Connected Podcast Episode 42: Data Mining vs Equity Mining

“Hi, I'm Jessica Rudnicki with Reynolds and Reynolds. Welcome back to Connected. Today I'm talking to Hayley Holmes, product planning manager at Reynolds and Reynolds, about data and equity mining and how dealers can use these strategies to sell more vehicles. Let's get connected.

Hi, Hayley. Thanks so much for being here today.

Hi, Jess. Thanks for having me.

We are glad to have you, and I'm looking forward to today's conversation because you're here to talk about data mining versus equity mining. And I'm hoping you can walk me through, and the viewers, through the differences in the two disciplines and how each practice can help dealerships sell cars. Right. That's what they're in business to do. So, Hayley, can you start by laying out the basic definitions and uses of each type of mining?

Sure. So let's start with equity mining. Oftentimes, equity mining is looking at your current customer database and evaluating how much equity a customer currently has in their vehicle. That means you can be looking at where they are at the life of their loan and comparing it to how much the vehicle is currently worth. A lot of times this is used to determine which customers may be looking to upgrade into a new vehicle. On the flip side, with data mining, you're going to still be starting with your customer database, but then we're going to be looking at additional data besides just the equity position. You're still going to be looking at maybe who's ready to buy or even based on different life circumstances that might make somebody in the market to buy. You're able to do this with database mining by adding demographic data, behavioral data, and also transactional data.

OK. That's good to know. I had kind of an idea of what equity mining was, but it's good to know that with data mining, like you mentioned, behavioral transactional data is all included in that. So thank you for explaining that. I feel like I have a little bit of a better grasp on the two now. And in terms of using the information that's collected, whether that be through data mining or equity mining, is there anything that dealers should be focusing on or any common errors that you see? How can dealers best use these strategies to sell cars?

Well, first, with the equity mining piece, oftentimes dealerships are using equity mining to only find customers that are in a positive equity position. This can be a big miss because oftentimes customers with negative equity might be just as likely to purchase a vehicle as somebody with positive equity. There might still be something going on in their life where they need to upgrade into a new car. On the database mining piece, we want to make sure that you go in depth and you have a broad amount of different data to really get an idea of what those customers are doing, who is likely to upgrade, and really, what are they likely to upgrade into? You want to establish an overall strategy so that way you are able to recognize different trends in the market and what the customer is likely to do next.

Yeah, that makes sense. So, Haley, if I'm a dealer, should I be looking into data mining or equity mining, which do you think is going to help me sell more vehicles?

Really, what I would think is it's going to be the combination of the two. You're going to use the equity mining piece to really get an idea of where the customer currently is in the life of their loan. What type of financial situation they're currently in, which is going to help you then upgrade into a new vehicle and be able to structure that new deal. But to really identify which customers are best, we really should be using the data mining piece to really get an idea of what's going on in their life. What are they likely to upgrade into? Maybe they just want to trade in the vehicle to get it off their hands. Maybe they need a newer model because they just want the newest tech. Or maybe they need a different model altogether because of life's circumstance. And we see this often, you know, someone maybe has a sedan and further down the line, they see they need something that's a little bigger, has more space. So an SUV might be a better fit. Regardless of what the customer's needs are or their wants really to be able to analyze all of this data and all the demographic, behavioral and transactional data that plays in with that equity position, you really need some type of robust predictive analytics engine to take in all of this information.

Yeah, it's a lot of data. And that's definitely something for dealers to keep in mind. Thank you, Hayley, for educating us on that. Is there anything else that you would like to share with the audience today while we have them?

Yeah. So really, you know, why is it important and why does this matter right now? Equity and data mining. And really, it's going to be most important when you're looking at allocating the right inventory to your current customer database and your customer base overall. This can also mean targeting certain customers that have a vehicle that will be a desirable preowned unit for your pre-owned inventory. That often means that it's maybe a more recent model year with less mileage and all the times we see that those customers actually are in a negative equity position. So that's why it's important to use both the equity and the data mining together as one to get a good idea of what inventory is best for you and your customer database. Take a look at your mining efforts, though, and really determine which category you're going to fall under. Are you maybe only using the equity piece or the data piece? And determine where you might be missing out and where you could improve.

Yeah. Very insightful. Well, Hayley, it's been a pleasure. Thanks again for being here today.

Thanks for having me.

Thanks again to Hayley for joining us today. We hope you were able to get a few takeaways from the conversation. Before we hop off, just a quick reminder, you can watch or listen to past and future podcast episodes on YouTube, or Apple and Spotify podcasts by searching for the Connected podcast. Subscribe on these channels to get notified every Wednesday when new episodes are released. Thanks for joining us. We'll see you next week.”