The 7 KPIs to track in order to maximise used-vehicle business
In a time when the internet is rapidly and profoundly changing the used-vehicle business, most professionals will agree that data-driven insights are crucial to drive that business forward. But which key performance indicators (KPIs) should you monitor, and which insights do they provide?
There is so much data out there – not to mention analytic tools – that there is a very real risk of 'analysis paralysis', says Jörg Höhner, Global Managing Director of Indicata, the provider of business intelligence and analytics for used-car operations, part of the Autorola Group.
In an enlightening webinar, Mr Höhner last week zoomed in on which KPIs used-vehicle sellers need to track in order to maximise their business. “They need to answer two fundamental questions: What goes on in the business? And how do we improve their performance?”
Mr Höhner warned not to confuse KPIs with metrics: “Metrics are anything you can measure. KPIs are the metrics that matter for the success of your organisation. They measure the progress you make towards key business goals. A big danger are vanity metrics: easy to measure, easy to improve, but not well aligned with your business goals”.
According to Indicata, picking the right KPIs can make the difference between “dazzling success and stunning failure”. And the 7 KPIs to monitor are:
→ Stock turn
→ Market days supply
→ Inventory age
→ Price to market
→ Pricing strategy
→ Share over first price to market
→ Number of photos
“Stock turn – basically, the amount of time that passes before the same money is used to buy another car – is the most important, and the most ignored KPI. Our benchmark is that you should have a stock turn about 9 times per year”.
Mr. Höhner went on to detail benchmarks for the other KPIs, and list some of the frequent strategic mistakes that hurt profitability in used-car sales. “For example, pricing vehicles too low, which can result from the failure to realise that the supply of that particular model is relatively low”. And thus, demand is relatively high.
Intriguingly, there is a very precise sweet spot for the last KPI on the list: “Don't put as many pictures as possible up. The ideal is nine pictures”.