[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.
As I mentioned in part two of this series, many DMS providers make it difficult for dealers to download their customer database. In some cases, it’s because there are control issues arising between dealers and their DMS (or CRM) as to who actually owns this data. Another issue can be that a provider fears their dealers will take the data and switch companies. Any dealership’s database of customer transactions should be treated as pure gold and it would be a catastrophe to lose this data when a change of providers occurs. Dealers would be wise to develop a business case surrounding their data. It is important to understand how vital it is to clean up this data. The time involved in so doing will actually save money by increasing the effectiveness of any marketing.
Most providers have tools built into their system that can be used to access and download this data. All big DMS providers have report writers or generator functions with which a dealer can download sets of users. Dealers can use this to generate reports on sets of customers and can use these reports to start the process in bite size chunks instead of trying to tackle their entire database all at once. In choosing whether to do this from your DMS or CRM, I would start with your DMS data. Both are important to clean. But your DMS data is the most prominent. This database is huge and can be mined more effectively. It contains all the long-term customers from which continuous revenue can be generated.
If a dealership does not have anyone with the proper skillset to accomplish this, there are third party companies such as Authenticon and StoneEagle that can assist. These companies have built workarounds with which they can use to access a dealership’s data, even from the most difficult providers.
The following is a good road map to use to clean up the dealership’s database.
1. Look for duplicates. Just about every DMS has a report generator that allows a dealer to export these files into an Excel format. In this format, it becomes relatively simple to sort fields and identify duplicate entries. Look for duplicated names, phone numbers, and addresses and attempt to consolidate these duplications into a single record. Start with the oldest records and work backwards to the present. Once one group is cleaned up, proceed to the next group. This makes the task a little more manageable.
2. Once the database is consolidated and duplicates removed, there are then two steps that should be done with two different USPS database services to ensure 100% address accuracy. It is important to get the sequence correct as follows:
a) First run the entire database through the USPS’ National Change of Address database (NCOA). This can be done directly with the post office using their NCOAlink System, or through third party suppliers such as Melissa Data. They will return the database with current mailing addresses.
b) After running the database through NCOA, then take the entire database and run it through another U.S. Postal Service database called ACS™ Service. Many DMS databases have a portion of address correct. Such as the address is 120 West Main Street, and the DMS has it as 120 Main Street; omitting the West from the address. NCOA updates the address and then ACS fixes such inaccuracies as this. So it is important to do both, one after the other.
Here is a link to the post office program for both of these: https://www.usps.com/business/move-update.htm
3. Once all of this has been done, import the updated database into the DMS or CRM.
4. Then move onto email addresses. There are a number of independent services that can verify the validity of an e-mail address and acquire any that are missing from the database. These services can be used to fill in the blanks. Once this is done, then look for any that are still missing and have an admin call the customers to get updated information. Once this is accomplished, enter these changes into the DMS or CRM.
Whether the dealership chooses to do this internally, or to outsource to another company, usually depends on how messed up the database is, and the scope of work required. In some cases the database is not a huge task to clean up and dealers can do a very effective job themselves. Some, however, are so messed up that the task becomes overwhelming and it is better to seek outside help.
This problem starts from the top and goes down. It’s industry-wide and not just confined to dealerships. At PLG we once worked with an OEM who sent us a database of all dealerships and a list of their salespeople. This was a current list and yet we found that half of the salespeople weren’t even employed at the dealerships anymore. The tragedy in all this is that there is so much upside to knowing this data and having it clean. Look at grocery stores. They know what cat food you buy and use it to cross-market. If you’re a loyal Purina cat food customer and all of a sudden you start buying a new brand, I bet you that the cash register spits out a coupon for Purina cat food.
Dealerships have the ability to do this as well. If a customer has changed their oil with you for 6 years and all of a sudden stops coming in, you can encourage them to come back in with a relevant offer tailored specifically to that customer. This type of offer has proven time and again to be highly effective. The point is to have this customer data readily available and then use it to correctly target customers. However, most dealers aren’t doing this. I still get service reminders for vehicles I haven’t owned in 8 or 9 years. I recently bought a new vehicle and 2 weeks later I received an offer in the mail for new tires! It’s a new vehicle. Why would I need new tires? Sending irrelevant messages to your customers only alienates them and makes them less open to receiving and paying attention to future communications from you.
