250 Million Car Shoppers – How Dealers Are Turning Big Data Into A Secret Weapon | Brian Macdonald, CEO & President of CDK Global
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Today, I'm joined by Brian McDonald, CEO and president of CDK Global.
The automotive industry is sitting on a goldmine of information, but the tension lies in how to
actually turn that data into dealership profit. Brian breaks down the staggering reality of a
system that has touched nearly 90% of car owners and explains how dealers can use this scale as a
competitive weapon. For any dealer looking to understand their true reach and the value of
their customer database, this is a must watch. A big thank you to our sponsors for making this
episode possible. Lotlinks, Open Lane, and of course, CDK Global. And now let's get into the show.
Brian McDonald, back on the CDG podcast. Brian, welcome back.
Thanks, Yossi. It's great to be back here. Just bringing back memories of the first time we did
this when you were still a cartoon character to the to the to the bulk of the world. And the
podcast has come a long way since then. And I'm an avid fan and have been since since your launch.
My man. Yes. Yes. That was that was the first time we met when I was a cartoon character.
I'm sure there's I'm sure there's some people here that are listening that we're not, you know,
exposed to that era, but it was not that long ago, just two years ago. And as this platform grew,
yeah, we started out anonymously as a cartoon. I'll give you a lot of credit. You and your team
have done a great job with the platform. Congratulations. I appreciate that, sir. And we
have a lot more to go. You know, we announced a couple months ago, we are Google syndicated now,
which has been a nice, you know, a nice, just great lift for the all the content material
and just dealer dealer focused content, which I believe did not really have the right
just online platform. Whereas we are churning out, you know,
dealer focus content daily at this point and heavily driven by our live show where, you know,
we interview multiple dealers three days a week. So it's been it's been great. And I we're going
to have a lot, a lot of great surprises this year that we're working on. So I'm I can't wait for
that. But less about me, more about you. I appreciate you coming coming back on.
You know, one of the fun parts about this podcast that we do is annual episode is that
in a way, you've sort of been like a bellwether to kick off the year. You also made a bold
prediction last year when we met. This was not during our podcast. This was a couple weeks later.
But you had said, I see Brian, this was live at NADA. I see Brian will give you some predictions
for 2026. You stated that you went to the conversation of consolidation. And you said,
Yoshi, I think we're going to see a billion dollar plus acquisition in the dealership space.
You were correct. We saw herb chambers get acquired. That was massive, massive story.
So kudos to you on that prediction. You're you're one for one there. So that was good.
But we'll ask you for more predictions today. Brian, before we get started and talk about
where the industry is headed, can you give us your pulse on just the dealer economy at large?
Where are we at today? Yeah, I think starting with the mappers. I mean, I think SAR 26 versus
25 will be flat, maybe up a little bit. You know, I think 26 will be a little bit maybe
more challenging in retail for profit. You know, if you think about 25, you had the
two exogenous events which drove some demand and profitability. First, you had the
free tear of buying, you know, which helped drive out margins and bring down inventory.
And then you had sort of the EV cleanup in September, which cleared out a lot of EVs,
but also brought in some other demand. So I think, you know, those are two exogenous events
that are unlikely to repeat themselves in 26. I think 26, it'll really be about
affordability and interest rates and how fast rates come down, what demand that drives in the
market. So I think for dealers, you know, dealers are always very resilient, very entrepreneurial
and find a way to adjust to whatever the market conditions are. And I think the, you know, the
market conditions in 26 will be, you know, very much back to the basics and kind of battling
through, you know, everyday competition, driving service retention, driving profitability,
managing costs, managing turnover. So I think it'll be a, it'll be a good year, but I don't think
it'll be a great year. That's what I've been hearing. I would also add that we're seeing many
mixed signals right now for January. I haven't seen a consistent pattern of performance across
dealerships that I've spoken to or data that we have access to. It seems, you know, very brand by
brand region by region. So that's just one note there. What are you seeing in terms of momentum?
Is there anywhere that's gaining momentum in the industry that's not getting enough attention right
now? Well, I think there's definitely, you know, the manufacturers are starting to focus more on
affordability and what that means for their lineups, what that means around whether it's
decontenting vehicles to get more affordable price points, maybe higher rates of leasing.
