Take your dealership through an oil change test

This is a simple market research project for you or a group of employees.  Budget between $400.00 and $600.00 for 20 oil changes in order to document the strengths and weaknesses of your nearest competition.  Evaluate items such as customer service, pricing, environment, what services your competition pushes, how long those services take, etc.  Then, compare your dealership to what your competitors have to offer.  If you don’t feel you have enough value to sell yourself, then work on a plan to add more.  This test is far superior to comparison surveys that only detail prices and services offered.  Price surveys help, but they don’t give you the full scope of how you exceed your competition.

Build your value propositions

Building the VALUE part of the equation means offering more for a competitive cost.  By working on both sides of the equation, you are more likely to cast a larger net of market influence to the variety of customers you can attract.  Below is a board to choose from.

The right price

Here is where the price comparison boards come in.  Find the most commonly priced services and concentrate most of your efforts there.  If you are trying to determine a good deal for a CV boot replacement, then you are giving away profit because you know too much about servicing a vehicle.  Offer consistent competitive prices on the most common services, and don’t feel like you need to reinvent the wheel with every communication.  Develop 12 to 15 core offers and vary those according to the season.

Also, be sure you communicate competitive offers for tires, brakes, oil changes & mufflers using consistency with your competitively-priced offers. This helps you battle pre-existing brands who offer similar services. Your customers may not purchase mufflers very often, but remember that you are targeting the core business model of competitors who began their companies with these types of services. Google “Midas” and you won’t see the word “muffler” in their company name or tagline anywhere.

DEAL = VALUE – PRICE. The key is to develop both sides of the equation.  Dealerships have so many built-in resources to attract and keep customers that they just don’t have a plan to use these resources to effectively build traffic.  Once you have the right values in the right places, take the time to sell these values across all communications and creatively reveal the great deal you have to offer prospective customers.  One common mistake dealers make is using the manufacturers’ programs that don’t allow you to sell the individual service department. Or, dealerships often use multiple marketing companies and don’t have a plan to make their marketing materials from different companies work in conjunction with each other.  Another challenge to communicating your unique values lies within your online presence. A customer might visit your website and go to service tab only to find it sells nothing.  Even worse, your website might include information and offers that are expired or under construction.  As far as message consistency goes, your customers might be getting a reminder for services due from one company with only the manufacturer’s brand all over it, but then they get mailed coupons that only sell on price rather than a marketing piece that sells price, customer service, convenience and the amenities of your individual dealership.

When dealers can go through the simple process of comparing themselves to their competition and striving to outperform them, they improve how much of a deal they offer their customers.  Evaluating the comparisons and finding new ways to beat out the competition ultimately allows you to drive in more traffic and increase retention.  The difficult part is managing a consistent communications plan over an entire year, with multiple solutions and multiple companies, even if your specific manufacturer dictates some of your choices in marketing services.  The challenge of exclusively working with manufacturer-backed marketing programs is a story for another time.

Economic times change and the question becomes this:  What have you done to ensure your service department has changed with the economy?  The competition is getting thicker and the customer has less expendable income.  The aftermarkets are catching up and catching on to how to take more share.  Larger and mid-sized service shops are emerging, whereas 15 years ago it was you vs. “Mike the mechanic.”  Add into this the need to adapt and utilize technology and the vast amount of choices you have. The pressure is on!  Even if you are the entrepreneurial service manager that your dealership needs, do you have the right tools to become successful?

Dictionary.com defines an entrepreneur as “a person who organizes and manages any business usually with considerable initiative and risk.” I would say that is the perfect description for today’s average service manager who runs the entire back half and the largest profit center in the dealership.  In order to initiate anything or take risk, though, you must have the right tools to adapt to the market.  Check your toolbox for the following tools and the right approach to successfully adapt.

Adaptability and the Approach

Step one – Keep it simple.  Customers want a deal.  Think of a deal as a mathematical equation.  Value – Cost = deal.

Step two – Define the two.  Value – what does your dealership offer that the aftermarket and the dealer down the street does not?  If you can’t come up with good values, create them.   Cost – define what your pricing is compared to the aftermarket shop down the street.  What offers will you put out in your market that will drive in traffic?   If you follow this approach correctly,  then you should be blowing the competitors out of the water with value.

Step Three – How do I get this out to the customer every time I spend money on advertising my service department?  Always sell your value at a good cost and customers will respond simply because it is a good deal.

The Major Tools of Action

Your message, your vehicle - Web, email, direct mail and reminders seem to be the predominant programs for marketing and driving traffic into your store.  Look out for up- -and-comers like texting and mobile apps.  The goal is to build all these systems to work together to sell the values at the cost that equals an unbeatable deal.  It may seem like there are new programs and promises added every day, but keep your message simple and consistent no matter how you market to your customers.

Sell yourself – You are the ultimate judge of manufacturers’ programs, but be sure they provide you enough flexibility and adaptability to sell YOUR values.  After all, dealerships are interested in keeping their customers loyal to their individual stores, not just the manufacturers’ brands.  From your dealership’s background to the offers, always sell you!

Manufacturer Your Dealership

• Factory-trained technicians
• Your staff of many years
• Factory-backed parts
• The new big-cost showroom
• Extended hours
• Your special loyalty program
• Newest vehicle launch
• Wi-Fi business center
• Loaner cars
• Car wash

Get control – The riskiest move you can make in today’s market is no move at all.  Every service manager should have a specific plan and the freedom to implement it.  Service manager turnover is higher than ever because some managers can’t adapt to the vision needed. Or, perhaps they are tied down by a general manager or dealer principle who doesn’t value the service departments or want a manager who can adapt.

The bottom line is that adaptability and control are intricate parts to marketing and selling yourself because they allow you to market what’s most important – value.  You can look at new programs or impressive technologies, as you should. However, when you evaluate the strategy, always keep it simple and ask yourself, “How will this sell the value at the right cost so my customers believe they’re getting a good deal?”

Your dealership has the leadership and vision to blow the aftermarket away.  This is all based on the fact that you can provide so much more value at a competitive price.  The largest hurdle for dealers involves a lack of time or resources to build up the many programs they could be adding – programs that could drive in more traffic and dominate those aftermarket programs.  But, that is a story of for another day…

This strategy sounds great, but it’s an important trend to monitor before making the jump. Many manufacturers’ service programs are heavily promoting this “right-time” strategy and if you are on one of those programs or if you are being pushed towards one, it is important that you understand the pro’s and con’s.

What is the $200 service marketing budget?

Could marketing be as simple as a sticker in the window? If it’s that simple, then it will cost you about $200 for the year.

Using an algorithm to predict human behavior is all focused on using today’s technology to follow the patterns of a specific VIN within your database to tell when it’s due for service. Then you send a message to the customer that owns that VIN, telling them their vehicle is due. So doesn’t an oil change sticker in the window do the same thing?  The sticker is in front of the customer exactly when the vin is due for its next service.  Data logic is a good thing but this approach can miss the target completely because it doesn’t take into consideration WHY THE CUSTOMER SHOULD CHOOSE YOU!

Here is the reality… The customer is fully aware of when they are due to come into the dealership, maybe because of the sticker in the window, or perhaps even the vehicle itself telling them it is time. The real indecision for the customer is who they will service with. Timing your marketing is important but it still doesn’t sell the customer on the fact that they should use you versus the many other choices they have for service.

The loyal customer myth.

Timing the message to when a vehicle is due for service has been around for a while.  Many programs have done it but not so successfully because they believe the success of the program is based on timing.  The problem is customers are very difficult to predict and have developed bad habits to NOT service on time.  For example in the average dealership less than 36% of the customers use the dealership for multiple visits in one year, which means you don’t get the full share of the customer. Also, did you know that more than 80% of your customers do not come in within the recommended time frame that you have sent that targeted service reminder. They’ll probably end up doing that service much later. The right message at the right time is a misnomer with many of your customers because to them, there are multiple, “right times”.

Bad strategy.

Your customer’s relationship is not with a vin number, it is with YOU.  Unfortunately some customers are aware that their vehicle is due for service, but simply choose not to use your dealership.  You need to get involved with the customers buying decisions and educate them on why they should do business with you rather than the competitor. If you concentrate your communications and your offers to address convenience, trust, and competitive price in your market, then you will start focusing on the primary driver of service maintenance decisions… Why to use you.

Why customers perform service at your dealership. Bullet pointing your amenities in the optional black text of a manufacture’s direct mail piece is not going to cut it any more.  Amenities such as, night owl drop off are a given and you need to find more creative ways to sell why customers should choose you. The servicing relationship is between the customer and the local dealer and NOT the manufacturers logo stamped on a communication. Many programs don’t account for the control needed to allow your personalized message that tells the customer why you are the best choice for service. Remember, relationships are about people and reputations, not logos and bullet points.

How to sell you.  Make it simple and ask yourself, “What can I offer that the aftermarket does not?”  Then, spread the word through consistency of communications.

People – Put pictures and names of your service writers on your direct mail communications, especially if you have employees that have been around for a while.  Most of your true retention comes from your customers’ relationships with them.

Price – Keep the Oil Change price down but don’t give up margin on coupons for services unfamiliar to the customer.

Amenities – Shuttle service, loaner cars, car washes, Wi-Fi are all things that make it more convenient to do business at the dealership, and lack of convenience is a leading reason why customers don’t stay loyal to dealerships.

Expertise – Sell the customers on the value of your staff’s training, expertise, and service guarantees. Your goal is to address the primary weaknesses most dealerships have…trust.

The smartest, “Smart Marketing”, is one that drives in large volumes of traffic.  Your smarter goal should be to tweak your communications programs continually to grow your overall retention and customer frequency. The cost of service marketing is significantly low, compared to the returns possible by building a loyal customer base that it doesn’t make sense to use some algorithm to shoot a BB through a straw. You also don’t need a blanketed shot gun approach but frequency is still an important part of making an impression and that consistency of message will build the trust it takes to truly earn a customer’s business.

Statistics quoted are from the 2011 Average Database Diagnostic and/or a sampling automotive dealerships in the United States.

How are you going to market your dealership to make sure you get the lion’s share of warranty and maintenance work on the vehicles sold in your Primary Marketing Area (PMA)?

When your industry changes, your marketing plan has to change with it.  The introduction of hybrids is an automotive service marketing game changer.  Aftermarket shops typically don’t have the resources to acquire certification for maintenance on all the different models in the market. Currently, it is a niche they can ignore and still survive. They will always be playing catch-up with the newest technologies.  As a result, the other manufacturer dealerships in your area have now become your main competitors for this lucrative market.

