By Duane Sprague
Mass media is more costly and less effective as it becomes
increasingly fragmented with more and more options for the
consumer. If you can afford the best placement, you can't
afford the saturation, production quality and talent that
will compete for attention with the Coca Cola, Nike, and
Budweiser ads. All 30 second spots are not created equal.
A typical dealership ad campaign will be swallowed up in
the sea of mega-buck campaigns from the global giants who
spend hundreds of millions in the same media you spend hundreds
or tens of thousands.
Because of the average dealership’s budget constraints,
production quality and market research suffer. Most dealership
ads are of a less than desirable quality. And consumers
have therefore rated dealership commercials and newspaper
ads as the very poorest in taste, quality, credibility and
retention. In fact, a dealership ad is more likely to be
muted or turned past than any other. In a focus group with
dealers themselves, we found the same feedback. They thought
poorly of their own ads, but did not have the budget or
resources to do any better.
In the mass media game, only great advertising is profitable.
Anything less is typically a waste of money. However, great
advertising does not need to be expensive.
"Everyone has recognized that mass marketing will
not work."
-Christine MacKenzie, manager of corporate advertising,
CHRYSLER CORP.
The experts, industry analysts, consultants and manufacturers
are saying the same thing. Concentrate your resources on
retaining your customer base for additional sales over their
lifetime. Make them happy, and new customer acquisition
will come in the form of referrals and word of mouth.
"It is the incremental business coming from customer
referrals and retention that will pay a much greater dividend
to dealers."
-Earl J. Hesterberg, NISSAN Division Vice-President and
General Manager.
Considering the new prospect pool is not growing at a significant
rate in most market areas, and the cost of new customer
acquisition is four times higher than retaining a satisfied
customer, retention makes sense. When we factor in the lifetime
value of a single customer as per Mr. Pohanka, a former
NADA president, and chairman of Pohanka Automotive Group,
each customer represents $325,000 in automotive and service
purchases to the dealer over their lifetime.
"If we can retain a portion of defectors, the leverage
is huge."
Philip Guarascio, Vice-President, General Manager, Marketing
and Advertising, GENERAL MOTORS.
Because retention is so critical, the age of database marketing
has arrived. Database marketing is a sophisticated method
of targeting your customer base with personalized messages,
offers and advertisements that will dramatically increase
retention, referrals, and lifetime value.
Database marketing is narrow casting your promotional offer
to those people who are most likely to respond. It is targeting
a very specific message that addresses the needs and hot
buttons of your customer base, be backs, referrals, and
those people in your area who are in the market to buy.
Database marketing means reaching the people who count,
rather than counting the people you reach.
Database marketing consists of a computer system and specialized
software that will allow you to store, sort, and categorize
your customers according to numerous criteria. It allows
you to create a profile of your very best customers, the
top 20% who are responsible for 80% of your profitability,
and treat them with extra good care, as well as attract
more people like them.
A database program will allow you to predict changes in
automotive needs for each customer based on the ages of
their children, family size, family type, income, occupation
and interests. This means the right offer arrives in their
hands at the right time.
With database marketing, you can use the mail to target
a specific offer to specific people who are in the market,
or interested, in that particular model or type of vehicle.
Naturally your response rates go up dramatically, and your
marketing costs are reduced, because when you are reaching
the people who count, you have a warm prospect to begin
with.
Some of the benefits of database marketing:
· Develop high gross new customers by profiling
your best past customers
· Generate quality ups by targeting those people
in the market
· Increase the retention rate of your customer base
· Increase referrals
· Increase service revenue and frequency of vehicle
purchases from customer households
· Bridge the gap from suspect to customer with personalized
follow-up
· Reduce media advertising expenses
· Reduce the dependency on sales people to follow-up
