Best PracticesDealership Operations & Processes

Avoid The Averages Because They’re Costing You MONEY!

Countless decisions get made every day in dealerships based on averages. Popular examples include market day supply, average retail price, average days on lot and average wholesale price. Too often we trust these numbers (simple averages) as if they are the be-all end-all.

After doing something for so long, we begin to take it for granted. We assume the numbers must be right. But what if we’re wrong?

  1. If all dealers use the same numbers, how do you avoid becoming average?
  2. What if these averages have been misleading us the whole time?

In our latest research paper, we dig into these issues. We start by highlighting the underlying problem of applying simple averages to a broad range of numbers. Then we delve into the most common and misguided number used by the industry – Market Day Supply (MDS.) The data shows, and the science of averages confirm, that this number is as accurate as flipping a coin.

Finally, we’ll highlight an alternative approach to using the wealth of data generated every day about the automotive markets to help you drive better acquisition and pricing decisions.

To learn more on how averages are costing you profit, download the latest whitepaper from CarStory here. It’s a quick and simple read that will provide answers while helping you avoid a race to the bottom.

Chad, navigating through all of today's different inventory metrics is no easy task for dealers. For so long we trusted only our gut (we often still do) to help us make important decisions that have a direct impact on the bottom line and our paychecks.

With technology we are provided a significant amount of market data that allows us to make more educated decisions based on our local regions and markets. But all to often, as you point out in this whitepaper, in order to comprehend and make use of the data, the math behind it results in simple averages. There are TOO MANY variables in this industry to base decisions on averages.

The only time I consider the average is if and when it highlights the positive or helps cushion the negative. ;-) Averages rarely provide you with THE REAL ANSWER. How does one take immediate action on the average?

In this whitepaper you/CarStory provide some clear examples on why and how dealers should avoid the averages and start relying on solutions that take a more intelligent approach while taking into account every variable available.

Also - I see you will be speaking at the next AutoVate conference next month (November) -
Great points Jeff! The idea of using data to support our intuition is talked about in the book Thinking, Fast and Slow. One of the pieces of research they share is how reviewing an increasing amount of data incorrectly builds our confidence in a decision. There is a limit to what the human brain can process. It's part of the reason we all rely on intuition to make decisions every day.

The good news is that with today's technology there is a better answer. Computers can process loads of data, without biases, and do improve with more inputs - both in accuracy and confidence.

I'm looking forward to speaking at Autovate next week. I'll be digging into this topic and will also be joining Russ Lemmer from Dealerware to talk about how our partnership is breaking new ground between the connected car and predictive AI.
Here is the full video from my discussion on this topic at Autovate.