Prospect Vision
Direct Mail Has Changed But It’s Never Going Away
Direct mail might seem like an outdated and out of fashion marketing tactic, but dealers using it effectively are having the last laugh: consistently reporting an average of thirteen incremental new car sales per month by targeting customers who are “in-equity” in their current vehicle.
A recent study of over 200 US dealerships using personalized direct mail for strategic, targeted campaigns showed that, with a minimal spend and little hands-on work by dealership personnel, dealers are experiencing huge ROI – moving customers into new vehicles with little or no out-of-pocket spend and getting great trade-ins as a result.
It’s important to understand how best to find those customers who are “in-equity” – you can’t simply rely on length of ownership as customers are often upside down in their vehicles, instead it’s important to do extensive database mining to find those customers who’s cars are worth more than they owe, despite how long they’ve owned it.
All the dealers in this study used a full-service, turnkey equity marketing solution that initiates customer contact with personalized, targeted direct mail – followed by email and calls from salespeople. And the impact was huge.
The targeted direct mail campaigns that deliver the strongest results were customized to focus on the specific needs of the dealer. For example, a “Year-End Clearance Event” helped move end-of-year overstock; or campaigns focused on moving a certain model; and, if a dealer was looking to fill up their lots with certain used vehicles, campaigns would target these specifically.
The results were an average cost per sale of just $112 per new vehicle sold – far less than any other marketing channel. And the huge benefit is that by communicating these offers, you keep your current customers close and don’t lose them to other dealerships.
Targeted, direct mail to in-equity customers works because the messages are personalized and customers are provided a “go shopping” amount that they can immediately put to use. And, because you’re talking to current customers, gross profits end up being much higher than that of a first-time customer – averaging $422 more per vehicle.
Isn’t now a good time to reconsider direct mail in your marketing mix?
Prospect Vision
Do Your Salespeople Spend Too Much Time Managing Software...Instead of Selling?
The fact is, lead generation is an expensive business and having the right tools to manage this investment and deliver the most qualified leads to your dealership is paramount to your success.
When it comes to mining your database and working your in-market customers, you have two choices: use your internal team to run and manage all aspects of it (self-service) or outsource many of the functions to a service provider who does most of the heavy lifting (full service). Self-service options demand the installation of comprehensive software that requires training and hands-on daily interaction to be effective, while a full service provider will take over the day-to-day tasks (i.e., database management, developing marketing materials, mailings, e-mails, etc.) and, instead, deliver qualified leads to your sales force.
Both approaches have their pros and cons. Full disclosure, I currently work for a full service provider, but I also spent eight years as VP of Sales and Marketing for a large, publicly-traded dealer group. This experience taught me that there are merits to both solutions, but also that there are a few simple questions you should ask yourself to help determine which road you should travel.
So, regardless of the type of product or service you’re considering, when is it right for a dealership to choose a self-service over a full-service option and vice versa?
Here are some basics questions to consider:
- Cost and ROI – are there any unforeseen/hidden costs?
- Vendor Reputation – do they have a solid track record? Do they offer good training/support?
- Staff Stability and Size – does your staff turnover mean you’ll be training and retraining often? Do you have enough manpower to handle another in-house solution?
- Staff Expertise and Knowledge – could a 3rd party handle the task at hand perhaps even better than in-house staff?
Cost and ROI
Of course, cost and ROI are key considerations when investing in any new solution. And when evaluating managed versus self-service, it’s important to also consider any hidden costs that might be there.
For example, self-service solutions will typically have a well-developed software platform that cost a considerable amount to build – but this is a cost that is usually passed on to the dealer as a relatively high monthly fee. And, then there is the staff required to run the software – in addition to needing front line sales people or BDC reps, dealerships have been known to hire dedicated personnel to administrate different software solutions. Given the high turnover rates in our industry, one of the biggest hidden costs is in training and retraining new staff to run the software and the often “lost” time/opportunities during this process.
