Drive away with bigger market share

Manheim runs more efficient, profitable auctions with help from SAS®

Automotive remarketer Manheim successfully realigned and transformed its business, increasing its share of the dealer market significantly over a two-year period. SAS® Analytics guided the successful realignment and is helping the company find other ways to be efficient.

Manheim is the largest remarketer of vehicles worldwide, auctioning 10 million vehicles a year. It also publishes the Manheim Market Report and the Manheim Used Car Index – both leading benchmarks of used vehicle prices. Awash in data, the company wanted a better way to integrate, analyze and exploit it. With prior positive experiences using SAS Analytics, Manheim’s Glenn Bailey, Senior Director of Operations Research, decided to expand Manheim’s use of SAS, adding SAS/OR® to optimize business processes and SAS® Enterprise Guide® to make it easy to use SAS in a Windows environment.

"SAS is best in class in terms of statistical procedures. We can focus on the insight and the predictive capabilities rather than on writing our own code,'' Bailey says.

We can focus on the insight and the predictive capabilities rather than on writing our own code.

Glenn Bailey
Senior Director of Operations Research

Getting to know Manheim's customers

The company's auction customers vary from large, high-volume, multi-site dealerships to small firms that specialize in used cars. Manheim wanted to better understand its customers so it could know what other services to offer – such as post-auction refurbishment. "It makes sense to offer a value-add service to dealerships that best fits their needs and business model,'' explains Bailey. Manheim also looks at which dealers are interested in online auctions, which prefer to buy and sell in-lane at an auction, or use a third party. "With SAS, we now understand that each customer segment has a distinctly different need,'' Bailey says.

Understanding the marketplace

Moving 10 million autos a year gives Manheim data that helps it discern everything from the ideal price for a red pickup sold in New England to the potential upside of a dealer paying to ship a luxury car to an auction farther away. The sales price data is shared through the Manheim Market Report (powered by SAS) and, Bailey believes, helps dealers manage their inventories more effectively. The data on topics like the value of moving luxury cars to a more lucrative auction becomes a key selling point Manheim uses to attract dealers to place vehicles in their auctions. "We've discovered that a luxury vehicle might sell better online, because it is a national market. The cost of transporting a vehicle doesn't have as high an impact (on profit),'' explains Bailey.

And since the market for used cars shifts rapidly (interest in high-fuel-efficiency vehicles soars when gas prices go up), Bailey needs to be able to craft models quickly and frequently.

Realigning the way it does business

When company executives wanted to realign and streamline the way Manheim deals and runs auctions, Bailey's group provided the necessary analysis to make the realignment a success. Before the move, Manheim auctions worked independently of one another, so dealers would sometimes get calls from multiple Manheim reps trying to sell them on the value of a specific auction.

Realigning to create defined geographic markets and then assigning reps to specific dealerships was a high-value, but potentially difficult, proposition. The company didn’t want to do anything to alienate customers, such as assigning them to one region when they historically used an auction in a different region. Manheim also did not want to create unbalanced or overly large territories that deterred its reps from providing consistent, high-quality service. Without using SAS, Bailey estimates it would have taken two analysts a couple of days to draft a realignment plan for just one sales territory. With SAS, he says, “It took several minutes.’’ This rapid optimization capability allowed managers to evaluate multiple scenarios in order to select the set of business rules that best matched customer needs. The realignment’s success is substantial: A 17 percent two-year increase in the share of the dealer market Manheim commands and a 15 percent year-over-year increase in dealer volume.

The company further uses SAS to help predict which auction resources can be effectively allocated by analyzing the data of customer buying and selling behavior by segments and auction location. “We forecast auction volume at an individual level and at a broader level. We’ve also used SAS to make projections on where the market is going and for budgeting purposes for the finance department.’’ Once again, Bailey says the speed of working in SAS brings tremendous value to the business. “It’s not like you have to spend a month working on the model and then it’s out of date a month later. As with optimization, in forecasting you have a fast, accurate model-results-feedback cycle that the business can leverage very quickly.’’

Looking to the future

Bailey says SAS is successful for his company, in part because management can understand exactly what goes into a model – and Bailey’s group can refine it to meet their needs. “Whether it is the CEO or the head of marketing, whoever it is, understands how the model is working,’’ Bailey says. “They can come to us and say, “Can you consider this?” “What if you add this?” With that confidence, Bailey’s group is now using SAS to help with the company’s Growth Strategy Initiative.

Challenge

Needed to quickly analyze and model large volumes of data about the 10 million cars it auctions each year and the thousands of dealers that use its services. Needed to realign its dealer network to improve performance.

Solution

Benefits

Increased dealer market share by 17 percent over two years and increased dealer volume by 15 percent year to year.

The results illustrated in this article are specific to the particular situations, business models, data input, and computing environments described herein. Each SAS customer’s experience is unique based on business and technical variables and all statements must be considered non-typical. Actual savings, results, and performance characteristics will vary depending on individual customer configurations and conditions. SAS does not guarantee or represent that every customer will achieve similar results. The only warranties for SAS products and services are those that are set forth in the express warranty statements in the written agreement for such products and services. Nothing herein should be construed as constituting an additional warranty. Customers have shared their successes with SAS as part of an agreed-upon contractual exchange or project success summarization following a successful implementation of SAS software. Brand and product names are trademarks of their respective companies.

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