Manufacturers are increasingly turning to large national programs that spew generic mailers and e-mails to weary-eyed customers who may be suspicious of dealerships. These national programs may group services efficiently in relation to cost, but do they produce results effectively?  Sadly, the promotions they produce are necessarily general in nature. They can’t convey the attributes of your specific service center.  These national programs promote only the message of the manufacturer, not that of your dealership.

If you want to have the largest market share in your PMA, you have to accentuate your dealership’s services, not merely subscribe to the herd mentality of a faceless national program.  In short, you have to stand out from the crowd. You need an agency that can create custom promotions that tell your story.  Have you remodeled your dealership lately?  Have you expanded your service hours? Perhaps you have the most certified technicians to accommodate hybrid owners.  Your service department’s story needs to be told, and your marketing plan is the avenue to convey that message to your customers.

Regional marketing companies like Traffic Builders are uniquely qualified to sell your service department.  Traffic Builders has an in-house graphic arts department that creates customized targeted messages that emphasize your dealership’s strengths. They tailor your communications to visually promote your value in a way that is compelling to your unique customer segments.  In contrast, national campaign postcards are necessarily impersonal and visually indistinguishable from dealership to dealership.  If you don’t make a personal connection with the customer with the artwork, they will disregard it immediately.

Regional agencies also have access to all the social media and can make a concerted effort to get your message out through these avenues.  Using the same message as your printed media means that your targeted promotion is viewed multiple ways by your customers.  Of course, the national programs have these same outlets, but again, the message isn’t yours specifically.  It’s profitable to use these emerging media in a comprehensive marketing program to accentuate your dealership’s niche. National programs strengthen the brand, not your service center.

Remember, the automotive service market is changing, and it’s to a service manager’s advantage to work with a marketing company that can convey a dealership’s specific message and value.  And in areas of new and proprietary technologies such as hybrids, service managers will be competing primarily with the other regional dealerships who service similar manufacturer vehicles.  Don’t be lulled into complacency with a national program by thinking that a manufacturer brand message is good enough.  Be the leader in your PMA with a targeted, results-oriented program backed by superior production value—one that sufficiently conveys your dealerships’ unique characteristics.

A Ford dealership, in a top 25 market, wanted to avoid its service being viewed merely as a commodity. Service marketing here had been Ford-focused with no real difference between the national brand and the individual dealership. The dealer had a reputation for quality expert service, but this wasn’t able to be communicated in their manufacturer-crafted marketing. Even though they did not have the newest facility or amenities, they felt their highly skilled, friendly technicians knew how to project value and confidence with customers.

Similarly, this dealership wanted a marketing partner who shared their personal-touch philosophy. Other marketing companies they had worked with in the past were absentee and difficult to work with. Furthermore, the service manager wondered how someone who had never visited his dealership could really help him improve repair order traffic. He wanted a marketing partner who would manage his service advertising effectively so he could spend his time with customers on the service drive.

Approach

Traffic Builders began by performing a Database Diagnostic^™.  Customer segments and behavior along with previously uncovered marketing opportunities were identified. A unique dealership-specific strategy was crafted including a series of messages intended to touch the entire database of customers and improve return-on-investment. Immediate opportunities were addressed through service reminder letters, declined-service letters, direct mail promotions to regular customers, and the use of Ford co-op.

Working very closely with the service manager and the service advisors, Traffic Builders identified the key attributes of the dealership that enticed loyal customers to bring their vehicles in for service as well as a couple of misconceptions that kept some customers away.

Keeping Loyal Customers Loyal

We overhauled their service reminder letter program to improve its effectiveness and further the dealership’s brand position of “quality people providing quality service.” A picture is worth a thousand words, so we incorporated as many dealership-related images as possible. Photos of the dealership provided the immediate recognition of this long-time landmark facility. And, most importantly, photos and the personal signature of each of the service advisors provided the personal touch with which consumers connect.

In addition to the standard recommended service letters based on mileage intervals, we began mailing thank you letters to every customer who purchased a new or used vehicle from the dealership introducing them to their service advisor and inviting them to the service department for accessories and any necessary maintenance. This helped the dealership improve their retention rates.

Another key addition was declined-service letters following a customer’s visit. According to the NADA, nearly 40% of consumers decline some service each time they visit a dealership. We had to address this segment in order to further the advisory relationship and reinforce the dealership’s service value for a next service visit. By mining the database for this new information, the service advisors were more connected to their customers, and Traffic Builders created an opportunity to increase dealership frequency-of-visits and recover service previously viewed as a final declination of service.

This is where Traffic Builders’ experience and commitment to our client’s success came into play. Declined-service letters only work if the service advisors enter notes about the customers’ needs within the database. To encourage and promote this practice, Traffic Builders provided training for the service advisors as well as visual prompts for each service desk to serve as reminders. Monthly results reporting included a synopsis of the number of declined-service letters written by each advisor as well as the results and amount of revenue associated with those letters. Seeing tremendous gains in revenue and increases in their personal income meant the service advisors were more than happy to enter this information with each repair order.

Direct Mail Communications Overhaul

A customized communication plan was projected for six months. Each communication was analyzed by dialing back into the system to match customers in the mailing to customers who came in during each promotion time period. Our REV^® reporting allows our marketing team to not only analyze valuable information but also adjust each new marketing message to continually improve return-on-investment and refine the marketing message to each audience.

Segmented communications served several important purposes:

• Reinforced the brand
• Communicated value with a highly competitive price
• Established the dealer as “quick” and “convenient”
• Gave the dealer visibility with customized name recognition
• Positioned the dealer as a valued information resource
• Took advantage of co-op dollars

As industry veterans, we recognize customers bring (or don’t bring) their cars to dealerships for a variety of different reasons. Consumer surveys show they choose aftermarket service providers primarily due to perceptions that the dealership is inconvenient and expensive.

To address these perceptions, our client added a QuickLane^® to their offering, and we created a direct mail postcard highlighting this convenience and a separate mailer sent only to Ford customers.

Additional information derived from the Database Diagnostic^™ on their non-Ford customer-base suggested a female demographic, so our artwork was geared toward women and families.

In marketing to this dealer’s long-time loyal Ford customers, a large portion of whom were over 60 years of age, our message appealed to their desire to take care of their cars, save fuel and extend the life of the vehicle. Our direct marketing focused on quality and the staff’s tenure, positioning them as trustworthy experts in automotive service. Our design was unique, similar to a printed newspaper – a trusted source of information. We used this design to create a regular mail piece where the dealership could provide additional information about their staff, tips for fuel economy or tips for safe driving.

Results

The dealership management gained new knowledge of their database, received a customized direct marketing strategy and plan to execute, had a customized identity incorporated into their marketing, and highlighted service features previously unknown to their customers. Service advisors were more proactive and engaged in marketing.

• The QuickLane^® postcard created a steady flow of customers.
• The newsletter-type mailers increased frequency among loyal Ford customers, attracted older model vehicles and positioned this dealership as a reliable source for service.
• The dealership experienced tremendous growth in the key areas of focus we incorporated into their marketing.
• Their average repair order increased 10% and their overall RO count increased 10% as compared with the previous year.

The critical factors in advertising are reach and frequency. This is as true for dealerships as it is for every business. Regardless of changes in shopping habits, technology or economic trends, we must get our message out to the right consumers, and we must get that message to them often enough to make an impact. It is profoundly naive to think consumers need to receive only one message through the medium of their choice in order to compel them to bring their vehicles in to the dealership for service. Consider the thousands of contrary messages they receive daily – advertisements from quick-lube facilities, independent service providers, other dealerships. Consider a scenario where your dealership sends one e-mail to a customer who, according to your records, is due for service. At the same time, the customer receives an inbox full of other e-mail messages with similar themes, various direct mail pieces, hears multiple radio commercials and views literally thousands of TV and internet ads from competitors. What are the chances that your e-mail will win the battle for the customer’s attention—especially since it looks exactly like every other dealership’s template (stressing only the manufacturer, not your dealership’s specific message and brand)?

Current manufacturers’ service marketing programs suggest dealers advertise to “the right customers at the right time.” That is a very smart idea, and, I suppose if your dealership is the only automotive service option in the area, sufficient. However, this plan fails to consider the rules of reach and frequency and sends one message through one medium.

Consider a Toyota dealership we work with in the Midwest. They were skeptical of the manufacturer’s recommended program because, when they took a deeper look, they learned that the only message many of the customers in their database would receive was a notification that their vehicle was due for service. And the only medium used to send that message was e-mail.

On the surface, this seems like a great idea for a number of reasons. Many consumers request e-mail messages instead of direct mail, dealers want to go green, and it is significantly less expensive to send e-mail than direct mail. But sending customers messages only when you suspect their cars need scheduled maintenance is a huge mistake. And using only a passive medium—such as e-mail that allows the consumer to delete the message without seeing any part of it—will cost the dealership more in the form of lost RO traffic than it could ever hope to save by using digital advertising methods exclusively.

Using direct mail, we sent a targeted message to customers within the database who had not serviced for 2 to 18 months and were not due for service. This is the key point: these customers would not have received any communication through the standard manufacturer’s marketing program. Furthermore, we followed this direct mail piece two weeks later with a corresponding e-mail message. In our strategy, e-mail is used to reinforce, not replace, direct mail.

With compelling offers for common services, this campaign generated a 13.7% response rate. More importantly, it brought in more than $100,000 in RO revenue. Again, these were customers whose last service date was between 2 and 18 months prior to the mailing, and they were NOT due for a scheduled service. With the manufacturer’s marketing program, these customers would not have received any communication from the dealership, and the dealership would not have benefited from revenue they generated. We de-duped the list so regular customers who were probably coming in to the dealership anyway did not receive this campaign.

It’s a little like baking a cake. You might add to the recipe and substitute certain ingredients, but there are a few critical ingredients that cannot be forgotten. If you forget to add the eggs, your cake will fail to rise. Leave out the flour and your cake is, well…just goo.

Similarly, the “right customer, right time” philosophy forgets two important ingredients: the right medium (and multiple mediums working in tandem) and the right frequency. Without them, your dealership’s service department will not rise to its full potential.

According to an aftermarket service association study, new car service departments charge 33% more for the same service than the aftermarket. A dealership service manager might rightly say that this study is a bit self-serving and probably biased, but it really doesn’t matter. What matters is your customer’s perception.

With that in mind, have you ever really asked your potential customers why they don’t service with you?

If you opened a brand-new franchise today, many of your potential customers would most likely tell you that you are too expensive—even if none of them had yet come through your doors.