This chart uses the example of equity marketing providers to compare the costs of a managed service versus self-service – taking into consideration hidden staffing costs. It appears at the outset that the self-service option is relatively comparable in terms of cost to the managed option; however, if it needs dedicated staff, it can be twice the cost. I suggest doing a similar analysis when considering any managed versus self-service program.
|
Managed Solution |
|
Self-Service Software |
|
|
Monthly Fee |
$600 |
$2,000 |
|
|
Mail/Postage/E-mail |
$1,500 |
$750 |
|
|
Dedicated Staff |
$0 |
$3,000 |
|
|
Training/Retraining |
$0 |
+++ |
|
|
TOTAL |
$2,100 |
|
$5,750+++ |
Vendor Reputation
It’s important to consider the vendor – not just the solution they are touting. Have they been in industry long or is it a newbie promising to deliver in almost impossible ways? Do they or their management team have a solid track record of results? If it’s a self-service option, do they offer good, solid tech support? Do they have automotive experience and what is their training like? If they are full service, do they have people on board who have worked at dealerships and understand instantly the challenges and needs of your business? Look at the ratings of the solution on platforms like drivingsales.com to get a handle on what other dealers are saying about the vendor. Also consider whether other dealers with similar needs/requirements turn to this solution – ask around!
Staff Stability and Size
This is a big one. With a self-service model, usually it’s the dealership’s sales people who do most of the legwork – this can be an advantage because every dealership wants their sales people to be actively working their leads. However, this can also be a huge negative because of high staff turnover in our industry. The facts speak for themselves: according to a 2013 NADA report[1], general staff turnover in a dealership is 35% while a CNW report[2] out earlier this year said that salespeople turnover rates at new-car dealerships is often higher than 100%!
You have to ask yourself: do you have time to be constantly training your sales team on how to use the product? One of the biggest advantages of a managed solution is that you don’t have to rely on front line employees to take action, and therefore never need to worry about the software sitting idle. There is also a great argument for dealerships with minimal manpower to adopt a managed solution for very similar reasons.
Staff Expertise and Knowledge
Even a dedicated workforce might lack the bandwidth/knowledge required to run an in-depth CRM software program along with, say an equity-mining tool. This is a real consideration – many stores with multiple products have a problem getting their sales force to use just one of them consistently.
Real World Example –Pros and Cons
Using the example of database mining and equity marketing (tools that rely on complex segmenting of databases to help dealers identify in-equity customers), we can evaluate some of the pros and cons of managed vs self-service products.
Self-service software can be stand-alone or directly baked into a CRM solution, giving the task of database mining (which can be complicated) to salespeople or an in-store marketing/BDC manager. A full-service solution, on the other hand, takes the onus off the dealership by handling the data mining and marketing for them, relying on sales staff only to close the deal. A knowledgeable account executive will mine the data on behalf of the dealership, doing all the legwork.
Dealers who choose a full-service program generally do so to take advantage of the expertise and knowledge provided by account executives who run numerous equity marketing campaigns, as well as the comfort in knowing that no matter how stretched the sales force is at any given time, all in-market prospects are being touched, including both cash and service-only customers.
Put simply, a self-service solution can make sense for dealerships that have a stable, low-cost work force and low turnover; while a full service solution can work for just about any dealership and can be a safer bet because you know that, regardless of whatever fire drills might be happening inside the dealership, business is going on as usual.
Allen Levenson has over 25 years of automotive and marketing experience. He is currently Vice President of Sales and Marketing for equity marketing pioneer, Prospect Vision. He also spent eight years as Vice President Sales & Marketing of Asbury Automotive Group and was responsible for all sales, marketing, Internet, CRM, strategic planning, and public relations activities for the company.
[1] 2013 NADA Dealership Workforce Study Industry Report
[2] 2014 CNW Retail Automotive Summary
2 Comments
Automotive Group
Allen, what you are proposing here is crazy. Training is not an expense it's an operational cost. Yes it never goes away and it shouldn't. You really shouldn't compare what you are doing against the value of training internal staff. You should compare the value of your product against the competition and propose a growth strategy that may not exist.
