Coming Buyer Information Boom May Refine Auto Dealers’ Strategy

A huge database that captures minute details of new-car purchases across the nation has been developed by J.D. Power & Associates and could do for car selling what supermarket scanner data have done for the packaged consumer goods industry.

Marketing experts consider the new system, which Agoura Hills-based Power & Associates calls the PIN database (Power Information Network), a potential giant step forward for the auto industry.

But consumer advocates, who also sounded warnings when supermarkets started collecting data about customers’ buying habits, say they will take a wait-and-see approach. They warn that the collection of information about consumers can make them more vulnerable to fraud.

Good or bad, though, the Power system seems here to stay. The giant marketing information firm began collecting the data five years ago and now has a network of more than 3,000 new-car dealerships supplying daily information about each sale. About 1,200 of them are in California, accounting for nearly a third of the state’s 3,625 new-car franchises.

Information gathered by Power is sold to dealers, auto makers and financial institutions, company spokesman Pete Marlow said.

The data, transmitted to Power by each dealer on a daily basis, come from the paperwork filled out in dealerships’ finance and insurance offices at the completion of the buying process.

Each transaction supplies more than 200 pieces of information--everything from the vehicle’s make, model, color and trim level to the purchase price, buyer’s address, down payment, amount financed and the interest rate on the financing. Even the dealer’s gross profit, the number of days the car was on the lot before being sold and the profit or loss the customer took on his or her trade-in is there.

“We are bringing the information revolution to the automobile industry,” said Jorge Silva-Risso, director of marketing science at Power and one of a handful of specialists worldwide in the collection and analysis of transaction-level data.

Consumers will benefit, he said, “because if the manufacturers can have a better understanding of what the consumers want, they will supply autos that better match [those wants]. And if manufacturers are using more sophisticated techniques to make decisions, this will begin building efficiencies into the system that could result in lower prices.”

John Bissell, managing partner of Gunderson Partners marketing consultants in Bloomfield Hills, Mich., agrees.

“One characteristic of the auto industry is that it has been pretty inbred and rarely looked outside for new ideas and people until just a few years ago,” he said. “This is another demonstration that there are major opportunities for the auto industry by glomming onto things being used in other industries.”

*

Auto executives have long held that their industry is unique and that cars cannot be sold like cornflakes or soap.

“But it is becoming clear that the same marketing principles do apply,” said Bissell, whose firm’s clients have included General Motors Corp. and Procter & Gamble Co.

Transactional databanks “are accepted marketing tools, all part of the information explosion,” Bissell said. “It is all related to target marketing . . . because what businesses want is more information about the customers they already have and more tools to help them use that information.”

Consumer advocate Jon Golinger said he has no problem with the idea, just reservations about the execution.

“Any data car makers collect about sales is fine--that’s their data. But anything they collect about their customers to use for something beyond record-keeping could raise problems,” said Golinger, Sacramento-based consumer programs director for the California Public Interest Research Group.

“Customers should at least know this information is being collected and used” for marketing purposes.

Officials at the Power organization say they have taken such fears into account. Although the information collected is on a sale-by-sale basis, all buyers’ names and other personal information is erased as soon as the data come in so that not even the Power analysts see it, spokesman Marlow said. No individual transaction information is sold. “It is simply not an issue.”

What may be an issue is how well Power can market the program.

“The information sounds very interesting, and it would be foolish to ignore it,” said Francie Rehwald, a general manager and marketing director at Santa Monica Mercedes-Benz dealer W.I. Simonson Inc. “It probably could help dealers refine their marketing.”

But some dealers say that although they need information, they aren’t sure more numbers would be very helpful.

“I already know what my competitors are selling,” said Jim Graham, owner of Santa Margarita Ford in Rancho Santa Margarita. “I’m more interested in knowing about my customers than other dealers’ customers.”

Instead of more numbers, said Kia Motors America spokesman Geno Effler, the auto industry needs more reasons. “We have all the numbers we can deal with. We know what’s happening. We need information that tells us why.”

Power and other marketing firms help provide that with customer surveys. Silva-Risso says the PIN data, even though it doesn’t provide for comments from the buyers, can help determine at least some of the “whys” by providing enough detail to permit answers to be deduced.

For example, he says, the Toyota Camry was the top-selling passenger car nationally in 1997. But in California, the top car was the Honda Civic.

Why?

Well, PIN data--among other sources--show that California has a higher-than-average percentage of young car buyers and a larger number of multicar households. Young buyers typically have less to spend (and the Civic is less costly than the Camry) and don’t need as much room (the Civic is smaller). And in multicar households, the second or third car often is an economy car.

So if Toyota wants to boost California sales, the Power data suggest, it needs to aim its marketing at converting potential Civic buyers into Tercel buyers--and perhaps redesign the Tercel to be a little sportier to appeal to a more youthful audience.

*

Silva-Risso says he’s not content with a database that forces users to do their own deducing and so now is developing a so-called decision-support system. It would let clients plug questions about marketing strategies into a software program that culls PIN data to spot trends and develop answers.

“Then, when a dealer or a car maker designs a marketing program,” he said, “it will be better tailored to what the consumer wants. We might have data that shows that in one region people have preferred direct rebates to reduced interest rates when they buy a car, and that will let them do a marketing program that is effective.”

Because the data come in daily, Silva-Risso said, Power can also supply trend information to car makers much faster than before, enabling them to cancel costly programs that aren’t working.

When Cadillac and Lincoln tried to move their customer bases into younger territory, he noted, Cadillac introduced the Catera entry-level luxury sedan and Lincoln the V-8 Navigator sport-utility vehicle.

“Cadillac found after a while that the Catera was attracting buyers in a similar age group to their traditional over-60 customers,” he said, “whereas the Navigator brought a lot of younger buys to Lincoln.”

Now Cadillac is bringing out its own luxury sport-utility, the Escalade, but it will hit the market two years after the Navigator.

“With the data we get in PIN, we can capture such trends immediately,” Silva-Risso said.