A recent article on the Huffington Post asked why consumers are still buying GM vehicles despite all of the recent recalls. There’s no question that there are many concerned owners of GM vehicles. According to the article, GM has “issued 44 recalls in North American this year, stemming from problems that have been tied to 50 crashes and 13 dealers, [yet] the company recently said its sales for the month of May were up 13 percent from the month before, the biggest May gain in seven years.” Common sense might lead a person to believe that consumers would become more hesitant to purchase a GM vehicle with all of the problems that are occurring. But the numbers indicate quite the opposite.
Loyalty doesn’t always follow reason. As the article indicates, there are many points that make consumers remain loyal in times of turmoil. One reason the article cites is ignorance of the recalls themselves. “Experts say about one-third of people with a vehicle affected by automaker recalls never bring their car in for repair.” Another reason is that people may perceive that these recalls are for vehicles made in the past and don’t apply to recent vehicles (which is untrue).
The last reason cited in the article is the one most likely to be the case: that GM has been successful at creating emotional bonds with consumers over time. Consumers are quick to back companies that have supported them in times of crisis, especially if the situation is handled properly. GM CEO, Mary Barra, has been running damage control well during her tenure. Her public commitment to identify any issues with GM cars and solve the problems seems zealous in nature at times. Many consumers are willing to forgive companies – especially companies of which they are already brand loyalists – if the company is willing to back heir product quality and rectify the issues.
Think of your favorite store. You may love shopping at that store and patronize it frequently. Perhaps one day you have a problem with a product or a bad experience. If handled properly and made whole, your opinion of the business may even increase. People understand that nobody is perfect. All they want is to know that the business cares about them as a customer and values their business enough to fix the problem.
GM has certainly experienced very trying times over the last 6 years going through bankruptcy and requiring the government’s assistance. It will certainly be an uphill battle to regain consumer confidence in the quality of their vehicles. As a society, however, we tend to have short memories. While GM will be forced to be more vigilant in vehicle quality and customer retention efforts, those efforts may prove to reinforce the emotional attachment its current brand loyalists possess and also earn it some new ones.
There are many things that companies can do to earn a customer’s loyalty. However, e-mail marketing isn’t typically high on the list. Consumers get barraged continuously with marketing messages via e-mail. As you go through your in-box, how many do you delete without even reading them in order to get to those you are interested in reading? A very good article on the Small Business Success blog shared some tips on how to write e-mails that will more effectively engage the recipient.
Consider these statistics shared in the blog article:
- Personalized emails improve click through rates by 14% and conversion rates by 10%.
- Leads who are nurtured with targeted content produce a 20% increase in sales opportunities.
- 70% of buying experiences are based on how the customer feels they are being treated.
In my recent data series blogs, I covered how dealers who use their data to effectively target consumers with relevant messages will increase responses. When relevant messages are relayed to the right customers, they tend to feel the company is more in tune with their needs and wants. They no longer feel like just another address on your e-mail list. As you establish a relationship with the customer, they will begin to value your communications and pay attention to them, rather than discard them into their trash, spam or, worse, opt-out of your marketing.
Targeting segmented customers is definitely something dealers should be doing. However, the content of any email message is equally important. Generic e-mails that are obviously sent en masse will detract from the consumer’s perception that you are actually looking out for their best interest.
In order to increase the chance that a customer perceives your e-mail message as helpful rather than intrusive, try and make your e-mails as personalized as possible. If you have cleaned up your data, it is relatively easy to insert a customer’s first name and the make and model of the vehicle.
At the same time, ensure that any attempts to send personalized messages to your customers are not destroyed by poor attention to details. Double check that there are no improper formatting or incorrect merge fields because of erroneous data in the wrong fields in your CRM.
In the end, it’s not just about using past behavior to predict the future. It’s also about how you can best convey your message to your target group. If your customers only receive helpful reminders and relevant messages from you, you will build relationships that help create loyalty and increase retention.
[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.