Prospect Vision
Chris, my apologies for the delayed response. I appreciate your feedback, but I believe you misinterpreted my point. Of course, training is always a good thing to do in any dealership, and it is required on an ongoing basis. However, with lead management tools there are options and continuously buying more software isn't always the answer, no matter how good the software is. I was the VP Sales & Marketing at Asbury for 8 years, and I have to tell you we bought a lot of great software that was never utilized properly or vastly underutilized. With the incredibly high turnover inherent in our industry, it can require the stores to constantly be training and retraining on the sophisticated and often confusing software. If there are low cost outsourcing solutions available, it can be a better economic decision for the dealersihp, particularly if they are in an area with high turnover. Better to spend their time training their sales people on the 10 step road to the sale, and not multiple different softwares. Thanks.
17 Comments
Grant Gooley
Remarkable Marketing
Great data and info! I laugh when I hear "Direct Mail/Print is dead". Here is the funny thing... Mailboxes aren't going anywhere, so either is MAIL! The second everyone jumps on the "Print is dead" bandwagon.. That gives everyone else a lot more breathing room to send people stuff. It's not going away EVER. I will say this though... It has a big brother (digital) that cannot be ignored! In fact when you p[air the 2 together, they go really nice :)
Lezlie Brannan
Heller Motors
Grant, I'm fine if the dealers around me think that direct mail is dead. ;)
Alyson Sharron
Cobalt
Great article, Allen! I completely agree that direct mail - when done right - can be extremely effective. Especially when it's part of a targeted, coordinated multi-channel strategy. Just like any other media, the key to success is targeting the right audience at the right time with a relevant message.
Tony Wood
Toyota
I believe we are using a company called Omni. We've had sporadic success. Some of our mailers blow the doors off and others just flop entirely. I know that the last mailer we sent out actually went out AFTER the deadline on the mailer. Not sure what that's all about. Other than that though, it'd hadn't been too bad.
Eric Mercado
Force Marketing
Consistency is Key Tony. A well developed strategy should yield consistent success every month and an overall great ROI when the year ends on all direct marketing dollars invested. If your Cost Per Unit sold isn't under $360 everytime.. they are guessing. Private message me if you want a free market summary that will identify the highest-propensity prospects in your PMA. No Charge.. great advice. Eric Mercado VP of Business Dev. Force Marketing
Allen Levenson
Prospect Vision
Thanks for the positive comments. Much appreciated. I do always laugh when I see people post with great conviction that "direct mail is dead" when I see results every day quite to the contrary. However, I would not be happy with cost per sale results at $350. As the study we compiled from over 200 dealers (using Prospect Vision) over several years showed, highly targeted equity based direct marketing can deliver results closer to $112. The key is laser targeting. Campaigns can be as small as 100 prospects or less...never over 3,000.
Megan Barto
Faulkner Nissan
Direct mail isn't dead, but you have to be cautious with which vendor you go with. We recently dumped our vendor after we saw poor results, and several other stores in our area & outside of our geographical area saw poor results.
Jonathan Dawson
Founder - Sellchology Sales Training
A client of mine recently spent $40,000 on a DM campaign that yielded 4 sales. You can imagine he was cracked! I'm in the staff development and customer relationship arena. I want to teach salespeople how to take care of customers and generate their own traffic. The best salespeople don't need direct mail campaigns to sell cars, so I'm biased. I don't see too much value in most of the campaigns Ive seen.
rick shahin
northtownautomotive
I have a question is the direct ail campaign targeting the existing customer base or is it a conquest campaign?
Eric Mercado
Force Marketing
The bulk of what we do for our clients is conquest direct marketing. But having a strong retention direct marketing strategy is imperative as well. Having an integrated mix of campaigns every month targeting prospects specifically based on where they are at in the trade cycle is what we recommend.