I think, you know, our team has done a nice affordability index, which we just released
last week. And it's quite interesting that looking at, when you look at trucks versus cars, we tend
to look at affordability as just one big lump number. But our team has done some studies,
again, leveraging the, you know, unparalleled data that CDK has, looking at the, you know,
average price for, for effectively the truck side, what we would call the truck side of the market
and the car side of the market. And there's a pretty big difference there. I mean, this is
always the problem with averages, averages lie. So when you look at the data, you know, the average
transaction price for the most common of cars is like in the 35,000 range. But for trucks and SUVs,
it's in the 56,000 range. And obviously consumers want trucks and SUVs, and they're
well above the average that we generally see in the, in the larger industry of 48, 49,000
transaction value. I think there's definitely some opportunity there for, for manufacturers to,
to figure out how they can offer consumers more options in that lower end of the market
to drive new sales, as opposed to those, those consumers crossing over into used.
That's good insight. And then in terms of poll, polls in the industry is, are you hearing anything
from dealers right prior to NADA that is materially different than what you heard last year at this
time? No, I think there's, I think there's, you know, consolidation continues to be a theme.
I think a year ago, AI was something that was pretty new. I know we'll talk about AI as we go
through the podcast here, but I think a year ago, AI was, was something kind of new to dealers today.
It's pretty pervasive. Dealers are either using AI in some form or fashion or, or about to start
using it. So I think that's, that's a, that's a different change from, from where we were a year ago.
Talk to me a little bit about innovation. AI aside, but when you see the industry at large,
and, you know, the progress being made in auto, how do you think about where you stand in the
industry, you know, building for the future needs of the dealer? How do you think about that?
Yeah. So I think the, if you think about CDK, CDK has been around a long time. And,
and so that gives us a lot of knowledge and deep expertise, a deep footprint and a lot of data.
And I, and I think the data is becoming more and more important with AI. And so we've spent that
CDK over the last, you know, few years, we've spent over $500 million, a half a billion dollars,
more than a half a billion dollars, investing in our technology, including a new data engine and
a new data platform, all so that we can use this rich data that CDK has that others don't have to
bring insights to dealers and to leverage AI. And I think that's what's really, what's really,
I think, happening in the, in the market overall, you know, with, with technology, it's, it's really
a big AI data story, whether it's, you know, chat GPT or other large language models, other
industries, et cetera. It's really how do you marry, marry this new AI technology, which has come,
you know, tremendously forward in the last couple of years. But how do you marry it with data to
bring insights that drive value for, for companies and customers? Can, can you drill into that?
Because I think you're right. We talk about data a ton. And I agree with you that in the age of AI,
you have access to data, you can garner or glean more insights and you can create a lot more for
dealers. But what do you, what can you actually do? Or what are you doing today? Right? How are you
building on that to actually serve as a competitive advantage for you and your clients? Is there anything
specific you can point to? You know, I've been saying this for quite some time. I should probably
trademark this expression. Artificial intelligence without data is just artificial. So if you think
about a company like CDK, as an example, you'll see, and I can give you many of these, we have 900
million repair orders in our system. Okay. 900 million repair orders. So if you think about any
vehicle repair, we can, we can look through, you know, that vehicle, we can look at what the
customer said the, the issue is, and then we can populate suggested, suggested repairs or suggested
issues. We can also populate, you know, the parts that tie together with that repair. We can also
do some very interesting things around warranty reimbursement. And I'd encourage dealers to come
by our booth at NADA and see how we're leveraging AI and machine learning to help dealers with their
warranty reimbursement process from their respective OEMs. So there's, there's many, many things that
you can do with this data, including what we'll be launching that NADA, which is our new consumer
data platform as our own, our own CDP, which again is populated with unparalleled data of CDK.
Because of the unique reach and footprint of CDK and the data we've accumulated over years,
we have over 250 million unique customers in our systems. So virtually anybody who bought a car,
had a car service, owns a car, we've touched 80 to 90% of those consumers and we have them in our
system. So that's an incredible asset of CDK that we can use to bring value to our dealers.
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Lotlinks.com slash LotGPT or click the link in the show notes below. So explain this to me.
First of all, I'm obviously aware of what a CDP is, how it functions within the dealership,
maybe some dealers who are listening are not. You're launching this platform and what does it
actually do for me as a dealer? How does this change my day? How does it make me more efficient,
profitable? What does it actually do? So one of the biggest problems that dealers have, as you
know, is duplicate data. I go to a dealer and they put me in the system as Brian McDonald,
MC, D-O-N-A-L-D. Then the next time they tighten me in the system as Mac, or they just put B
McDonald if they're really busy. So you have all of these duplicate records. If it's a dealer group
with 14 stores, I could be across that multiple different records. So the CDP and the power of
our data is to bring together that record of Brian McDonald and see what I've done across all of
your stores and then literally service up how many cars I bought from your group,
how profitable those were. Do I bring the cars back for service, creation of the customer lifetime
value of a buyer? Because obviously a buyer who buys the car back and brings it in for service,
even after the warranties over is a very valuable customer compared to somebody who just buys the
car and just brings it in for warranty work. So I think that's where we, again, leveraging
the power of our technology platform, our data engine, our AI machine learning,
and our footprint. We're able to bring together these dealer insights around who are your best
customers, who are your most valuable customers, etc. Got it. Now, is this something that's already
in the market? Have the others adopted this already or is this just starting now? So we will be
talking a lot more about this at NADA, but we will be offering this to our CDK customers
as part of their CDK dealership experience platform. So we will be bringing this to market
now and dealers can come by and have a look at it and we'll be giving it to dealers for free.
