By Ian Sherr and Mike Ramsey
Ford Motor Co. wants to read car buyers’ minds.
A fantasy? Maybe. But by mashing together large databases and analytical algorithms, the Dearborn, Mich.-based auto maker may have achieved the next best thing.
About three years ago, Ford began offering a system to dealerships that reads the dealer’s inventory, checks national and local supplies of vehicles, interprets buying trends and makes recommendations about what vehicles the dealer should stock—for example, three Ford Fusions with blue paint and specific types of engines.
The result has been significant. Ford vehicles are sitting on lots for fewer weeks, and the prices consumers are paying are rising. The increase in “net pricing,” or the price a consumer pays minus a subsidy from the manufacturer, has been a driving force behind Ford’s big surge in profitability.
“Making sure the inventory matches what the customer is looking for is really critical,” says John Ginder, manager of system analytics and environmental sciences in Ford’s research and advanced engineering division. “The dealer makes a major investment every time he or she orders a vehicle—there is a long lead time in getting a vehicle, and if the vehicle is ordered in a fashion not popular with customers, it can sit on the lot for months.”
(Published March 7, 2013, in the Wall Street Journal.)