I mentioned at the beginning that the sell-it-for-less strategy isn’t necessarily the best way to go. So, what is? I would suggest changing the nature of the conversation and the type of customer you go after. In other words, target your “value market.”

In a recent promotion, a service director targeted all of the lost customers in his dealer group offering them a free oil change if they would answer one question. Why are you no longer coming to us for service? As you can see in the chart, the customers said exactly what we thought they would say. 31% of customers polled said the dealer was too expensive. 12% said the dealer wasn’t close enough to home, and 9% cited a bad previous experience or had an oil change program somewhere else.

Once you find out what your customers’ reasons are, what are you going to do about it?

Start targeting the “value market.” The value market is the large portion of your potential or lost customers who would purchase a product or service based on it providing a value-added benefit over and above the industry standard. Every seller of products or services should know what they provide better for their customers and why. Your service customers are either using a quick service solution because it saves them time or an aftermarket program because they believe it’s cheaper. The smarter marketing strategy is to specifically target profitable customers who would readily admit that, if you provided a greater service experience value, they would be willing to overcome their perception of dealerships being more expensive and service with you.

You can’t change the minds of the “would nevers.” There is a portion of the customers we surveyed that would fall into the “would never” category. Too many dealers are looking to build their businesses by trying to get brand-new business from people who will most likely never choose to service with a dealership. What they say might sound something like this, “I would never pay $19.95 for an oil change when I could do it myself for 14.95.” or “I would never go to the dealership because they charge way too much.” I am not saying you can never attract these types of customers, but it is very expensive and takes a long time.

Three stages of a “value market” plan:

• • List the advantages you provide your customers and create even more if you have the power.
• • Stay in front of your customers on a regular basis selling both value and price.
• • Sell the values in your market.

You need to create a value plan and identify the advantages you provide. Every market is unique and every dealership has a particular vision or brand. I encourage you to spend some time enumerating what makes your dealership unique and a better value for your customers in your market. How much value do you need to provide in order for the customers you are seeking to jump ship from their current automotive service provider to you? Think of it like this: the value you provide equals the benefits minus the cost. This net value of this equation is known as your value proposition. The list below shows a number of value-added intangibles that you find in the automotive service industry across the country. It’s a good place to start.

• • Manufacturer guarantee on parts
• • Manufacturer guarantee on service
• • Express lane service
• • Multi-point inspections
• • Shuttle services
• • Complimentary car wash/vacuum
• • Rental vehicle program
• • Points program
• • Knowledgeable and friendly staff
• • State-of-the-art facility
• • Certified technicians
• • Extended hours for customer convenience
• • Customer lounge (FREE Wi-Fi, refreshments, TV, etc.)
• • Community involvement
• • Multiple locations

How do I target the value market? Once you’ve determined the benefits/amenities of which your value proposition is comprised, it’s time to go after those potential “value market” customers. The answer to how you target them is, in many ways, no different from other types of marketing. It takes frequency and consistency. Marketing is an art and a science.

Many service marketing solution providers are telling customers it is merely about getting the right message to the right person. While that’s important, there is more to it than that. If that statement was completely true, then all we would need to do is put a sticker on customers’ windshields informing them when the next service is due and wait for them to show up.

Most likely you are using the “big four” to target your service customers—the internet, e-mail, reminders and direct mail. Every time you send a message to a customer, you articulate a unified values plan (such as above) and communicate that to those potential customers who will try you if you can convince them as to why they get more with you.

What does it look like?

• • Pictures worth a thousand words – facility, waiting room and staff
• • Take up panel space to sell one concept per month
• • Create simple artwork regarding standard services like shuttles, car washes, extended hours
• • Put frequent visitor programs and dealership-specific benefits in front of the customer

What does it cost? If you choose a marketing strategy that sells this type of value, you should expect to invest 10% – 15% more. However, the potential for return is worth the extra expenditure. Saving money on the front-end can actually mean losing money on the tail-end. And that really isn’t a savings.

A value-market strategy like this will typically require that you go to a company that provides a level of customization that allows you to market your dealership and stress your particular message instead of a vendor who is only able to stress the manufacturer.

Don’t get me wrong—there is a place for using competitive and lower-than-normal pricing in order to attract certain segments of your potential market. Price is the number one negative perception of the automotive industry, and we must address it. However, addressing that challenge by focusing exclusively on price doesn’t totally remove the mountain of challenges you face by being a new car dealer. You need to promote the added value you provide through a clear and consistent marketing message so that your customers will say, “I know I might get it a little cheaper elsewhere, but it’s worth it to me to pay a little more because (your dealership) offers (value proposition).”

Our culture encourages consumers to seek out the “latest and greatest” in almost everything, so why are people still so responsive to direct mail? According to researchers the answer may be a combination of habits being hardwired into consumers’ brains and the stressful environment we live in.

A study led by MIT’s McGovern Institute reveals that important neural activity patterns in the brain change when habits are formed. They can change again when habits are broken, but will quickly remerge when something rekindles that extinguished habit.

Direct mailers have been around much longer than newer marketing methods, and this familiarity is part of what makes them successful. Consumers are conditioned to use them. That’s not to say that newer technologies aren’t effective. However, their usage requires extensive research to determine effectiveness, target audience and tracking. Up to now, those technologies simply have not been as effective as direct mail.

According to scientists another intriguing reason for the forceful power of habits is the stress level of our culture. A recent study with lab rats was published in Science magazine, revealing that chronic stress can actually shrink the part of the brain that allows for changed neural activity patterns. The habit controlling part of the brain grew with stress levels, thus old habits were fallen back upon and fewer new patterns were developed. Relating this to an automotive consumer: the more random and unpredictable stressors are in the world, the more the customer will cling to old habits.

When reviewing your marketing strategy remember that direct mail is a tried and true method of reaching a world-weary, stressed consumer who finds comfort in repetitive habits. Consumers are hardwired to respond to the mailers they have used for years.  Mailers give them comfort to move on to the next unknown stressor.   As time goes by a select few of these emerging technologies will also form to become comfortable habbits to the consumers.  When it is obvious that these new technologies yield a strong enough result to focus on, you should fold them into your current marketing portfolio and view them as another way to communicate with your customers.

1. “Brain researchers explain why old habits die hard.” October 20^th, 2005. http://www.physorg.com/news 7412.html
2. “Stressed out rats become creatures of habit” October 3^rd, 2009 http://blogs.discovermagazine.com/80beats/2009/08/03/stressed-out-lab-rats-become-creatures-of-habit/

The first thing to remember when giving thanks is to just give thanks. Most people don’t appreciate conditional apologies or thanks, so be careful that your “thank you” doesn’t come across as another way for you to get their money. If you include a coupon, ensure that your thank-you message isn’t off-putting because it solicits additional spending by the customer…even if it’s at a savings. Since you should already be taking care of couponing with an orchestrated direct marketing campaign, the best approach might be to focus exclusively on the thank-you message to build rapport with your customers.

The most personal way to recognize your customers is to send them a handwritten note. It lets the customer know you took the time to think of him or her specifically. It is a personalized reminder that your business depends on customer patronage. This practice certainly cannot be done for all of your customers, so make a plan to write perhaps a couple of notes a day. One way to choose good candidates for handwritten notes is to run an operations report that shows the three most expensive customer-paid repair orders for that day. It is very possible that paying for the extensive repairs may have been a financial strain for these customers. They may have even financed the balance with your dealership. Write a letter to acknowledge their significant financial expenditure while reinforcing the quality and benefits of visiting your shop. You could even include references to programs that you are doing to keep costs down. Again, the handwritten note makes it personal and can help reduce any post-purchase (cost) dissonance customers may be feeling.

Another way to use handwritten thank-you notes is to recognize customers you think may have had a bad experience at your dealership. You can get their names from a variety of places including your service advisors and your voicemail. Even if you don’t think a complaint has merit, you should address it. If the customer felt strongly enough about the incident, you should honor his or her concern with a response. Write a letter that shows you understand what transpired, your dealership policy on the situation and what to expect next. Don’t forget to follow up afterwards. People love to see management reacting to their complaints and taking them seriously. It shows a willingness on the part of the dealership to “partner” with the customer to make a better service experience.

Thus, while pre-printed thank-you mailings and letters of appreciation that include coupons can all be effective, deliberately using handwritten thank-you notes or cards in a targeted fashion can greatly enhance the message of gratitude that you wish to extend to your customers.

Lastly, make sure all messages of gratitude are reinforced face-to-face when your customers visit your service department. People know they have aftermarket options, and those options may be cheaper. A polite, well-mannered service technician can create the positive atmosphere that builds brand loyalty by making customers feel good. Every time customers come to your service department, they are giving the gift of their business. Don’t take that relationship for granted. The astute service manager knows that happy customers drive in referrals. Happy customers are those who are recognized and appreciated. Direct marketing is a systematic communications model to send the right message, at the right time, to the right customer in the most efficient manner possible to produce the highest response.  The key word is response.  Sometimes there is just no substitute for the personal gesture of a hand written letter of care.

Marketing and advertising people are often “what box” type personalities. Even the craziest commercials on television can be given points for creativity and originality. And if you remember the name of the company or the product in one of those commercials, the ad has reached some level of success.

However, you may feel as if you don’t have time for creativity and originality. Maybe you work in a setting where “that’s the way it’s always been” means “that’s the way it’ll always be.” The prevailing attitude is definitively planted firmly inside the proverbial box.

But, maybe there’s a slight opening somewhere in that box. Check out this Top 10 list. Implement one thing. Maybe two. Track your success, and then you’ll be ready to step further out of the box the next chance you get.

1.     Be positive – The attitude of the leader is often reflected throughout the organization. Even the most difficult situations have something positive. It’s your job to show it. You don’t have to be a cheerleader to make this happen. Use your polished leadership skills to show the positive in as many ways as you can, especially with customers.

2.     Frequency and tracking – Successful advertising lies in frequency and tracking. Who are the first few companies you think of when it comes to advertising? They most likely top the list because they have advertised consistently over a long period of time. Then take the next step of tracking the engagement of your customers with your marketing efforts.

3.     E-mail is more than your Inbox – Overwhelmed with e-mail messages? Even more overwhelmed on how to fit e-mail into your marketing plan? Work with your marketing agency to come up with a realistic plan to include e-mail. It is a very targeted (and trackable) way to reach customers—especially the younger set.

4.     Plan ahead for disaster – Are you ready for disaster? I mean from a marketing perspective. It is a good idea to have a media kit in place, just in case. Have current shop photos and a fact sheet ready. Decide who will be the spokesperson/spokespeople for your shop if anything happens. Having a plan allows you to stay cool in the face of a disaster, and in the face of the media. How you react to a troubling situation can make or break your reputation.

