Equity Mining
The biggest drawback of equity mining is that it is only as effective as you make it. If a dealership doesn’t have high-quality or robust data, then there isn’t enough for the algorithm to analyze. Likewise, if the analytical software isn’t set up correctly, valuable data goes unanalyzed or evaluated incorrectly.
Additionally, having customers trade in cars that contribute to service revenue may decrease. However, this cost is usually offset by the profits from selling a used vehicle.
Developing a Strategy With Parts Delivery
With equity mining, you can retain the exact same customer base while adding to your monthly sales. An established dealership is leaving money on the table when they don’t utilize its established customer base for equity mining. Parts delivery software may be a key tool in your equity mining strategy. By keeping a record of what parts are being delivered (and when), you may get a better understanding of the opportunities your dealership has for equity mining. Furthermore, if you keep this record by vehicle or owner, you have even more data to inform you of the right opportunity with the right customer at the right time.
Start your free trial with parts delivery software and start gathering the data you need to begin your equity mining strategy.