Q:
What is the Power Information Network (PIN)?
PIN is a unique,
nationwide data collection system that aggregates daily new- and used-vehicle
transaction information from more than 7,500 automotive retailers
nationwide.
PIN provides
a unique opportunity to understand the dynamics of each vehicle purchase.
It allows manufacturers and retailers to see what programs are most
effective and which combination of vehicle pricing and incentives
are optimum for increasing sales, reducing costs and improving profit
margins.
For the first
time, the industry has a complete picture of the competitive environment.
PIN data gives manufacturers, suppliers and retailers the ability
to compete more effectively and efficiently in the marketplace by
understanding the factors that influence consumer behavior and by
adapting their distribution, supply chain and marketing and advertising
plans accordingly.
Q:
How many markets does PIN represent?
PIN represents
retailers in over 22 major metropolitan U.S. markets that collectively
represent more than 70% of all national light-vehicle retail sales.
PIN compiles data on more than 300,000 transactions per month in these
markets.
Q:
What kind of information does PIN collect?
PIN transforms
more than 200 individual customer data collection points—demographics,
vehicle transaction information, finance and insurance data, and sales-related
information—into modeling data that is used by automotive manufacturers,
suppliers and retailers. Conceptually, the system is similar to the
retail scanning system in the packaged goods industry that collects
consumer transaction data to analyze purchasing habits, control inventory
and reduce costs.
Q:
When was the first commercial adoption of PIN data?
The first entity
to utilize PIN data (1997) was General Motors' California Marketing
Initiative (CMI), a skunkworks operation located in Thousand Oaks,
California.
CMI—which
went on to develop the GM BuyPower online retailing effort—made
use of PIN data to better configure new vehicles and develop leasing
programs for the highly competitive California marketplace.
In addition, CMI
used PIN data to analyze brand loyalty and explore conquest and defection
rates.
Q:
How does PIN work and where is it currently in use?
Currently, more
than 7,500 dealerships in 22 major U.S. metropolitan markets participate
in the PIN program.
Dealers who participate
in PIN provide daily consumer transaction-related information through
software installed on the dealership's computer system.
This data is sent
automatically, via satellite, each night to PIN headquarters where
it is verified, cleaned and analyzed.
Reports are generated
and sent to participating dealers each week showing the retailer's
performance compared to the overall market; new- and used-vehicle
sales; finance and insurance data; new-and used-vehicle inventory
information; and other market intelligence.
Q:
How do vehicle manufacturers use PIN data?
Manufacturers
use PIN data in several ways—to determine how consumers respond
to varying levels of new-vehicle pricing and to understand how price
changes affect demand. PIN data is also used to evaluate the short-term
effect of changes in pricing to handle over- or under-supply situations
at the national and/or regional level.
Consumer response
models
PIN data can also
be used to build consumer-response models to determine the impact
of new product introductions, major redesigns, and changes in option
package content and pricing, and to understand pricing models of the
competition.
Predict cannibalization
PIN data is used
to gain insight into patterns of inter-brand competition and understand
how sales increases for one model will affect the sales of a similar
model within the same brand (cannibalization).
Determine the
proper mix of build combinations
PIN data allows
manufacturers to determine the proper mix of vehicle configurations
and build combinations, to assess brand loyalty and to understand
brand conquest and defection rates.
Through this near
real-time data, manufacturers and retailers get a clear picture of
which vehicles are in demand in a particular geographic region and
are able to build or transport vehicles to those areas.
Q:
What are the benefits of PIN data?
Identify inefficiencies
PIN data allows
manufacturers and retailers to identify inefficiencies and reduce
vehicle distribution costs—vehicle transportation, logistics
planning, dealer floor planning and inventory for new and used vehicles—that
can result in significant savings to both manufacturers and retailers.
By better matching
supply and demand and avoiding excess inventory, retailers and manufacturers
save money on floor planning and other inventory costs (i.e., vehicle
maintenance, cleaning, etc).
Timely used
vehicle data
PIN data
helps retailers understand the used-car market by identifying the
prices their competitors paid for trade-ins. In doing so, a retailer
can stock an adequate supply of vehicles that are in demand in that
local area and avoid spending money to support an inventory of vehicles
that are not in high demand.