5.     Investigate and exploit – You know those coupons you get from your aftermarket competitors? Use them. Secretly shop them and see what they do well…and what they don’t do well. Compare that information to what your shop does, and then make sure you do everything better.

6.     Educate and brag – Give your employees an edge. Send them to train in some specialty areas and, if they are adept teachers, have them train their co-workers. If the specialty is one to brag about, do so.

7.     Seal the gaps – Losing employees or customers? Employee and customer retention should be high on your priority list. Here’s where you can get creative. Find out what your employees and customers like and find a way to give it to them. This helps not only your bottom line, but your reputation in the community.

8.     Take the nickel tour – Be aware of what is happening in your shop. If you were walking into your shop for the first time, what would you think? Maybe ask an opinionated friend to give you his unadulterated view. Fresh eyes may see things that are problematic or that you have just unconsciously passed by.

9.     Meet the leaders to be a leader – Especially in smaller communities, who you know may help keep your dealership afloat. Solidify your name in the community through networking. Join the Chamber of Commerce. This is one of the basics of marketing and advertising—when someone needs something you can provide, you’ll be first that comes to mind.

Be a good neighbor – Do something in your community. Whether it is local charity or just having your dealership’s name on a local ball team’s shirt, show that you are a concerned player in the community. Pick your best internal spokespersons and get them to join a committee or their favorite local cause. That will engender good-will and bring customers in your door.

When I feel like this, it reminds me of a social studies lesson from middle school about subsistence farming. Subsistence agriculture is all about self-sufficiency—growing enough food to feed yourself and your family. In other words, just enough to get by.

When you are doing just enough to get by, you often fall back to what is comfortable, familiar or easy. You choose the cheapest and safest routes to advertise. Right or wrong, logical or not, your focus becomes that of a subsistence marketer, continually working with results being based primarily on the economic climate. This leaves you open to economic famine and the pestilence brought on by fierce competition that can wipe out your profit harvest

You probably have the shop, tools and employees that you need to complete your tasks, and your decisions are made based on a projection/budget of what the dealership will need for the coming year. You might produce only enough profit to sustain the business. Because surpluses are rare, your business doesn’t grow, accumulate capital or allow for additional specialized labor or projects, and you don’t feel like you can justify a more aggressive marketing strategy.

But, you do want to grow, right? Who wants to be stuck in a rut? So, how can you go from subsistence marketing to sustainable growth? You first have to focus on who you are and then how to get that message out.

Figure out what you do well or where your expertise lies — If you don’t know your strengths, you cannot expect your customers to know. Is your customer service the best in the area, or do you know hybrids better than anyone else? There are long-term benefits to truly understanding your strengths and weaknesses.

Determine what you are selling — Is it really just vehicle service or is it actually quality, relationships with customers or a manufacturer’s name? This goes hand-in-hand with knowing your strengths. Once you determine what you are selling, you’ve found your marketing focus. You can then focus on cultivating the right “crops.”

Branding — Once you know what you’re selling, make it part of an overall branding initiative. Make your image and message consistent with one another. Then, shout it out loud with consistency and make sure every employee can reinforce and articulate it accurately. This also helps with employee retention. If everybody feels as though they are on the same page, they are more likely to feel invested in the company and will be more willing to ride out the dry spells.

Some cheaper “crop dusting” marketing options can spread your message over a huge area, hoping that something will stick to the right customer. But, if you’re not getting the response you need, are you really saving money? The smarter alternative is to target different types of customers with specific messages geared to them. This will encourage greater growth and a higher return-on-investment. Less is more, as long as you pick the right ‘less.’ Work with an agency that can advise you of marketing initiatives that can be more efficient and, when streamlined, more cost-effective. Also, like the subsistence farmer, many service managers remain unaware of new technologies that increase yield, such as text messaging, e-mail marketing and electronic coupons. Whatever you choose, every marketing decision to showcase your brand should be planned and tracked.

With a clear vision and the right strategy, you can go from being a subsistence marketer to a successful marketer.

Inform everyone on your staff about the mailer, including details about the offers and limitations. Your marketing partner will send you a packet of extra copies of the mailer, as well as a laminated copy to post in the service drive. Don’t leave that box in the corner of your office to get buried by seven other things before the week is out. Pull out those extra copies and share them with your entire service staff to ensure everyone is well-informed.

Let everyone from your service advisors to your receptionist know about the mailer so they can answer questions effectively. Are you trying to win back lost or defecting customers? Is this mailer designed to increase frequency or loyalty among your regular customers? In one instance, after we sent out new customer acquisition mailers for a dealership, I tested the employees’ knowledge of the mailer. I called the main number listed on the mail piece and asked about the offer. The service manager had not communicated with his team about the mailer; the receptionist had no idea what I was talking about. I was transferred several times before I finally got a service advisor’s voice mailbox. Imagine how prospective customers would feel about that experience. They would most certainly not become new customers.

Discuss your expectations with your staff regarding how they handle coupons. Some service advisors and cashiers unwittingly express frustration to customers about the hassle of handling coupons. The customer often feels as though he or she is being punished for redeeming the coupon you sent them. Remind your staff to thank customers for coming and bringing in the offers. Be sure they are well-versed in the procedures for entering the repair order (RO) with the discount and attaching the coupon to the RO so they are not fumbling in front of the customer.

Train your staff to welcome back lost or defecting customers. Obviously, you want to provide customers with exceptional service, but a customer who has not been in your dealership before (or in a long time), should be handled with extra care. Consider offering a “welcome” or “welcome back” gift such as a key chain, coffee mug or other token gift.

Use the offers to up-sell. Your service advisors are trained to perform an inspection on every vehicle, right? They recommend additional services and repairs as needed. The extra copies of your mailer can be used to entice customers to go ahead and have those additional services performed immediately. Your chances of performing those services are significantly greater if you get to do it sooner rather than later. If customers leave the service drive with your recommendations, there’s a higher chance they will take their business to your competitor. Snag it while you can.

Feature a lead offer that represents a clear value. Are you concerned that you will be discounting your services to a customer who would otherwise have paid full price? Then perhaps your coupon strategy is a little off the mark. When designing a mailer, you must have a lead offer that sets the tone for the mailer, such as a low-cost oil change, that demonstrates you are price competitive. Keep in mind that you should advertise prices that are competitive but that don’t destroy your effective labor rate—ensuring that you can feel comfortable offering those prices to all your customers.

As with everything, inspect for what you expect. Perform “snoop calls” of your own. Give a friend a mailer and ask him or her to bring in a vehicle for service. Get input on how he or she was treated. Recognize your employees who handle customers effectively and coach those who could improve.

Getting effective marketing messages into the hands of your customers or prospective customers is really only half the battle. Service departments that consistently see great results are those where effective marketing goes beyond the mailer and permeates every step of the customer’s experience.

Download the “Mid-year Marketing Evaluation: Part 1″ Podcast

Chuck Patton, CEO/Owner of Traffic Builders, talks with AutoSuccess magazine on making a mid-year evaluation of your service department’s marketing strategy. Read More »

A recent review of 18 months of data for a large midwestern import dealership group (119 dealerships) showed that over a 12-month period, repair orders for vehicles with less than 60,000 miles had an average amount of $137.00. Vehicles with over 60,000 miles had an average repair order amount of $277.00.

Further review of the dealerships’ promotions revealed that the most successful dealers most often used coupons that featured an Oil Change and Filter, Free Alignment with Four Tires, and Coolant Service discounts. While these offers have proven very successful, but they will not grow the potentially lucrative older vehicle market segment. Why not include some coupons targeted directly at owners of older vehicles thereby bringing in additional customers who will spend more per repair order?

Service Managers need to frequently evaluate the direct mail coupons they offer to make sure they also include ones that match the consumer group with the highest growth potential. For your fall promotions, consider offers that target 60K, 90K and 120K maintenance packages. Offers for a percentage-off of all work done or an “older vehicle special” coupon are options that can attract new customers with older cars.

The “we only work on new vehicles” mentality no longer works in an industry that offers multiple years of free maintenance on new vehicles. By targeting the older vehicle segment of your market and pairing that with seasonal maintenance and preparation for winter weather, you have the potential to increase revenue and add new customers to your ranks.

*3/30/2009

Download the “Marketing in the Modern Automotive Market” Podcast

Chuck Patton, CEO/Owner of traffic Builders, talks with AutoSucess magazine about adapting to the challenges of the modern automotive marketplace. Read More »

One answer can be found in a success story that occurred recently in a southeastern U.S. market. There were two dealerships in close competition in the same metropolitan area. They had very different business philosophies and marketing plans that produced starkly contrasting results.

One dealership was an established business that valued the long-time relationships that had been built with their customers. They had a well-executed marketing plan that included mailers and reminder letters. They created value by consulting with customers and up-selling only services needed without regard to monthly sales goals. They knew that when their customers’ vehicles needed other services, those customers would be back. Their customer relations were as good as gold, and the repeat business was like money in the bank.

The second dealership was not as accommodating to customers. Their predatory up-selling offended the customer base, and most customers never came back. In fact, a customer database analysis revealed that 95% of the customers only serviced their vehicles one time in 12 months. The other 5% came in twice with almost no one returning more than that. The economic downturn, a poor marketing plan and the lack of attention to customer service all contributed to the sale of the dealership in 2009.

Our first dealership example went on to buy the failed dealership. They set out to win the loyalty of the other dealership’s previous customers by repeating behaviors that had made them successful at their original dealership. They sent a postcard to announce the change of management, accentuating customer service. The purchasing dealership knew that it had been pulling customers from over 30 miles away from the other dealership before it was sold. Customers could now trust the new, improved dealership for the customer service they expected—coupled with the added benefit of not having to drive as far for service.

The postcard was just part of the well-organized marketing strategy patterned after the one employed effectively at the first dealership. The current campaign included reminder letters, promotional mailers and e-mail campaigns. All were consistently branded with verbiage that promised their dedication to customer satisfaction.

After nine months, trending reports showed the success of using consistent marketing to attract and retain an untrusting customer base. In this case, the one-time visitor rate to the newly bought dealership decreased from 95% to 59%. Subsequently, second and third time visits grew to 26% and 11% respectively. The original dealership’s annual one- time visit percentage is an extremely low 50%. While that dealership lost some of their customers to their newly acquired dealership, they were both owned by the same group, and the real goal was to grow the whole market—which is what occurred.

