[This is part 6 in the “What’s the Big Deal With Data Anyways?” series. Click here to read part 5]
The whole goal of this series is to help dealers understand that there is no need to be afraid of your data. It is one of the most valuable assets a dealership has and, when used correctly, can increase revenue by improving the effectiveness of any marketing.
Previously in this series, we covered segmentation of the DMS and CRM database. If you view those segments as control groups, you will be in a better position to view the real ROI of your data marketing efforts. Measuring ROI is not easy. But you don’t need to be a statistician to succeed. You simply need to measure certain elements for your data marketing efforts and compare them to customers who are not part of those efforts, segments or control groups.
In a dealership, the four most important metrics for measuring ROI are:
- Average customer-pay RO amount for the segment customers vs. the non-segment customers.
- Annual visit frequency for the segment customers vs. the non-segment customers.
- Annual retention rates of the segment customers vs. the non-segment customers.
- Vehicle repurchase activity of the segment customers vs. the non-segment customers.
You don’t have to rely on third-party marketing companies to take your data and tell you how to market. They generally lack knowledge about how to measure a targeted marketing campaign’s results. Therefore, you’ll never know if your efforts are succeeding.
The most effective way to measure ROI, program lift and retention is to assign every customer to a type of control group. Control groups can be determined by any number of qualifiers such as: make or model, mileage, distance from the dealership, lease customers, pre-owned customers, parts customers, time elapsed since purchase or any other segments that could be used in targeted campaigns.
While this may sound like a daunting task, believe it or not, most dealers are well on their way to accomplishing this already. Many assign every customer a unique customer ID number in service and, at times, in sales. This ID number is stored in a dealer’s DMS as a unique identifier for that customer. The dealership uses this ID to track activities such as vehicle service records.
To segment your database you simply need to add a check digit to the already existing customer ID number. This number appends the customer ID in the DMS. By simply adding multiple number identifiers, customers can belong to a single group, or to multiple groups.
Once your customers are segmented into the appropriate group(s), your DMS’ report writer function (or equivalent) will allow you to run simple reports that show exactly which groups and customers are responding the most, spending the highest and retained the longest.
When looking at the four metrics listed above, it becomes easy to see which subsets of customers are performing the best in each category. This can assist in identifying where to spend your marketing budget. It has always bothered me when I ask a service writer or manager which of their service marketing efforts are working the best. I find that their responses are typically based on that month’s coupon redemptions. This type of visual performance tracking of service marketing is a recipe for wasted marketing dollars.
Throughout this series I have been touting the benefits of customer segmentation and the positive effect it can have on your marketing efforts. Think about looking at each group before you commit to any marketing campaigns, regardless of the content. It is so important to determine ahead of time which groups will receive the message based upon their past performance. How many times do we send, at our expense, communications to customers that either live too far from the dealership, or don’t have the vehicle anymore? This type of marketing is almost guaranteed to get no response, yet it is such a common practice in our industry. I see it almost every time I step into a dealership. Insist that your marketing group, regardless of if internal or a third party, is responsible for marketing the correct message to the correct group. It has been proven over and over again in almost every type of business that smaller, highly target messaging will create a much better response than any unrelated mass approach.