“Over the last five years, Kelley Blue Book has really gone through a significant transformation in terms of how we look at data analytics,” said Dan Ingle, the company’s vice president of analytic insights and technology. “Over the last five years, the company has figured out that we’re an information company. We’re a data company.”
That’s no small shift for the 85-year-old firm. For most people, Kelley Blue Book is, or has been thought of as, a publishing company. Specifically, the company has been publishing its guide to used and new car values since 1926.
But by the 2000s, Blue Book sales began to drop, and the company needed to find new ways to create revenue and compete with new online rivals. That’s when the company decided to make a strategic shift, Ingle said. As he tells it, Kelley Blue Book came to the “realization that data is a product for us, not just a byproduct.”
Overhauling KBB’s data management infrastructure
With reams of data on new and used cars, Kelley Blue Book turned to data analytics to make better use of it. The first step was updating the company’s data management infrastructure. Until then, the company’s appraisers collected data by hand, in notebooks, and faxed the information back to headquarters, where it was keyed in to a rudimentary database system, Ingle said.
“From a data management perspective, the big challenge for us was figuring out what data we own and what we can use,” he said. “A lot of data management challenges raised their heads pretty quickly.”
The company performed an audit of its data, including clickstream data collected from its KBB.com website, and began to collect third-party data as well. It invested in a Netezza TwinFin data warehouse appliance to collect, integrate and house the data, as well as BI and data analytics software from MicroStrategy and SAS Institute to make better use of the information.
KBB uses data analytics software to stay competitive, improve services
From there, the company began to explore the ways that data analytics could help to improve its existing services. By integrating third-party data and automating data integration, for example, the company was able to refine its car value estimates on KBB.com more quickly and more accurately than ever.
“The fact that we can value vehicles faster, update quicker, with more accuracy, that’s been huge for us,” said Ingle, who gave a presentation on Kelley Blue Book's experiences at a TDWI Solution Summit on analytics held in San Diego last month by the Data Warehousing Institute.
Kelley Blue Book is now also looking for ways to monetize its new data analytics capabilities. For example, the company has created a tool designed to help car owners determine the best time to sell. The tool uses historical data to estimate when a particular car make and model will need significant repairs. If a particular type of car usually needs a new water pump at a certain mileage mark, the owner may want to sell it before reaching the mark, Ingle explains.
Or say the radiator usually needs replacing at a certain point in the life of the car at an average cost of $2,500. “Depending on how much you owe on the car, it might be better to [sell] it,” Ingle said.
Kelley Blue Book is also looking at adding a widget to its website that will forecast likely car prices over a three-month period so potential buyers can time their purchases to the lowest price. Another tool under development would help buyers understand how much negotiating room they have with dealers based on recent sales of similar cars in the same geographic region, Ingle said.
The bottom line for Kelley Blue Book is that data analytics has the potential to create new sources of revenue, which it will need to stay competitive with online rivals such as Cars.com.
“Given the amount of competition in the market now, Kelley Blue Book would definitely be on the decline from a market share and consumer mindshare perspective” if not for data analytics, Ingle said. “As we go forward, we are going to have to compete on analytics. That’s how we’re going to maintain a competitive advantage.”