Depending on the answers to these questions, you may want to consider making adjustments to your marketing plan for the second half of the year. As you take stock and plan your next six months, consider the following areas of opportunity upon which you can capitalize.

Retention—The retention measurement that makes the most sense is the one that measures the share of your customers’ business within a year. Start by separating your customers into the following categories:

• Number of times your customers have come in during the past 12 months
• Number of customers doing all their service with you
• Number of customers added in the last 12 months

What are you doing to retain your customers? Are you providing the best service in the market and going the extra mile to keep your customers happy? Consider loyalty programs and perks to show your commitment to a long-term relationship.

Unique opportunities—Warranty work affects us all and Toyota corporate is learning all too well how much cost is associated with it. For the dealer, however, warranty work can be a gold mine. Some dealers are saying that close to 40% of recall customers were new to their dealerships. Recalls are a great opportunity to make an impression on customers who are NOT typically working with the dealership. Train your team to spend some time to convert each recall customer into a long-term fan. Have your service manager meet every one of them—such as you might with the sale of a new car. Target them with a segmented letter or make a phone call to address the opportunity. Every dealership has warranty opportunities!

Older model programs—The units in operation most associated with dealership loyalty (newer cars or cars under warranty) have diminished significantly, and it will be quite some time before service opportunities are where they were several years ago. Create a strategy to become the new home for all older model vehicles. You have master technicians who have been with you longer than the age of some of those older vehicles!   Who better to fix those vehicles? Loyalty or older model programs that can be quite profitable do exist. Make sure your writers know how to sell the program and be willing to give a standard discount/benefit package.

Marketing—Separate your marketing investments into what has produced a direct result versus what has kept your name in the marketplace—and track the results for each category. This will allow you to look at what each investment yields in order to determine whether or not you’ve invested your marketing dollar wisely. If you haven’t already, plan through the end of this year—and even include all of January 2011. Most people give up on the last and first months just because they didn’t have anything planned. These are wasted opportunities if you have not prepared for them.

Technology assessment—Embrace the technology that comes your way as long as it helps you to manage your customers and your employees better. Too many companies are telling clients to do things because “this is where the market is going” or “your competitor is doing it.” Be careful about experimentation. Conduct some research and make sure that any technological expenditure fits within your budget and is a long-term solution, not a short-term jump on the latest bandwagon.

Email marketing—Dealerships set high expectations for e-mail because they are sold on the concept that it can replace direct mail. E-mail marketing is cost efficient and a great way to directly reach the small segment of your customers who actually respond to e-mail. However, our average client has e-mail addresses for only about 21% of his or her customer base. If you use e-mail marketing, make sure you incorporate it with direct mail and other solutions. To maximize your e-mail marketing efforts, create an e-mail collection process. Ask your customers how they prefer to be contacted. That will give you a good indication how to really reach your customers.

Spend your time being a great manager—This is an old school concept. Because most service managers are being pulled in so many different directions, they can’t do any one thing well. This is an environment where managers can stray from their core purpose of taking care of customers and managing the shop. Be sure not to lose that perspective when faced with additional expectations and responsibilities. Every purchase you make and every partner you work with should strengthen your position within the dealership, not give you more work.

One way to boost the perceived value of the dealership is to use direct mail with cost-competitive coupons. Dealers find coupons to be very effective in reducing negative perceptions about the added cost of the dealer’s service.

In addition to marketing initiatives, there are many simple behaviors you can start today that will instantly showcase your value—and they don’t cost anything to implement. They involved common courtesy coupled with a desire to make the customer’s visit as pleasant and unencumbered as possible. People like to feel that they are important to you, especially when they spend their hard-earned cash.

When a customer arrives, they expect congenial, attentive service advisors who properly evaluate a vehicle for necessary services. How helpful would it be if the service advisor suggested alternate transportation? Options could include: free shuttle service, a hassle-free rental from a neighboring vendor, or a courtesy car for services that require an extended stay. The key here is to offer transportation and not make the customer have to ask. That initial sincere interaction will create perceived value with customers by giving them something they don’t get at the aftermarket. Often, customers have already thought out their transportation needs before bringing in their vehicles. But, by taking time to make the suggestion, you’re acknowledging that service visits can often interrupt their busy schedules, and you are committed to making their experiences as hassle-free as possible. You see them as real people instead of merely your next car to fix. Most aftermarket shops can’t accommodate all of those options or just don’t take the time. When it comes to impressing a customer and building value in your brand, you have to pay attention to details.

When customers come back to pick up their vehicles, it is your last chance to make a lasting impression. Ideally, the service advisor should greet customers and ask if there is anything else they need. Once any issues are resolved, customers need to be educated on all of the procedures performed on the vehicle. People like seeing worn parts and hearing exactly why they needed replacement. It is valuable to gain knowledge of one’s vehicle, and it can lessen the impact of the final sum on the invoice that may follow.

After customers have paid, you still have opportunity to impress them and create value. A practice of preferred dealers is to escort customers to their vehicles instead of simply handing them the keys and saying, “Have a nice day.” This is an opportunity to engage them and get valuable feedback on your operation. Customers will probably be pleased that you take the time and effort to attend to them personally.

Once you reach the vehicle, open the door for your customer and remove the floorboard paper, seat plastic and mirror tag. The customer doesn’t need those things and shouldn’t have to be bothered with disposing of them. However, allowing these disposable items to be viewed before you take them out makes it obvious that the technicians took care in ensuring that the vehicle interior stayed clean during the repair. Folks know that service technicians encounter all types of grease and grime. And who among us hasn’t gotten back into our car as we prepared to start it and drive off and noticed that our steering wheel feels just a little grimy? That’s not a good last impression. A great finishing touch is to clean the steering wheel and gearshift with an anti-microbial wipe and dry them with a paper towel.

Being attentive to customers’ needs doesn’t always involve what goes on in the shop. All of these suggestions are inexpensive ways to boost your appeal to your customers. You might be able to think of and institute others. Ensuring customer satisfaction from beginning to end will go a long way in creating the “value added” experience that will sufficiently differentiate you from the aftermarket in order to attract and retain your customers.

To increase customer frequency and revenue through a cost-effective, targeted marketing program for a group of dealerships in a northern Midwestern metropolitan area.

An average dealership has 63-70% of their customers coming in only one time per year. So out of every 10,000 customers who have serviced with a particular dealership, roughly 7,000 serviced only one time within the past 12 months. Bringing back only 20% of these 7,000 one-time customers a second time could potentially mean $252,000 in additional revenue in a year.*

Since most surveys indicate that keeping an existing customer is five to seven times more profitable than acquiring a new one, it’s obvious that luring back customers who are already familiar with the dealership is a cost-effective way to get more for your marketing dollar.

Solution

Extend an aggressive offer to lost customers in order to entice them back.

Every month in 2009, a group of seven dealers participated in group-focused lost-customer postcard campaigns. The dealers all serviced the same manufactures, so they pooled their resources to win back customers who were no longer getting regular service.

The group-focused postcard campaign drove down production costs for each dealer. The mailers invited customers to redeem cost-competitive coupons at any of the listed dealers. Customers could either find a new dealership nearby or give their original dealership a second try. This created options for the customer, which is helpful in competing with the aftermarket. The main focus of the postcard was to grow the total market. That results in everyone winning—including the customer.

Results

The results showed a higher-than-average response:

The group had an average response of 4.11%. Lost-customer postcards typically have, by comparison, a 2-3% response. The average repair order for these returning customers was $182.25—significantly above the average of $150 per RO. Our group grew their market by 1.59%. The combination of brand awareness, cost containment and providing choices for consumers is a winner in the marketplace.

It is harder than ever to generate the same revenue from parts and service customers. Vehicle quality has consistently increased over the last decade, and preventive maintenance needed for these models has been reduced. Even oil changes have become less frequent—with the introduction of synthetic oil blends. The bottom line is that it is difficult to identify the right marketing plan to increase your service department’s gross profits and year-to-year sales. Where can we find a market opportunity to drive in customers?

Approach

Over the years, dealerships have emphasized new car sales and service. Some have forgotten the older model vehicles. What would be the result if we specifically targeted those older-year models, and how would that affect the dealer’s profitability? Perhaps service managers should rethink the paradigm of their primary market being the servicing of new vehicles. This shift in focus could boost the dealership’s profitability during more difficult economic times.

By increasing the scope of your promotion to include older models, you could bring in vehicles needing more service than vehicles half their age. Also, these older cars will need parts that are more expensive and require higher labor charges. This combination will increase the average amount of the dealership’s repair orders—making the dealership more profitable.

A Database Diagnostic™ report for three Midwestern import dealers showed the gross revenue for the most profitable model years. All labor and parts dollars were analyzed to account for the lack of warranty work on older vehicles and the lack of customer-paid work on the newest models. The goal was to have yearly totals in order to do a trend analysis to find the model years of vehicles with the greatest sales opportunity for the service department. The recommendation was a direct mail and e-mail promotion to reach owners of older-model vehicles.

Results

The data for the 8- to 10-year-old models shows that the average repair orders for those years have the highest value of all year models. The higher average repair order (RO) amounts show the market potential for this otherwise forgotten group. In fact, the average RO for vehicles 8- to 10 years old was consistently twice that of those up to 5 years old. While it is true that older vehicles come in somewhat less often, this fact is negated by the large dollar amounts they represent once they are at the dealership.

Looking at the chart below that shows annual gross sales, one can see that years 8-10 provide 35% of all gross revenue. It is worth mentioning that they achieved a similar amount of revenue with fewer visits.

Summary

The tight marketplace requires that service managers think out of the box when defining their market and their customers. Sometimes it pays to challenge industry standards and look at your data as a way to direct  marketing decisions. According to our research, dealers should be using direct marketing to reach customers with 8- to 10-year-old vehicles. The dealer could make three times as much or more by servicing an 8-year-old vehicle as opposed to a 2-year-old vehicle. An older-model vehicle target approach could boost gross sales by creating programs to target vintage vehicles with price-competitive coupons. One strategy would target only older vehicles. Another would be to target all potential customers regardless of UIO.

We all depend on our service department to level off the front-end sales loss during a down sales cycle. The good news is service can still be there for you. Challenge yourself to look at things in a new light and start assessing the importance of reinvesting in your service department just as you would your personal financial profile. Most dealers set a goal for their service department to achieve the highest absorption rate possible. If you have the right perspective, your service department can achieve this and double as a prospect base to build strong sales. This is because the larger your customer base is in service, the stronger your prospect base is to sales. So, is your service department a profit center or is it actually an advertising investment? Increased loyalty in your service department will eventually lead to a larger customer base to mine for sales. But, first you must set it as a priority, and second you must mine it for potential. So, if you are thinking of cutting back on your service advertising, think again.

