Tag: data-driven targeting

In the world of marketing, this can happen to all of us. We think we know how much ad spend we should put towards a PPC campaign or what time a TV ad should air. In this digital realm, dealers are given a lot of data when a campaign finishes. Technology has pushed our boundaries so now, someone looking at a video of a specific automobile on a social media platform like YouTube can be targeted to receive video advertisements for your dealership. With that said, how do you know if you are targeting the right people? When it comes to your campaigns, you want to know your money is going towards the right forms of advertisements as well as the right demographics. If a campaign is doing well, extending out that campaign can be a better decision compared to letting it end. On the other side, if a campaign is doing poorly, pausing or evening stopping the campaign can be more beneficial in the future. The big questions you must ask yourself are: Am I targeting the wrong people? There can be a few reasons why you may be targeting the wrong people. First, the type of campaign can be incorrect. Social media is the newest and hottest form of marketing, but that may not work with your audience. Second, your demographics may be off. Without knowing the key demographics that you are targeting, you could be blindly targeting customers not interested in your vehicles or not in the market. The opposite could be said for that as well. You may be leaving out potential customers in key geological areas around your dealership. Because of this, you could be losing sales. Targeting doesn’t just stop with humans. You must think about your location and what you have in your inventory. If you are in a state like Colorado, you will want to allocate more SUVs and vehicles that have all-wheel-drive. By advertising rear-wheel-drive or sports cars to individuals that exclusively drive SUVs or only research SUVs, that can be a loss of advertising dollars. What can I do about it? A revamped marketing campaign is a good start for a strategy, but it may not be enough. Targeting can be a difficult endeavor, but thankfully there are programs and companies that can help. Experian Automotive’s Dealer Positioning System® can target key ZIP Code™ and display which campaigns are working - as well as which should be cut. Thanks to this type of data-driven targeting, market share and sales can increase even while advertising spend decreases. Another great aspect of using a system like Experian DPS is the ability to create campaigns to target vehicles your customers want. Like the example above of what not to do, you can formulate a plan of attack to focus on SUVs and light-duty trucks in a mountainous area. Conquesting intelligently not only means more people coming through your door but more allocations for vehicles your customers will want. Marketing is important. Whatever kind of advertising you do, remember that building your dealership is important. Having a solid game plan to conquest around you relies on smart targeting and the correct forms of advertising. Experian DPS can help boost market share and increase sales core models which is very helpful. To learn more about how Experian Automotive can assist with your targeting, click here.

Many institutions take a “leap of faith” when it comes to developing prospecting strategies as it pertains to credit marketing. But effective strategies are developed from deep, analytical analysis with clearly identified objectives. They are constantly evolving – no setting and forgetting. So what are the basics to optimizing your prospecting efforts? Establish goals Unfortunately, far too many discussions begin with establishing targeting criteria before program goals are set. But this leads to confusion. Developing targeting criteria is kind of like squeezing a balloon; when you restrict one end, the other tends to expand. Imagine the effect of maximizing response rates when soliciting new loans. If no other criteria are considered, you could end up targeting high-risk individuals who cannot get approved elsewhere. Obviously, we’re not interested in increasing originations at all cost; risk must be understood as well. But this is where things get complicated. Lower-risk consumers tend to be the most coveted, get the best offers, and therefore have lower response rates and margins. Simplicity is best              The US Navy developed the KISS acronym (keep it simple, stupid) in the 1960s on the philosophy that complexity increases the probability of error. This is largely true in targeting methodologies, but don’t mistake limiting complexity for simplicity. Perhaps the most simplistic approach to prescreen credit marketing is using only risk criteria to set an eligible population. Breaking a problem down to this single dimension generally results in low response rates and wasted budget. Propensity models and estimated interest rates are great tools for identifying consumers that are more likely to respond. Adding them as an additional filter to a credit-qualified population can help increase response rates. But what about ability to pay? So far we’ve considered propensity to open and risk (the latter being based on current financial obligations). Imagine a consumer with on-time payment behavior and a solid credit score who takes a loan only to be unable to meet their obligations. You certainly don’t want to extend debt that will cause a consumer to be overextended. Instead of going through costly income verification, income estimation models can assist with identifying the ability to repay the loan you are marketing. Simplicity is great, but not to the point of being one-dimensional. Take off the blindfold Even in the days of smartphones and GPS navigation, most people develop a plan before setting off on a road trip. In the case of credit marketing, this means running an account review or archive analysis. Remember that last prescreen campaign you ran? What could have happened with a more sophisticated targeting strategy? Having archive data appended to a past marketing campaign allows for “what if” retrospective analysis. What could response rates have been with a propensity tool? Could declines due to insufficient income have been reduced with estimated income? Archive data gives 20/20 hindsight to what could have been. Just like consulting a map to determine the shortest distance to a destination or the most scenic route, retrospective analysis on past campaigns allows for proactive planning for future efforts. Practice makes perfect Even with a plan, you probably still want to have the GPS running. Traffic could block your planned route or an unforeseen detour could divert you to a new path. Targeting strategies must continually be refined and monitored for changes in customer behavior. Test and control groups are essential to continued improvement of your targeting strategies. Every campaign should be analyzed against the goals and KPIs established at the start of the process. New hypotheses can be evaluated through test populations or small groups designed to identify new opportunities. Let’s say you typically target consumers in a risk range of 650-720, but an analyst spots an opportunity where consumers with a range of 625-649 with no delinquencies in the past 12 months performs nearly at the rate of the current population. A small test group could be included in the next campaign and studied to see if it should be expanded in future campaigns. Never “place bets” Assumptions are only valid when they are put to the test. Never dive into a strategy without testing your hypothesis. The final step in implementing a targeting strategy should be the easiest. If goals are clearly understood and prioritized, past campaigns are analyzed, and hypotheses are laid out with test and control groups, the targeting criteria should be obvious to everyone. Unfortunately, the conversation usually starts at this phase, which is akin to placing bets at the track. Ever notice that score breaks are discussed in round numbers? Consider the example of the 650-720 range. Why 650 and not 649 or 651? Without a test and learn methodology, targeting criteria ends up based on conventional wisdom – or worse, a guess. As you approach strategic planning season, make sure you run down these steps (in this order) to ensure success next year. Establish program goals and KPIs Balance simplicity with effectiveness Have a plan before you start Begin with an archive Learn and optimize In God we trust, all others bring data