[Part five in the "What's the Big Deal With Data Anyways?" series. To read part four, click here]
Segmentation of DMS data can be defined as the process of dividing up your customer data into specific groups for the purpose of defining a more precise behavioral profile that will lead to a predisposition or higher purchase rate for a specific offering. Data Segmentation is when you break your customer base into groups and identify generally when, why and how a customer interacts or engages with your dealership. Did they previously respond to a specific product or service offering? Do they prefer a certain model? Did they stop purchasing? Do they only respond to discounts or price incentives, or do they only purchase a singular item from you?
The real goal of segmentation marketing is to deploy profitable marketing communications based on behavioral patterns exhibited previously by your customer. Segmentation is not just for the retail customer, but can be used in all of the dealership’s departments. For example, BMW has a program solely for independent body shops to increase the sales of certain OEM replacement parts purchased through their dealer network.
Data segmentation allows a dealership to focus on the customer segments that are strongest and to put less emphasis on those that are weaker.
Data segmentation will provide a dealership with, at a minimum, five basic insights into its customer base which will allow it to build a framework for segmentation campaigns as follows:
- Who are my customers?
- What do they like?
- What are they purchasing exactly?
- How often to they purchase or visit?
- What marketing channels are they responding to?
So what segments would could you potentially extract or filter from the volumes of customer DMS data you have already gathered? Think store wide, departmentally, and what each department offers in the way of all products and services.
By starting with some basic data filters, you can build some very specific marketing groups, singularly or by grouping multiple filters:
- New vehicle purchasers within a certain time parameter
- Pre owned vehicle purchasers within a certain time parameter
- Service department customers who purchased elsewhere
- Mileage parameters – Between, greater than, less than
- Purchase date (both sales and service) – Between certain dates, or before and after a date
- Vehicle type (pre owned and new)
- Extended Warranty Purchase – Still eligible
- Customer Spend – Between, greater than, less than
- Last Dealership Visit – Before or after a certain date
- Campaign response – Those who responded to specific campaigns in the past
- Total number of service visits – indicator of possible new vehicle purchase
- Preferred method of contact – text, email, etc.
- Wholesale parts purchases – frequency
- Accessory purchases
The basic frame-work for a successful data segmentation and subsequent marketing initiative should not be daunting. Actually it can be very simple if you start small.
- Identify your key customer segments or groups. For example one segment may be; customers with vehicles that have eclipsed over 90,000 miles and are 6 model years old. Another may be; customers who only respond to discounts or special offers. Yet another; those customers who have not come back for a specific period of time or those who have defected.
- Create four to six target groups. Combine your segmented groups into just four or six sub groups to start. If possible, group those together with like demographics. As an example, group those customers who live more then 25 miles away from your dealership into one sub group. Another group may be those customers who respond to service reminders.
- Deliver different messages and engagement experiences. Deliver a different product messages and each approach should be tailored to the specific group you are targeting, realizing their preferences and demographics.
- Keep it as simple as possible. Leave the complicated mass marketing stuff to your manufacturer. After all, they have the big marketing budgets to handle it. Simply choose your five or six target groups and focus your campaigns and efforts on them. You can always change them later if you feel your initial strategy is proving less than successful.
- Measure the effectiveness of each campaign and adjust your strategy when necessary. By measuring how your customers respond to your campaigns, you will be in a better position to predict their future buying habits and to polish your future marketing strategies.
By utilizing a more customer-focused approach, and by shifting resources away from the typical “shotgun” style mass marketing used by many dealerships today, you will be able respond more quickly to any market changes. This is while focusing foremost on your best customers up front while increasing profits and decreasing costs.
When deploying such a strategy, ensure that everyone in the dealership is on the same page when interacting with a customer who has responded to one of your segmented communications. This includes receptionists, BDC or call center scripting, service writers and sales employees. It is extremely important that all customers receive the same messaging, tone and product or service positioning that was offered in the communication. The more consistency you employ, the higher your ROI will be. To your success!