Here is a clear argument for making your service department an investment — go through the most current financial numbers and trends at NADA.org and read between the lines:

1. The following numbers were down two years ago: total dealership sales, net profit before taxes and new vehicle sales.
2. The largest increases in income came from the used car department and the service department.
3. The average dealership achieves around $31 million in sales. Just under $4 million of that comes from service department.
4. In 2006, the service and parts department profi ts accounted for 77 percent of total dealership operating profits, and that number is rising.
5. If you consider any of the forecasting about the economy and how that will effect your retail department, it makes sense to concentrate your advertising investment in the area that makes you the most money — the service department.
6. Your service department is definitely a profit center.

Now, here are a few ideas HOW to expand your service department vision from just a profit center to an advertising investment:

1. Take control of your service advertising and make sure you are marketing YOUR dealership, not the manufacturer. Service marketing is typically a communication that occurs four or more times a year, and some programs you might be using spend more time talking about what the manufacturer offers and less about what your dealership offers.
2. Don’t cut the budget. Most dealerships invest less than 10 percent of their total advertising budget in the very department that produces 77 percent of the profit. That might be too low. Typically the only soft sale, customer relations branding you will do is in service.
3. The key customers for prospecting are those who have serviced their vehicle within the past 12 months and have a three- to four-year-old vehicle. Don’t be surprised if that number stretches to five or six years, given the down economy.
4. Look to make your less loyal clients more loyal and build your primary purchase base. Try marketing to service customers who have not been to your dealership in 12 to 36 months in a completely different way than loyal clients. Get aggressive about your offers and approach the marketing conversation differently.
5. Sell yourself. Keep a consistent message of quality and talk about what you have to offer, or, what is known as “your brand.” Remember, if the customer is making a purchase decision, they will start by listening to someone they like and trust.
6. Be careful about which advertising experts you listen to. Service marketing doesn’t work like the one event wonders that may have been proposed to you.
7. How many customers bought from you but are not servicing? If you use direct mail and they are dialing into your database, they should be able to tell you who you are retaining and who you are not.
8. Monitor everything, such as the number of loyal customers, number of customers who service between 0-24 months, and number of defecting customers. Send a message according to known behavior, not just the year and model.

Depending on what statistic you follow, a loyal client to the service department will give you a chance to sell them their next vehicle about 75 to 85 percent of the time. This means if you have a loyal customer base of 3,000 customers, you will have 2,550 ups or 850 per year over the next three years.

So, is your service department a profit center or an investment in advertising? This example shows that there are at least 70 quality ups per month from your dealership customer base of 3,000 customers, and your closing ratios should be high.

We are always looking for a magic pill or the next new idea for advertising that will sell more cars. However, the largest profit center is under our nose and is easy to market to. Expenses will become more of an issue for 2008 and into 2009. Service is looking to be a pretty good investment within your portfolio!

According to a recent study by the Automotive Aftermarket Industry Association (AAIA), vehicle repairs cost an average of 34% more at a new car dealership than at independent repair shops. They argue that this is leading to 11.7 billion dollars of excessive costs annually to consumers.

A large import dealer located in the southern United States decided to address the issue of being cost-competitive­—without sacrificing profitability. The first part of his challenge was to utilize a cost-efficient means of keeping his name in front of customers and enticing them back into the dealership, despite perceived higher cost.

The second part of the challenge was to retain new customers. Being cost-competitive is great, but really showing the value of the dealership is the key to turning one-time customers into regular customers. What value proposition could the dealer create that would justify perceived higher cost?

Approach

The dealer sent a mailer offering a $19.95 oil change. The shop is the number one store (of that particular manufacture) in that region in paid-customer work. On subsequent mailers, the dealer continued to offer the $19.95 oil changes. To sweeten the deal, he chose the rock-bottom price of $9.95 to put on a lost customer postcard, which was mailed at the same time as a regular mailer that featured the $19.95 oil change.

(Customers are considered to be lost when they have not visited the dealership in 24 to 36 months.)

To overcome the second part of our challenge, the difficulty in retaining customers, the dealer turned his focus to branding his dealership as having great value and strong personal interaction. This dealer has eight technicians, most of whom are master technicians. Each technician performs an oil change and a multi-point inspection. If he sees a problem, he assumes the role of a consultant and shows the customer. He will either take the part up front or pull the car around. Allowing the customer the courtesy of a visual inspection and presentation of damaged parts/systems fosters credibility. If the technician can tie the work to performance or safety concerns, he will further increase the likelihood of an upsell.

Side benefit: The customer can gain exposure to the entire dealership and perhaps that customer will buy a car from the dealership in the future. The relationship begins at your service department and the goodwill continues.

Results

The dealer brings in over 10 million dollars in revenue per year. His one-time customer visits are high (which is true of each dealer in his region), but the number of customers who visit five or more times per year is still higher than his competitors’ in the region. In one case, his average of customers who visit five or more times is almost eight times as much as another dealer. In fact, his customer count, number of visits and revenue are all highest in his region.

Maybe you use direct mail only because you think that something the customer physically holds has more impact. Perhaps your customers are more tech-savvy, so you try to reach them via electronic communication. According to the 2009 ExactTarget Channel Preference Study, 87% of consumers, on average, prefer to receive either e-mail or direct mail for marketing communication.

The best way to reach them is to find out what they prefer—and most likely, there isn’t only one answer. The Study looked at consumer preferences of over 1,500 consumers. They compared the influence of traditional versus emerging media in driving consumer purchases. They found that direct mail has directly influenced more consumers to purchase than any other channel, and regardless of age, e-mail drives more conversions than any other online channel.

The most successful marketing strategies involve multiple products that combine the best of several mediums, so start with an evaluation of your database. Then talk to your customers. By learning their preferred methods of receiving communication from you, you’ll be able to more intelligently aim your marketing dollar where it has the most effect. Take that increased return-on-investment, couple that with top-notch customer service once you’ve enticed them in, and you’re on your way to increasing your customer retention.

Ideas on getting customer feedback:

• Follow up a service order with a short survey on customer satisfaction, and include a question asking how they would like to receive your communication. Do they prefer e-mail or direct mail? Since the average dealer database only has valid e-mail addresses for 21% of its customers* you may not receive as many electronic requests as you might expect.
• Ask if they have visited your website. If so, what sections do they like? Would they prefer to schedule an appointment online or redeem online coupons?
• Would they like to receive text messages with limited-time offers?
• When you return their keys and walk them out to their vehicles, ask them what you could do to improve the experience at your dealership. In addition to building rapport, some of the best ideas come through casual conversation.

Once you’ve talked to your customers, see how their answers fit into your overall marketing plan. Segmenting your marketing messages makes a lot of sense, especially when customers have told you what they like. However, keep costs in mind. You don’t want to slash your direct mail quantities too much, because it is generally cheaper to print larger quantities and mail in bulk. However, e-mail is often a cost-effective addition to your overall plan if a certain segment of your customers respond favorably to that. It also helps to generate immediate response when service business is slower. There are cost considerations in every marketing initiative, so incorporating customer feedback into your comprehensive plan is the best way to get the most of every marketing dollar.

*Information based on an average Traffic Builders’ dealer’s customer Database Diagnostic.

The silver lining was this dealership had been investing its marketing efforts into a group strategy. Even though they had gone from eight dealerships to six and lost two of their strongest stores, the dealership had its own brand value to fall back on. This value helped retain employees, provide their community with long-term solutions and avoided putting a family-owned operation of 40 years out of business. The lesson that dealer groups like this have learned is that there is safety in numbers when marketing your stores as a group.

Where are the opportunities?

How can we find safety in multi-point numbers? How can I take advantage of the power of my dealership group to achieve more than I would as a single point?

Opportunities unique to group dealers fall into three categories:

Volume – Sheer amount of dollars of product/services purchased. Each dealership is a different manufacturer’s point but they purchase relatively the same advertising services from the front end to the back end. This volume is attractive to business partners but the true value is communication opportunities for a unified message across that invested volume.

Money – Each store is spending money to drive in traffic but is there any duplication in strategy amongst the dollars they spend? Audit your group twice a year and throw out any wasteful marketing. If you have 10 stores and they each spend $50,000 in advertising a month, what percent of those budgets are targeted and conveying a message about your dealer group advantages? Get all of the stores on the same page and you will grow responses exponentially as you strengthen the value of your own brand. Sometimes individual marketing initiatives become stale programs that can be cut.

Brand – The dealer group benefits from more prospect loyalty when the overall dealer brand is viewed as having more value than one store. Branding your dealer group is also a key advantage when you are rewarding loyal customers. Consider programs for loaner cars, free car washes, free service clinics, massive oil change discounts or exclusive parties every year. Everyone likes like to feel they are special.

What hurdles must you overcome?

The average mindset – You can monitor marketing effectiveness month-to-month but do not plan it that way. Proactive long-term planning is a must. You must have a written plan that covers the group and work that plan. This is not a short-term fix to help what is going on right now.

Assess the dealership – It is a lot of work to accumulate the standard practices of each store and cross reference them with manufacturers’ programs. Execute a thorough audit to see what each franchise is doing to market their store as well as an analysis of the results.

Provider capabilities – After the assessment you need to find people who can market the dealership group effectively. This is defined as a company that knows what works at the dealership that can recommend and automate a plan so you are not spending all of your time managing the marketing.

Smart results management – Look at the results of each store and the group, then measure deeper than just the sales numbers. You need the plan to be measured against an ROI so you can get an idea of what to do next. Don’t go old school and only look at the sales numbers. Today’s technology allows you to manage much more cause and effect.

Where do I start?

The backend is typically the easiest place to start because of the uniformity of strategies that the franchises most likely share. Direct marketing typically makes up about 80% of the total advertising expenses of most service departments and falls into three main categories – reminders, conquest mailers and e-mail.

Go to each store and ask a series of simple questions. What are you doing and how effective is it? How do you measure it? Why do you think it is working? Ask for documentation to back up their numbers. Just because they say they were swamped or had a great month doesn’t mean the marketing strategy caused it. Sometimes a service department handles large numbers of recalls; you shouldn’t associate that increased work volume to a specific marketing piece.

Start interviewing marketing partners. Ask them what makes them different and how they can work with your dealerships as a group versus individually. How much will each store save by streamlining advertising and avoiding duplication of advertising dollars toward the same customers? Find a vendor who can effectively implement a strategy for the dealer group for all categories that focuses on results! Challenge them to make you more money, not just cut costs. The message will be consistent, will promote your brand value and the total participation or gross dollars will be effective enough for you to get a better price or added services.