For an industry that has grown accustomed to sustained year-over-year growth, recent trends are concerning. The automotive industry continued to make progress in the fourth quarter of 2016 as total automotive loan balances grew 8.6% over the previous year and exceeded $1 trillion. However, the positive trend is slowing and 2017 may be the first year since 2009 to see a market contraction. With interest rates on the rise and demand peaking, automotive lending will continue to become more competitive. Lenders can be successful in this environment, but must implement data-driven targeting strategies. Credit Unions Triumph Credit unions experienced the largest year-over-year growth in the fourth quarter of 2016, increasing 15% over the previous period. As lending faces increasing headwinds amid rising rates, credit unions can continue to play a greater role by offering members more competitive rates. For many consumers, a casual weekend trip to the auto mall turns into a big new purchase. Unfortunately, many get caught up in researching the vehicle and don’t think to shop for financing options until they’re in the F&I office. With approximately 25% share of total auto loan balances, credit unions have significant potential to recapture loans of existing members. Successful targeting starts with a review of your portfolio for opportunities with current members who have off-book loans that could be refinanced at a lower rate. After developing a strategy, many credit unions find success targeting these members with refinance offers. Helping members reduce monthly payments and interest expense provides an unexpected service that can deepen loyalty and engagement. But what criteria should you use to identify prospects? Target Receptive Consumers As originations continue to slow, marketing response rates will as well, leading to reduced marketing ROI. Maintaining performance is possible, but requires a proactive approach. Propensity models can help identify consumers who are more likely to respond, while estimated interest rates can provide insight on who is likely to benefit from refinance offers. Propensity models identify who is most likely to open a new trade. By focusing on these populations, you can cut a mail list in half or more while still focusing on the most viable prospects. It may be okay in a booming economy to send as many offers as possible, but as things slow down, getting more targeted can maintain campaign performance while saving resources for other projects. When it comes to recapture, consumers refinance to reduce their payment, interest rate, or both. Payments can often be reduced simply by ‘resetting’ the clock on a loan, or taking the remaining balance and resetting the term. Many consumers, however, will be aware of their current interest rate and only consider offers that reduce the rate as well. Estimated interest rates can provide valuable insight into a consumer’s current terms. By targeting those with high rates, you are more likely to make an offer that will be accepted. Successful targeting means getting the right message to the right consumers. Propensity models help identify “who” to target while estimated interest rates determine “what” to offer. Combining these two strategies will maximize results in even the most challenging markets. Lend Deeper with Trended Data Much of the growth in the auto market has been driven by relatively low-risk consumers, with more than 60% of outstanding balances rated prime and above. This means hypercompetition and great rates for the best consumers, while those in lower risk tiers are underserved. Many lenders are reluctant to compete for these consumers and avoid taking on additional risk for the portfolio. But trended data holds the key to finding consumers who are currently in a lower risk tier but carry significantly less risk than their current score suggests. In fact, historical data can provide much deeper insight on a consumer’s past use of credit. As an example, consider two consumers with the same risk score at a point in time. While they may be judged as carrying similar risk, trended data shows one has taken out two new trades in the past 6 months and has increasing utilization, while the other is consolidating and paying down balances. They may have the same risk score today, but what will the impact be on your future profitability? Most risk scores take a snapshot approach to gauging risk. While effective in general, it misses out on the nuance of consumers who are trending up or down based on recent behavior. Trended data attributes tell a deeper story and allow lenders to find underserved consumers who carry less risk than their current score suggests. Making timely offers to underserved consumers is a great way to grow your portfolio while managing risk. Uncertain Future The automotive industry has been a bright spot for the US economy for several years. It’s difficult to say what will happen in 2017, but there will likely be a continued slowing in originations. When markets get more competitive, data-driven targeting becomes even more important. Propensity models, estimated interest rates, and trended data should be part of every prescreen campaign. Those that integrate them now will likely shrug off any downturn and continue growing their portfolio by providing valuable and timely offers to their members.