Over the past few years numerous new marketing companies have emerged as a solution for dealers’ digital and print marketing needs. Some of these new entities specialize in SEO, some will write your social medial posts and some will manage your online dealer reputation. Yet the largest growth is seen in companies that go after “orphaned” service and sales customers. They try and get them back to the dealership, generally for a healthy fee, if and when they succeed. Wouldn’t it have been nice to have not lost those customers in the first place? To not have to pay again to reacquire them? But that is a subject for another story.
While customer re-acquisition programs do have some success, dealers should be very careful when directing a third party company as to which customers to market to. Don’t let the vendor make the choice. It could end up hurting you instead of helping. Using your data for a mass market approach is contrary to all segmentation marketing principles. It will garner you a much lower ROI.
Wikipedia defines Mass Marketing as a “market coverage strategy in which a firm decides to ignore market segment differences and appeal the whole market with one offer or one strategy.” This is exactly what these third party vendors suggest and is exactly what should NOT be done. In my next blog I will cover in more detail the benefits and value of market segmentation. How to divide your data into a number of segments, allowing you to target a specific message to a specific audience at a specific time. This approach is what will garner the best ROI.
Sadly this is not the approach most third party vendors take.Unfortunately, some have really muddied up the field and in fact, do not help the dealer at all. They have a convincing sales guy that says “if you give me a copy of your database, I can help you sell another 40 cars per month.” In most cases, it’s just not completely true. Yes, you may get few sales. But generally no one quantifies the results and much of it ends up being nebulous, at a big cost to you. Additionally, with this type of marketing you may end up alienating as many customers as you bring in.
In most cases it just does not work to do it this way: “Let’s go into your database and find everyone that has not bought a car in last 5 years and send them a generic letter” – how many would that sell? Perhaps one, two, a few? Now tighten up the audience. Filter out or segment some customers and make it more specific to individual customers….say we take a look at everyone that has a Honda Civic with 90,000 miles and more than $5,000 in maintenance costs – that’s your target mailer. And send them a Civic specific ad touting its product value and your intrinsic value as their dealer – not something like low interest rates, or something that does not relate much to the customer. Let’s leave that up to the OEMs — they do a wonderful job showing us customers dancing in the showrooms. When was the last time you actually had a customer dancing on your showroom floor because they were so happy with the financing you just got them? Really? It’s time to get personal with your customers and show them that you know what they want, when they want it and that you can provide the necessary tools for them to get it.
Another example of failing to correctly use data is in the aftermarket. There are so many call centers out there for extended service contracts that give dealers a commission for providing their database list to call from. They call or send a mailer to all these customers without any clue if they need a service contract or not – it’s not helping dealers, it’s hurting them. I recently received a mailer from Mercedes Benz soliciting a prepaid maintenance program when I had just bought one with my new Mercedes ML a few weeks before. This just makes the dealership look bad and only serves to alienate customers rather than drive them back into the dealership. I truly believe a dealership could do a better job marketing me a maintenance program on their own — after the sale — if they had only tried. A quick segmentation of those customers who did not buy a maintenance plan would provide a nice call or mail list to work from. And I am just guessing that the grosses would be higher on the plan sales sold directly by the store.
Don’t allow your marketing partner to put together a blanket program. Use your data – I promise you there’s gold in them there databases! It just has to be properly mined, managed and applied. Programs should be designed around what will best appeal to the customer. Customers in different sized markets will have very different motivators. Look at what your customers have already purchased and don’t send out blanket marketing pieces. As I mentioned above I recently leased a new vehicle. Not even a month after I purchased it I received an offer for new tires from my selling dealer. My car was a month old! I have a 30K lease on it and should never need tires during the lease. I looked at that and thought, “You’ve got to be kidding me!” This type of blanket marketing causes customers to lose faith in the dealer. That’s the whole point of segmenting — to avoid this type of situation.
The same principals should be applied to seasonal communications. Don’t send winter-related communications to customers that live in Florida! It’s crazy but we see it happen all of the time.
The fact remains that by segmenting your customers and then targeting those groups with relevant offers and messages, you will save money tenfold on mass marketing and you will see a better ROI
Watch for my next blog, part 5 of this series, where I’ll cover data segmentation in greater detail.