The April 2012 issue of AutoSuccess Magazine featured a column written by Dealerslink® Senior Sales Executive Travis Wise: “What Your Dealership Can Learn From Baseball’s Underdog”.
In it he explains why you should be running your dealership like a professional baseball team, and the meaning of the word sabermetrics. If you missed the print edition you can read it online here.
Sabermetrics: What your dealership can learn from baseball’s underdog Before Oakland Athletics General Manager Billy Beane led his cash strapped team to the2002 American League playoffs his critics claimed “… by the very nature of their enterprise they cannot ever win a playoff series.”
As one of the poorest franchises in Major League Baseball, Beane couldn’t afford to pay top dollar for top players. And even when the A’s were able to grow their own talent they couldn’t afford to keep those players on the roster. Beane couldn’t match offers made by richer teams like the Red Sox or Yankees.
Unable to hold on to his quality players, Beane nevertheless built up a team that was able to compete with franchises that consistently outspent them. He was able to do this by following through on an insight that baseball’s insiders had known for years but willfully ignored: no one inside the game actually knew how to identify quality talent. Beane built up the Oakland squad through a systematic analysis of player’s statistical performance. He ignored the advice and input of his scouts and manager and focused on the data. (The story is chronicled in the book Moneyball, which has also been made into a movie.) This process of statistical analysis is known as sabermetrics, from the acronynm for the Society for American Baseball Research.
Baseball, possibly more than any other sport, is obsessed with player statistics. Beane’s insights were not particularly innovative- he was not himself a statistician but a former player. In fact, the ideas he put into play had been around since the late 1970s. Number crunchers outside the game had already discovered that batting averages and home runs had no correlation with on-base percentage and points on the board. Paying millions of dollars for an all-star player did not help win games.
Beane changed the game because he was able to identify players who were undervalued and assemble them into a winning squad, all on a shoe string budget. We are living in the era of big data. The internet has forced many industries to adapt to the new status quo. Those industries that don’t adapt are in the process of dying off. The auto industry is no exception.
The automotive industry has already seen the digital revolution bring about new efficiencies. Everyone is running a computer based DMS now. CRM, Market Analysis, Online Sourcing, Lead Generatrion, Payrolls, Financing, Vehicle History Reports, credit checks, etc. – these chores are now digitized, automated, and painless.
The new century has also changed how we access information and what we do with it. • Your customers don’t need to walk into your dealership to shop for a car. (When they do how do you find them what they want?)
• Your customers have access to the same book data you do, and they know what to expect to pay for a car.
• Your competitors don’t have to spend time and money at the auction to stock up on inventory. They can buy online, just like your retail customers.
• You can determine exactly how much money you lose on a unit every day it sits on your lot.
• Your dealership performance data and reporting is increasing but your sales grosses are diminishing.
It’s difficult enough keeping up with the pace of change, but keeping up is no longer sufficient. The dealership that succeeds in the 21st century will be the dealership that utilizes and understands every scrap of available data.
Embrace technology, but understand that technology by itself cannot make decisions for you. You still have to take command of the information and use it to improve the profitability of your business.
Identify the partners that return the most value to you. Technology is filled with promises and jargon. Don’t assume the latest and greatest service is doing anything useful. You have to think clearly about how your available tools benefit the business. The consumer economy, while recovering, is not as robust as it once was. But the available technology tools today are more robust than ever, attempting to take the guess work out of running your business. You can no longer rely on ambiguity or tolerate inefficiency- the new economy is too fast and too precise. When the data is available, right under your nose, there is no excuse for not using it.
Billy Beane changed baseball. We know his name now only because he was the first in his business to actually use the information others had ignored. But as soon as he did, every other Major League Baseball team followed his lead.
To learn more about Dealerslink®
CONTACT: Travis Wise at 877-859-7080 x302 travis.wise@Dealerslink.com
