CarMax Drives Performance With Analytics
CMO Jim Lyski is revving up business value at CarMax by using analytics to bring personalization to life.
CarMax CMO Jim Lyski has a straightforward strategy for demonstrating the power of analytics to his marketing team: “Once they see the initial results, they get excited. Nothing is more exciting than winning.” Lyski used that show-and-tell approach during a string of victorious marketing-leadership stints at The Scotts Miracle Grow Company, Cigna, FedEx, and Nationwide Insurance prior to joining CarMax. Since taking the marketing helm at the nation's largest retailer of used cars in August 2014, Lyski has put his analytics pedal to the metal as part of managing all of CarMax's marketing functions, including advertising, brand management, consumer insights, public relations, creative, and strategic direction.
What's your marketing passion?
I love all aspects of marketing. I find it highly engaging that it's part science, part art, part people, and part strategy. In the past decade I've put the greatest emphasis on analytics. And my current passion is leveraging analytics to drive business value.
When did you become hooked on analytics?
The light bulb went off for me when I was a young marketer with FedEx. At the time we were transforming from a product-centric organization to a more customer-centric organization. That effort included segmenting our customer base, and I was the first marketer to have the chance to lead our new small-business segment. One of the first things we looked at was our sales costs. We discovered that our average sales call cost several hundred dollars. That was almost identical to the average profit we earned on small-business customers.
What did you do?
We ruled out sales calls as a way to influence our customer base. We started getting into direct- response marketing: direct mail, telemarketing, etc. We also started building models: a look-alike model, a performance model, a profitability model, and then a lifetime value model. We kept getting tighter and tighter on our modeling, and we made a killing as a result. We more than doubled our small-business segment in just over two years. We really moved the needle. I thought: This is awesome! It was all about model development, stimulus response, and measurement. That's when I got totally hooked on analytics.
Tell us about CarMax's current markets and growth?
We reach about 63% of the U.S. population right now. We have some big markets that we've yet to enter, including Boston, Seattle, and San Francisco. Our existing stores are very large in terms of their size. We've developed smaller-footprint stores that we're using to reach into some smaller markets, such as Tupelo, MS, and Tallahassee, FL. We currently have more than 150 stores nationwide, and we're opening 13 to 16 stores each year for the next two years, so our growth is fast-paced.
Tell us about your brand.
We know that our experience in the store is completely differentiated from our competitive set. It's been the main thrust for our company since day one. We treat customers with honesty, respect, and transparency. Once customers experience the brand, they're incredibly happy with their experience. In fact, 95% of our purchasers say they would recommend us to family and friends.
Today, we want to make more people aware of our key differentiators because we can't just wait until they happen to come into our stores. We've put a lot of effort into relaunching our brand around emotional attributes, such as transparency, integrity, and honesty. We commissioned a brand study about a year ago and recently launched a new brand campaign called “The Bright Side of Car Buying.” One commercial shows a consumer using our five-day money-back guarantee, which takes the risk out of a large purchase. Another spot shows how much care and expertise we put into reconditioning cars. A third demonstrates how quick and convenient our purchasing process is. People typically prepare for battle when they go in to buy a car. We don't want that. We want you to come in, enjoy yourself, and drive away extremely happy in your car.
How will marketing analytics help drive growth?
Historically, CarMax has grown the brand in the traditional mass-marketing manner: broadcast, mass promotion, etc. We think we have a valuable opportunity to create a much more personalized experience. Analytics is going to play a significant role in bringing that personalization to life—not only in the digital world, but also when you come into the store. That integration is definitely possible, and we don't think it has been effectively applied within our industry yet. We have a great opportunity to do that given our scale, the amount of data we collect, and the sophistication of our operations.
How have you built up CarMax's marketing-analytics capabilities?
One of the first things we did after I joined the company was to examine our technology infrastructure. We looked at what capabilities we'd need that we didn't have. Since then we've been working closely with our IT department to fill those gaps. We hired a marketing technology leader, who reports to me and to our CIO. We went out and hired a great analytical lead for marketing. He joined our company from Capital One, a company I admire on the analytics front. And we're currently hiring for approximately 60 positions in the digital space—such as positions in agile, UX, developers, product managers—in the coming few months.
How do you emphasize the value of analytics to your team?
It's really a matter of showing your people the performance you can drive using analytics. Once they see the initial results, they get excited. Nothing is more exciting than winning. Show them how to win, and the passion for analytics feeds on itself.
As you've been hiring, are there any differences in the skills you seek today as compared to a decade ago?
At the most fundamental level, I don't think the attributes that I look for are that much different than they were in the past. First and foremost, we look for a curious mind. You want people who are always thinking: Why does this work? Why doesn't this work? Your people, especially your senior marketing talent, should constantly challenge the norms to figure out if they can find new insights on why something is successful. That's been a valuable competency since I've been in marketing.
One attribute that I look for is new, though. Not only do you need a curious mind, you also have to possess a deep curiosity about technology. Technology has to be something that is slightly fascinating to you. Otherwise you're not going to want to explore a new technology, or a new capability, by putting it through its paces to see if it offers a nugget—or more—of value.
What analytics-related work are you focused on right now?
We believe that personalization is a big opportunity for us. That means taking the information that you make available to us, either by being on our website or being on your mobile device, and then facilitating something in our stores that recognizes and builds on all the pre-purchase work and research you've already conducted. Most people do a heck of a lot of work before they set foot in a store. And when they do, the salesperson says, “Hi, welcome to XYZ!” without knowing anything about them or all the work they've done. If I can leverage some of the information I have about you—by, say, having the cars you've been researching ready for you when you arrive at the store—that would be great. The key is making that cool and convenient, not creepy. This type of personalized experience is going to be one of our pushes.
Do you have any other analytics efforts in mind?
There are attitudinal segments that we can go after because we already do well with some of these segments. We're currently doing research on people who deeply value good customer experiences, which we feel is one of our prime differentiators in the industry. We haven't cracked the code exactly on how to reach those people uniquely yet, but I think we will. And then we'll go after them heavily.