Finance data
PIN data allows
financial institutions to compare the products and market penetration
of the competition; monitor market share by brand and track residual
values; and understand competitive information such as rebates, loan
terms, leasing rates, annual percentage rates (APR), average down
payments and monthly payments.
Optimize vehicle
ordering
PIN data allows
retailers to optimize vehicle ordering; reduce inventory levels; determine
market pricing for trade-ins; monitor used-vehicle ROI in the local
market; compare financing products of captive vs. non-captive lenders;
evaluate gross profit margins, measure the effectiveness of local
marketing and advertising efforts, and monitor sales of the competition.
Identify trends
earlier
PIN also
provides an early warning of price softening or a decline in certain
market segments by measuring the turnover rate—the number of
days required, on average, for a particular vehicle to sell. With
accurate information on retail transactions, vehicles that are popular
in a particular region can be readily available for consumer.
Q:
Why was PIN developed?
It is estimated
that there is approximately $100–$120 billion of inefficiency
within the automotive distribution system. Distribution costs—which
account for nearly one-third of the cost of the average vehicle—include
sales and marketing, contests and incentives, model mix management,
inventory, warranty, transportation and dealer costs, among others.
Also included
is approximately $40 billion for incentives and rebates, $15 billion
for advertising these incentives and driving traffic to retailer locations,
and an additional $50 billion in finished goods inventory.
Manufacturers
spend billions of dollars annually providing incentives to encourage
the purchase of new vehicles. Since automotive manufacturing is based
on a "push" marketing model, manufacturers build vehicles
according to projections of increases based on historical sales information.
PIN data allows manufacturers and dealers to employ a "pull"
model, in which consumers are attracted to dealers' locations because
the vehicles they want are available and the make and model mix closely
match consumer demand.
Nearly all manufacturers
offer some form of incentive to consumers and their dealers—lower
APR financing rates, cash-back rebates or a combination of both. Incentive
planners measure the effectiveness of previous incentive programs
to determine which offers might have the greatest impact on sales
volume. In doing so, they use a combination of intuition and experience.
The reality however, is that competitors usually match each other's
incentives or special financing rates.
Previously, there
was no way to determine which of two or more options would have the
greatest impact on sales—would it be better to offer $1,500 cash
back or a subsidized (lower) APR rate? Prior to the development of
PIN, there was no scientific way to measure the efficiency or the
impact of varying levels of financial discounts or special financing
rates. Now, manufacturers can get near real-time data that allows
them to determine the effect of different incentive programs.
PIN data allows
manufacturers to accurately assess the effectiveness of incentives
and provide more cost-effective programs to stimulate sales. In addition,
PIN data helps manufacturers determine which combination of incentives
is most effective and helps them target marketing and advertising
efforts to specific consumer segments to stimulate sales in diverse
geographic areas.
Q:
What does PIN allow that couldn't be done before?
Prior to the establishment
of PIN, there was no standard data collection system across all brands
in the automotive industry. Each manufacturer has its own proprietary
system for sharing information among channelsÑmanufacturers, suppliers,
and dealers. In many instances, because of the lack of hard data,
anecdotal information is used to make important financial decisions.
Without a scientific
process for measuring incentive program effectiveness, money is wasted
because incentives are required to move inventory from a market situation
where supply exceeds demand to where demand exceeds supply. Holding
and moving excess inventory is inefficient and very expensive.
With PIN's data-modeling
capabilities, clients are able to run their operations more efficiently
saving millions of dollars in incentive spending while increasing
sales volume and market share. By examining consumer response to various
programs and price points, manufacturers are able to implement programs
that increase sales. With PIN data, manufacturers gain a deeper understanding
of the relationship between their products and competitors' products
and gain the ability to adjust their incentive spending and pricing
strategies in order to respond to short-term competitive actions.
PIN data also
creates more choices for consumers. By better matching vehicle supply
with local demand, consumers have more choices among the vehicles
popular in a given area. With PIN information, manufacturers get the
near-real-time data they need to adjust production schedules and deliver
vehicles to locations where demand is highest. With PIN information,
retailers control and reduce inventory costs by eliminating the need
to stock unwanted vehicles. This reduces retailers' financing costs
as well as the expense of maintaining and cleaning vehicles while
they sit on dealers' lots.
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