Allen Levenson
Prospect Vision
This response is directed to Rick, Jonathon, and Megan. First off, I don't know how anyone could ever spend $40K on direct mail. Sounds inconceivable to me, but who knows. At Prospect Vision, 95% of what we do is working the existing customer database. While there are times to do conquest, you always want to work your existing customer base first. And if you target to the folks who are in equity, been in their vehicle at least 15 months, have at least one payment remaining, still live within 50 miles of the dealership, can purchase a new vehicle and retain their current payment, etc, the quantities are quite small. For an average sized dealership, the monthly spend would be about $1,000-$1,500. You really don't need anything more than that.
Eric Mercado
Force Marketing
I disagree with the fact that nobody can spend $40k on mail and get an ROI. We have more than 100 clients who do that every month. Focusing on In-Equity prospects in a dealer's DMS is a great strategy and should definitely be part of your marketing plan, but so should a completely conquest direct mail strategy. That takes a little more budget to target buckets of specific vehicle owners, special finance prospects, conquest expiring leases and more.
rick shahin
northtownautomotive
No disrespect to the Direct Mail industry I can understand Allen's Value proposition, Eric 40k a month that's shot gunning. I spoke to people at your firm and other firms which recommended large spends and when asked about the justification for the spend they could not explain how and why the answers were glittering generalizations. The other thing I have encountered in large campaigns is the way a sale is quantified just because a mail piece is sent out to a large number of consumers and one buys it seems like the direct mail industry takes all the credit for the sale. That person could have already been working with us, maybe a referral an internet lead walk in etc. and there was a there was a dms match and direct mail takes all the credit what a sham LOL. We sell 5000-6000 new cars a month in our entire marketplace so 40000 pieces would seem sheer odds would match up bunch.
Eric Mercado
Force Marketing
I couldn't imagine you spoke to someone at my office and they couldn't explain the value. We do not "Shot Gun" Anything we send out. Everything we do is based on a prospect's current propensity to buy at the time the message is delivered. You may have used staffed events for your mail and that is why you assume with $40k you have to be "Shot Gunning" the area. We don't take credit for ALL purchases during your sale time period either; only the ones who have received the mailer on the initial manifest and responded through a Personal URL or Tracked 800 #. In the perfect situation; the dealership supports the efforts of the marketing and the marketing supports the efforts of the sales team. So either way; the lead is confirmed; commits to an appointment and inevitably becomes a sales or repair order.
rick shahin
northtownautomotive
I spoke to multiple people at your office I do not want to mention names online that would be improper. I do not want to attack any company in this kind of a discourse and if it came off that way I am sorry that was not my intention. I can tell you the conversation if you want to take it offline. The bigger point is many companies have a large budget paradigm not just yours. The idea of a 40000 dollar campaign a month in a market our size would be shot-gunning from everything I understand, but I could be wrong. By the way my contact is 7162073711 if you want more details of my interaction feel free to contact me.
Jonathan Dawson
Founder - Sellchology Sales Training
@Allen, it seems inconceivable to me too. Even though he's my client I didnt (and don't think I ever would) advise that kind of spend on a DM campaign. I agree with target marketing, aiming at specific CTA's based on unique opportunities; lease end, year end, etc. To me what gets overlooked or even ignored are the fundamentals of a marketing strategy and vision. Direct Mail, Digital, e-Campaigns, Equity mining tools, and traditional media are all TACTICS! Most vendors in that space (marketing/advertising) are selling a tactic, without helping the dealer know, or develop a STRATEGY. That's how they end up spending $4k or $40k a month on a program, piece, or pipe dream and hope to "sell more cars".
Eric Mercado
Force Marketing
Your right. Dealers don't need to spend $40k on direct mail. For the most part eliminating waste is an important part of direct marketing. If you are only targeting in equity customers in your DMS you are missing a HUGE part of your market potential. If you do not have a conquest direct, digital, or email marketing strategy you are wasting something more than marketing dollars. You are wasting potential. Training is the last ingredient that makes marketing work (and I do agree it is imperative). That is why dealers should partner with companies that consult with them to find out their short and long term needs; Create a campaign that meets those needs; Train their staff on those needs; Engage the right customer at the right time with that campaign and report back the results.