So I do want to shift to, well, I remember last year when we chatted at the round this time,
you were telling me about your new focus on an inventory suite within CDK. I actually
demoed it myself. I got a chance to take a look at it. This year, you're bringing another release
with the CDP you just mentioned. I also want to talk to you about just your stance on AI
and what you're doing there, how dealers are leveraging it. Let's just start with, I did read
one of your reports prior to this podcast. I believe you had a stat that stated CDK had a stat
stating that 39% of dealers are using AI as of today in one way or another and roughly another
quarter planning to adopt in 2026. So we know that it's growing. We know there's increasing
adoption. We see it. We hear about it every single day. From your vantage point though,
let's just start with how are you seeing dealers using AI the most? How are they leveraging it
today? Yeah, largely three main areas where dealers are using it today. One is to interact
for customers to schedule service appointments as an example. Another one is for personalized
marketing to handle calls, miss calls to do some scheduling. So those are the primary uses that
dealers are using today. What we're really trying to do at CDK, we help dealers with all of those
things today, but what we're also really trying to do is how do we leverage our rich data to bring
insights. As I said before, the 900 million repair orders we have or just in the last five years,
85 new vins have come into the CDK systems, which is equivalent to all the basically new
cars sold in the last five years in North America. So 85 million. Now that includes used cars too,
okay trade ends, but it just gives you a sense of the volume of data that we have.
And so our goal is how do we bring this data to help dealers and beyond the use cases I just
talked about. So as an example in our CRM, we use AI to help dealers or sales people with like my
day, next best action, customer summaries, helping them write emails back to customers or text
messages. However, the customer wants to interact just to help drive that efficiency. I think that's
a big benefit of AI is how to drive more efficiency for the dealership employees
and how to drive a smoother experience for retail consumers. And is all that also live when you
mentioned your new platform leveraging AI? Is that already live in market? Dealers are already
showcasing it at NADA for broad rollout. Yes. What's your expectations? When you think about
all this change and call it like agents doing more work for our teams and within dealerships,
what's your expectations for this year? One thing you told me, another sound bite from our prior
podcast, you said it was again, it was January, you said I'm very happy to close the book on 2024
and I have all these great expectations of 25. How do you feel right now going into this year
with where you stand as a company with these new releases, with the state of technology
and how dealers are evolving? What's your expectation for this year?
Yeah, I feel great about where CDK is at. I think the investments in our technology platform
that we've been making over the last number of years are yielding very tangible results
for our customers. And you don't spend over half a billion dollars and not see results and
improvements for that. I think the way our teams have innovated around AI and bringing AI use cases
to all of our products, I'd like to say that we think about AI at CDK. It's built in, it's not
bolt-on and I think you see a lot of companies in the space with some AI bolt-on solution but
ultimately we know the complexity that bolt-ons bring over time and we've really focused on how
do we have AI built in to all of our solutions for our customers. That's helpful. This episode is
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the link in the show notes below. I want to shift to more general trends if you have any
information that you can share but just like starting high level when you think about the
state of car sales right now in the market, I wrote down a couple notes like new versus used
deals thinking about where we're headed in terms of performance as an industry. Do you have anything
top of mind that you can share on the state of just dealership, vehicle sales, and where we're
headed? Well, I think this year probably we'll see in the back half of the year what's real EV
demand. I wouldn't extrapolate Q1 EV demand because we had to pull forward as the incentives came
off. But I think towards the back half of this year, I think we'll learn what's normalized EV
demand as a percent of sales, which I think will be healthy for the industry in terms of
planning and going forward. I do think that we as an industry have to make new vehicles more
affordable. I think that manufacturers obviously have to lead the way there, but I think dealers
will have to become more and more efficient to do that. How do you become more efficient? You
leverage more technology. It doesn't matter what industry you're in or what space you're in. Ultimately,
technology drives efficiency. I think the consumer expectations just continue to rise
as more and more people do more and more online. AI becomes more pervasive in the shopping
experience. I think there's some really interesting dynamics there. I think watching how car
shopping evolves, leveraging LLMs is very interesting. I just read an interview recently
of a CEO who asked the CEO how to use AI in your daily life. He said, well,
I need to buy a new car. I don't really know much about cars, so I just decided to go on a
LLM and ask a bunch of questions about what kind of cars you get, what kind of questions I should
ask. I think we'll see LLMs continue to be much more pervasive in the shopping experience.