In summary, marketing as a group allows you more control to influence result and impact and to monitor and reduce expenses. Ultimately it gives you more control to secure a better future by elevating your dealership brand to a level that is distinguishable from the competition and not hostage to the ups and downs of the manufacturer.

For years each manufacturer has fought for its independent identity in the public and on your lots. This can create conflict within your dealership or dealer group because you carry multiple manufacturer brands. Your interest lies in getting your customer more focused on loyalty to your dealership or group rather than to just a single manufacturer. Fortunately, the make of vehicles you sell is probably not among the strongest factors that influence your customers’ decisions to buy and service at your dealership or group. Rather, factors such as reputation, value, proximity, cost, convenience and relationship exert a stronger influence. This is good because you can’t control the overall reputation of the make, but you CAN control your own dealership brand and work to maintain your good reputation. This is also true if you are part of a group. So, for some dealers, it makes sense to develop a group strategy.

Each dealership is different, but typically, dealerships within a group have more commonalities than differences. Understanding that “the whole is larger than the sum of its parts” can add up to increased revenue—if you implement the right strategy. Group programs involve two or more dealerships who run the same promotion within a similar time frame and utilize a unified year-ahead strategy. Advertising as a dealer group makes sense in today’s volatile market as there are many advantages to branding and marketing your dealerships as a group versus each dealership acting independently. We can create customized, cost-effective, year-long strategies that are built for group and brand consistency. Our Proven People manage all of the campaign details, including analyzing and segmenting your data, as well as promotion-by-promotion reporting.

Specific factors must be in place at your dealerships to make a group promotion work: good leaders over each of the dealerships who can promote the benefits of the group program to the service managers and get everyone on board, a willingness to change, and an openness to the idea of a big picture plan. More than likely, the dealerships within a given group are going in different directions. Getting them to adapt to a singular group vision can be a challenge, but the rewards can be worth it.

The challenge was to create a larger and more unified market presence for multiple dealerships, all located in the same city in the northern United States. The group wanted to build manufacturer brand loyalty while maintaining strong individual dealership identities.

The ultimate goal was to grow each dealer’s market share and market penetration. This increase would also lead to more frequency in customer visits and eventually lead to more brand loyalty for increased vehicle sales.

Approach

All service customer repair order (RO) records and prospect lists for each participating dealer were merged into one master group comparison list for the purpose of removing duplication of mailings and allowing prospective customers the opportunity to choose between seven dealers, rather than receiving a message from a dealer to which they have no loyalty. A colorful, powerful postcard was designed that encompassed all seven dealers, who picked their own price points and offers. Individual dealership mailers were also designed that featured a variable discount offer and a premium.

There are advantages to group programs:

There is potential to eliminate consumer confusion and competition among regional dealers of the same brand, specifically allowing each dealer to set his own standards of service pricing and to maintain higher margins by not worrying about being under priced by another regional dealer of the same manufacture.

The competitive focus can be realigned against the after-market service industry.

Frequent mailers create more consistency with a brand focus, which hopefully will generate more consumer familiarity, confidence and trust, resulting in increased business.

Results

Regular customer mailer

Six dealers reported the following results:

• Customer responses as a percentage – 22.4%
• Customer RO dollars generated – $2,861,728
• Average responding RO – $200.83

Lost customer postcard

Six dealers reported the following results:

• Customers responding as a percentage – 5.8%
• Customer RO dollars generated – $432,976
• Average responding RO – $222.38

It can be determined that prospective customers are more likely to respond when given a choice. These dealers did not lose when they allowed other dealers (of the same manufacture) to market to their customers. Instead, they benefited from the united front portrayed on the postcard.

It can be determined that prospective customers are more likely to respond when given a choice. These dealers did not lose when they allowed other dealers (of the same manufacture) to market to their customers. Instead, they benefited from the united front portrayed on the postcard.

Hybrid sales are past their initial surge spawned by consumers labeled “early adaptors.” These are the gadget gurus who always want to be the first to own the next trendy item. According to industry experts, the second wave of owners, which included luxury brand owners, has also come and gone. Today’s consumer is most likely a person who is buying a hybrid for fuel-economy and environmental concerns and assumes that the initial “bugs” have been worked out.

Although hybrid sales have leveled off due to the slowing economy, they continue to represent between two to three percent of total sales in the United States. On its website, hybridcars.com reveals a recent forecast by J.D. Power and Associates which predicts the sales of hybrid and diesel-powered cars will more than triple by 2015: “The new study predicts that hybrids will account for seven percent of the car market in 2015—up from 2.2 percent in 2007— and diesel vehicles will carve out a 10-percent market share as compared to last year’s 3.2 percent.”

Hybridcars.com also predicts all carmakers are expected to make the shift to lithium ion batteries for hybrids: “If carmakers start using smaller, more affordable lithium ion hybrid batteries, the higher purchase price of gas-sipping hybrid gas-electric cars could be slashed, dramatically increasing their popularity.”

Understanding the type of people who purchase these vehicles and serving those needs is essential in order to enact a plan that will increase your dealership’s profit margin. According to J.D. Power:

• More than 71% of hybrid owners have an annual income of $113,000 or greater.
• More than 73% of hybrid owners are older than 40 years old.
• Hybrid owners have high product satisfaction with greater than 88% reporting being very happy with their hybrids.

According to a recent study by the Scarborough Institute with the Nielson Company, hybrid owners consume more organic food, yogurt, and decaffeinated coffee than the general population. They engage in healthier lifestyles such as hiking, biking and yoga, and are highly educated with above-average technological skills. Hybrid owners also spend more money on their vehicles, and that is why service managers should take notice.

This new breed of auto service consumer typically pays 10% more for a hybrid when compared to standard gas-only-powered vehicles of a similar type. They understand that their hybrids are built with proprietary knowledge. Thus, owners accept that these vehicles, more than likely, need to be serviced at a dealership. When they bring their vehicles in for service, the cost of repair is 15% higher for hybrids in the first five years. Because of this, it is safe to say that the hybrid owners have high expectations for service. Are dealerships ready to meet their higher expectations?

Dealerships that sell hybrids need to understand that the whole dealership is scrutinized by this rather discriminating customer. Our highly educated, tech-savvy customers want to be introduced to a clean, well-run, polite service area before they make their purchase. This is a far cry from the five-minute “mini-meet-and-greet” with the service manager that customers often have received after their purchase. Since most OEM repair shops are not an option due to all of the proprietary technology, the service department presentation is very important to a purchase decision.

Higher wage earners are usually accustomed to higher standards of service that, if not met, could be a deal-killer. Your dealership should be taking steps now to curry favor with these customers as hybrids and other alternative-fuel vehicles continue to be popular. Here are some things you can do that will transform the consumer experience in your service department and lay a foundation for future profits.

• The pervasiveness of laptops and handheld internet devices makes wi-fi in your waiting area a must. Hybrid owners embrace their gadgets. An internet connection can turn two hours of idle time with magazines into quiet productive work time. Extra outlets in the waiting areas to recharge phones or laptops could be a lifesaver.
• When possible, have healthier options in your waiting area. A coffee machine offering something other than the same old cup of joe is nice. Green tea and juice options are appreciated. Also, fresh fruit and yogurt in a refrigerated vending unit are preferred by hybrid owners to the candy bars and chips that are the current staples.
• Cleanliness is probably the most important attribute. Higher income earners are accustomed to clean environments and demand it from all service vendors. Automotive service areas are not given a pass because of their proximity to grease.
• A going-green approach will resonate with these vehicle owners. By becoming leaders who make environmentally friendly business decisions, you are providing a greener standard for your dealership as well as your community.

Hybrid owners are discerning consumers who don’t mind spending more for what they believe in. Service managers need to be attuned to those owners’ needs. One never knows when a potential new hybrid purchase prospect may be surveying the shop and waiting area with a keen eye. Remember, they are more likely to check you out before a purchase. A service manger who enhances the waiting area with the amenities that hybrid owners enjoy will likely reap the financial rewards of their ongoing patronage.

There are questions to ask before you start to encourage more discounting. Are your services priced correctly? Make sure your pricing is strong enough to maintain profit even with the discount. Consider going to grid-pricing for repair jobs. Is the work being dispatched for profit and production? If you check these and all is well, it’s time to start a strategic discount program.

Start with a direct mail piece with a limited number of coupons and a lot of information about what your dealership does that your competition doesn’t. Show why you are the one-stop maintenance and repair shop. For the coupons, do a “Hassle-free 101-point Car Care Clinic” and a 20% off coupon. The disclaimer for the coupon should have the following exclusions: tires, preventative maintenance and a maximum discount of no more than $100 (I have been just as successful with $75 though). Our customers wait for their coupons before coming to the dealership for service, and our advisors say they are able to sell more to the customers to whom they offer a discount. By capping the discount and indicating the exclusions, you are only discounting your most profitable jobs.

Once you get the customers in the door, show them every time you discount anything, no matter how small. Bill every line on the repair order at full price. Change the labor to the amount of labor you need to discount. Add a description to your op code like “Preferred Customer Discount.” Have your parts department make a part number called “discount” so they can add that number to your discount line as a negative number. Having a separate op code and part number will make tracking very easy. (For import dealers, this will also help greatly at warranty increase time.) The bottom line on the invoice will have a negative number for both parts and labor that the customer can easily see. Track the total as a percentage of each advisor’s customer-pay labor sales. As a guide, I like my guys to be around 5%. Give your technicians this report daily and encourage them to offer the coupon to sell additional work. We average 75% gross profit retention with 5.2% a month in discounts.

The best example I can give to show you how well this approach works came from our dealership’s shuttle driver. He was down to his last two customers and was listening to their conversation. One customer was telling the other how he got the best of the dealership and was going to keep doing it. He had made a photocopy of his 20% off coupon and blacked out the expiration date so it couldn’t be read. My advisors gladly accepted the coupon and gave the customer the maximum discount of $100. This particular customer’s bill had been $1346.18. I just hope he continues to “put the screws” to the dealership like this forever.

At a time where money is tighter than ever, if your customers think they are saving money with you, they will come back. Your competition is doing everything they can to steal your customers. How much could you lose by not discounting? You could lose a customer!

Pat Arnotte can be reached by email at patarnotte@comcast.net.

Increase service revenue as well as increase the core service customer base for a mid-size to large import dealership in the Northeast.