In part four of this series, we’ll explore what to do with the data after a dealer has obtained it and cleaned it up.
In part one of this series, I discussed the importance of dealerships using their data effectively in marketing and how, when done properly, it can increase vehicle and service sales while improving customer loyalty. Now I’d like to discuss why a great majority of dealers aren’t already using their data to its full potential. I can’t think of another business today that is as antiquated as we are in the automotive business when it comes to truly understanding our customers purchase habits and buying preferences. That’s primarily because we don’t take the time and make the effort to understand them, even though we have the data right at our fingertips.
The principal reason that many dealers aren’t using their data correctly is a lack of understanding about exactly what data they have, how to access it, and how to segregate it into valuable subsets of customers. Most dealers realize and understand that data mining can be an important asset and do use it in some very broad, general ways. It is most frequently used for following up with orphan owners and customers coming off-lease. While this is certainly a start, there are surely many more practical and effective ways to use the data. The underlining issue always seems to be a lack dealership knowledge as to how to get the data, segment it and then market it properly to the correct audience.
The big DMS providers like Reynolds and ADP certainly don’t make this process easy for dealers. In-fact they have implemented changes that actually make it harder for a dealer to effectively use their own customer data, especially if the dealer chooses to enlist the help of a third party marketer. There have been numerous public conflicts between dealers and their DMS providers regarding who actually owns the dealerships customer and transaction data, and just as importantly, who should have access to it. Despite the hurdles you might encounter with your DMS provider, it is well worth the effort to familiarize yourself with the process for extracting and marketing to these very valuable customers. If you don’t currently have an ongoing business practice in place for this you should add it to the top of your to-do-list.
Getting the data is one thing. But another challenge is that your data is only as good as the information that was put into the system by your employees. If customer data isn’t collected with diligence and accuracy every time a customer visits your store, you are missing a significant opportunity to learn more about that customers contact information and buying preferences. Do you have a process in place that every service writer asks the customer if their email or mailing address has changed? A recent survey of over 100 individual service departments indicated that only 6% routinely asked for updated customer contact information. The most recent US Census indicated that approximately 36 million Americans changed physical addresses last year. At a 6% update rate, dealers missed out on 34 million new customer contact points, just last year alone. Add in the number of email address and phone number changes and the total number of outdated customer contact records in dealers systems is staggering.
Compounding these issues, many dealerships don’t police how data is entered into their system and end up with multiple entries for the same customer. Not only does this make it more difficult to accurately track the customer’s transactional history, it also does a disservice to the customer, as the dealer will thus be frustrated in the effort to provide accurate detailed service records or tie the purchase of the vehicle to its entire service history.
There are many points along the way in which a customer can be duplicated. They can be entered multiple times in the CRM during the sales process. For example, if handled by multiple salespeople, or if the original record was in one person’s name, but the actual sale happened in another person’s. They could be entered as different customers if the husband brings a vehicle in for service on one occasion, and the wife brings the vehicle in a separate time. It’s even possible that a customer makes a purchase within the parts department and is then entered another time. Many dealerships work with CRM companies that create a database on top of the DMS that serves to further increase duplication.
Dealerships should have a strong business policy in place regarding their data and implement best practices for the collection of good, clean data, including full information on every customer contained in a single record. It would be wise to verify with each customer at every touch point that the information contained in their system is accurate, complete and current. Mandate that each customer has a single customer ID and that every transaction is recorded within that ID. Invest the time into cleaning up your CRM and DMS, with the ultimate goal of having identical databases with the cleanest data possible. This is an ongoing process that should be policed consistently. Unfortunately, many dealerships don’t have anyone tasked with marketing that has the right skill set to effectively accomplish this.
In my next blog, part three of this series, I will talk about how to get your data then clean it up so that it can be used effectively in target marketing.