I would agree with that. I feel it myself already. I mean, for pretty much everything,
it's made life so much easier in that sense. On that same note, I have to imagine that
you have some daily briefing, some daily report. You look at this thing. It tells you the
performance of your business. I have to also imagine that there's some dealers who have either
communicated with you, called you, emailed you, texted you, whatever. Where you have that visceral
reaction, this dealer knows what they're doing. They are ahead of the curve. You just know in your
mind right now, as I'm saying this, you're probably thinking about a handful of dealers or many,
many more who are just on top of their stuff and performing very, very well, taking the right steps
to future proof their dealership and not just future proof, but actually build it the right
way so that they can get ahead. I am curious now with all that lead up, what are the best dealers
in your sphere doing? You mentioned adopting technology because it strives efficiencies.
Agreed. What else? Is there anything else you can share, any best practices, anything out there
that you're just seeing as like, hey, the best dealers I'm exposed to are doing X,
Y, and Z right now in today's market given everything going on?
Look, I think it's any business, any company, culture and people are key. This is an industry
prone to high turnover. I see first of all with some of the best dealers that I interact with,
they're very focused on their people and retention, succession, not just
succession in the family ownership change, but succession roles, growing talent internally to
be GSMs or GMs. I would never underestimate how important the culture and how you treat your
employees is. Brian, what are you looking forward to most at NADA? Other than seeing me,
of course. It's always great to see our customers and people that I've known for a long time.
It's great to meet new customers. I also get to see a lot of our employees there. We have
multiple offices and I don't get to see the employees together in an environment like that
that much. Then the most important thing is just showcasing the work that the teams have done at
CDK over the last year since last NADA. Last NADA was a washout, as you know, because of the weather,
but I think just being able to show our dealers the proof points of our commitment to them,
the investments that we've been making, the over half a billion dollars of investments that we've
made over the last few years to our technology platform, and really showing them the benefits of
CDK, the benefits of our data, how we're bringing those insights to life to bring value to them.
I always tell our employees that they're so committed. Our employees are so committed to
the industry and to dealers. That always comes across when the dealers come by to our booth and
talk to our employees. We have lots of executives that will be around there, including myself, but
it's also great to talk to the employees and see what's going on at CDK.
Any hot takes or predictions for 2026 that we should know? I know you had a good one last year,
very specific. Anything top of mind? We could see an EV incumbent may really struggle this year.
One of the EV incumbents may really struggle this year, may have to make a pretty big change. It's
sort of on the periphery of our industry, but I've been watching that space and some of the
players for quite some time, so I think that could be fairly interesting to watch this year.
All right, I'll take it. Brian McDonald, anything I didn't ask you that I should have?
I always like to ask this to see, is there anything lurking in the back of your mind
that you say, I forgot to mention that before we wrap up?
Well, you know, Yossi, I think a lot of our competitors like to say CDK is old, and I will say
I'm old with old. It comes wisdom, but look, I kind of would say it a little bit like this.
Microsoft was founded in 1975, Apple was founded in 1976, Oracle was founded in 1977,
and Google was founded in 1998, if you can believe it. It doesn't seem that long ago.
These companies have reinvented themselves and their business models and their technology
in terms of what they do for their customers. They're obviously much bigger scale companies
than CDK, but we at CDK have literally done that over the last couple years. As I've said,
we invested over half a billion dollars to redo our technology platform, to leverage the data
that we have for our customers to bring them insights and value, and then we have been around.
One of the benefits of being around a long time is our employees know this industry,
they know the workflows, they know the business processes, and our employees are so committed
to dealer success that there are a lot of benefits of being old with a new technology platform,
and that's what I'd encourage our customers and prospective customers to come by and take a look
at CDK. Well said. Well, Brian, great to have you on again. I look forward to seeing your NADA.
We will also share your booth information which you just mentioned in our show notes below.
Brian McDonald, CDK Global. Brian, thanks so much for coming on the podcast.
Thanks, Josie. Always great.
All right. Hope you enjoyed that episode. Please give the podcast a rating. Consider subscribing
to the show and check the show notes for links to what we talked about. Thanks for tuning in.
I'll see you guys next time.
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