Approach

The first layer of the solution lies in understanding how you communicate with your core business. Separate customers by behavior. It makes sense to approach a recent customer differently than a defecting customer. According to an article by Kate Horstead featured on BusinessWeek.com, “Your old customers can be a valuable source of sales. They already know your business and were once interested in buying from it, so you may be able to persuade them to buy from you again. With new sales leads you have the time and expense of finding customers from scratch. As long as you have kept good records of customers, you will know their buying habits.”

Focus a marketing strategy on that premise: that it is easier and more cost-effective to win back former customers than gain new customers. To win back these defecting and lost customers, the dealership offered much more aggressive coupon offers.

The goal was to build long-term business from these lost customers and bring them back into the cycle of becoming regular customers. After the mailing, a comparison was completed showing the results of the segmented marketing campaign compared to a previous month’s marketing approach that featured less aggressive offers to all segments of the dealership’s database.

Results

By specifically targeting the lost customer base with a deeper discount, the dealership experienced an increased response from this marketing segment. The response rate of this segmentation was compared to a previous non-segmented marketing approach to determine if the deeper discounted offer provided an incentive to visit the dealer.

Summary

The increased revenue supports the marketing segmentation approach.  The aggressive offers drove lost customers back to the dealership. At first glance, aggressive couponing may appear to be counter-intuitive in today’s tough economic climate, but if customers never come in, what is the return of that investment? This dealer clearly saw a 105% increase in RO’s with a corresponding 143% service revenue increase by applying a more aggressive marketing strategy targeted to a specific lost-customer segment.

My real passion was to learn more about the specifics of automotive e-mail marketing and how it can affect a dealership’s approach to gaining and retaining clients for their service departments. I knew it would fill a niche but I was looking to see how huge this “wave of the future” was projected to grow. E-mail is targeted, able to be tracked, interactive, dynamic and variable. Based on the conference, l left with the impression that it could do almost anything but service the vehicle itself. The big question was did it work?

Can we associate a specific e-mail message with specific repair orders (ROs) generated? The purpose of this column is to show how to make e-mail marketing work for your service department, how to effectively cut costs without jeopardizing return on investment and how you can measure the results with confidence.

How do you determine if it will work at your store?

Service marketing is all about driving in customer ROs so your writers can reach their potential. You can track many e-mail elements such as open rates, click-throughs, and opt-outs, but there is no evidence within these reports that tie directly into an RO. You need to track which e-mails were sent that can be directly associated with a repair order. Most e-mail marketing programs do have valuable analyses of the results but fail to show responses that affect your bottom line. If you don’t know what marketing messages motivated your clients then you cannot evaluate the true effectiveness of e-mail.

What is the right strategy for e-mail in the service departments at dealerships?

The right strategy means e-mail and any other marketing vehicle must be incorporated into a much larger communication plan and not serve as a single leg that holds up the entire table. E-mail marketing is a strong lure for those fish that want to swim in the technology pond. However, just because you have an e-mail address does not mean you have an e-mail responder. What works is determined on a customer-by-customer basis; which customer will respond to messages in their e-mail Inbox and which will respond to messages in their physical mailbox.

A quick reference guide to do’s and don’ts:

Do’s:

1. Continue the brand – Use e-mail to support any of your other marketing messages. Since direct mail and e-mail are the predominant advertising mediums for automotive service departments, make sure the offers and the messages complement each other.
2. Extend an exclusive discount to e-mail consumers – Give special discounts to drive in customers during slow times of the day and/or week to fill slots where you need cars. Discounts gain validity when the customer buys into the reason for the discount. This drives up redemption of the offer.
3. Create a strong – enough message to drive the customer to your website – If they interact with your site, they are much more likely to generate a repair order. Here is an average of responses you can expect.

Don’ts:

1. Don’t replace your direct mail with e-mail just to save a few pennies – You will not even come close to having enough coverage of the total opportunity. E-mail should only replace direct mail when it matches its effectiveness in driving in RO dollars. Simply put… only omit the names of customers from your direct mail if they responded to your e-mail marketing.
2. Focus on ROI and not just on response rates – E-mail is a low-cost alternative but only when it is effective. It will cost you a fortune in lost opportunity if the customer is NOT coming in. You must demand performance in response and not just in cost cutting.
3. Do not make the message too complicated – If you create an elaborate message about something the customer does not want a lot of detail on, then the message will be lost.
4. Talk about you and make it relevant to the customer – Talk about local events, local charities and specific issues on their vehicle models. Here is just a reminder: your competitor is the aftermarket. Talk about the dealership’s value, convenience and competitive pricing.

E-mail marketing is a smarter way to market to some segments of your database and increase your return on investment, but you must be sure it tracks how many customers came in compared to how many you e-mailed. If they respond to e-mail then de-dupe them from your mailing list to help cut your direct mail costs and improve your ROI. If they don’t respond to your e-mail, be sure they are continuously re-categorized and accounted for within your total automotive marketing strategy. Keep in mind you have a great deal at stake because each repair order generated brings you an average of $160.00 to $228.00. For a dealership generating 1,500 repair orders a month, you can make a six figure mistake in a matter of months.

Perhaps that Nissan dealer’s situation is the same as what you may be experiencing. In the short term, you really can’t feel the impact, but after about a year, you realize something is wrong. At the end of the second year and into the beginning of the third, you really feel the problem. By that time, it may be too late for the dealership to turn around quickly, and your income, or your job, could be impacted.

So what should you do to address your dealership’s issues before the impact worsens? In the consultation with the Nissan dealer, we discussed the importance of planning, in terms of the “bucket-with-holes” theory. Running a retail retention-based business is like filling a water bucket punctured with holes. To grow volume you must close the holes and fill the bucket with more water. You can find new water or refill it with the water that drained. Either way, you must have a plan and proactively execute that plan to be a good service manager in both today’s market and in the future.

Here are some strategies on how to approach things long-term:

1. Internally create aggressive pricing plans and coupons for vintage vehicles - If the dealership normally sold 200 cars a month and that recently went down to 150, you are looking at having 600 less units per year. That equates to about $270,000 less in income if those customers only came in for service once a year. Regardless of what you sell, there is never a shortage of older models going to the aftermarket. Put an “Older is Better” coupon on every mailer to let both your older vehicle customers and your newer vehicle customers know that you will support their vehicles through the life cycle of the car, no matter how long they keep it running.
2. Increase what you retain – Traffic Builders now has reminder programs that do very well for this segment – your loyal customer base.  Reminder programs keep your message in front of your customers and  help build on what you already have
3. Effective Service Advisor Consultations – Service Reminders and other marketing pieces are meant to bring in the customers.  But ultimately it’s about how the customer feels when they come to your dealership and when they leave your dealership.  There is no replacement for good training.  Your people need to love to work with people – consulting and educating the customer on what services they need and why.
4. Target your lost customers – Take a look at running full-blown lost-customer campaigns. This involves sending them a message and giving them exclusive offers based on their behaviors. We have shown response rates going up with this approach by about two to four percent if you do it correctly.
5. Discount the big tickets – You CAN get them as long as you are price-competitive. Remember the customer that says, “Oh, I am not spending that much. I would rather spend the money on a new car.”  Make it affordable to keep an older vehicle on the road.
6. Email campaigns – Email does not replace direct mail, as of yet. That is another topic for another day, but our results reporting shows that email is best utilized for a cost-effective solution to stay in front of your customer and for effective message campaigns to build traffic on a slow day.  Put together an email campaign to all customers with vehicles aged three years and older. Run a cheap-loss leader such as an oil change, and a creative coupon for an “I’ll just put it off” discount of ten percent off all the repairs that you have been recommended to do but keep putting off.

One thing you can bet on that will not change is the expectation for growth.  If you don’t grow, you go!  So how do you adapt to the market?  You cannot do the same thing you did last year and expect a better result.  What do you need to do differently that you have not done in the past?

If you have had any time at all in the service industry, you know that yearly planning will typically include approaching the same challenges with better solutions. You know you will evaluate your staff and the products they deliver, continue to train your technicians and work with the manufacturer on expectations. However, extreme market conditions have initiated a shockwave of unforeseen trends that will negatively impact your business.  Here are three:

1. Warranty changes will continue to hurt the total sales value of a customer – Your manufacturer is going to continue to extend the number of miles on regular maintenance intervals in order to imply that they make a more reliable and maintenance-free vehicle than the competitor.  Standard maintenance used to be recommended every 3,000 miles. Now it is every 5,000 miles, and some manufacturers are now suggesting every 10,000 miles.  This could cut your recommended frequency to service vehicles in half.

2. Units-in-operation are down dramatically – If you aren’t selling cars, then you aren’t continuing to expand the pool customers who service their vehicles primarily with a new car dealership.  Many dealerships have been spoiled.  Vehicles 4 years or younger make up to 43% of their databases (customers who have serviced between 0-24 months) because of the heavy emphasis on warranty service.  If you lower the amount of warranty claims available, and you lower the number of cars sold over a two-year period, what happens to the customers who have typically been your primary market?

3. Short-term thinking – This may be the number one issue within automotive dealer markets.  This is why dealerships have such a high rate of turnover, so little loyalty, and why it costs so much to attract new business.  Paradoxically, service departments can be the exception.  If you only plan month-to-month, then you will only solve those problems for that month—and then start the process over the next month.

If you focus on solutions for these three issues, you will begin to build stability for your dealership, your employees and yourself.  You will be in a position to replace the lost business and start making money. Here is a list of practical solutions that you might want to include in your plan:

1. To address warranty issues and customer retention

• Retain what you have—Review your service reminder programs. Over 60% of customers come in only once per year.  It is time to re-evaluate your reminder effectiveness and try something different.

• Compete in the non-warranty world—Create retention programs to preach your value statements and your price competitiveness. Go back to the old 100,000-mile club and show your customers you are a valuable option for their older vehicles. Specifically target these customers with enticing offers.

2. To address fewer units-in-operation

• Prospect for your lost customers—Target them with personalized letters from the service manager. These letters may invite them to come back, ask for satisfaction feedback or inform them that they can take their names out of your database if they no longer own the vehicles.

• Prospect for new customers—Twice a year, target customers whose last service date is between 18 months and 36 months with a specific campaign to come back and try your service department again.  You should get between 2-3% of them back.

3. To combat the ineffectiveness of short-term thinking

• Put together a written plan—This should include what promotions you will do each month, new initiatives, as well as specific numeric goals based on specific initiatives

• Start with a SWOT analysis
  • Typical Strengths – Most dealerships provide things like rental units, car washes, Wi-Fi-enabled showrooms, and shuttle service.  You should also focus on qualifications and tenure of your service personnel. A real strength is the manufacturer’s guarantees that are provided with service and parts (something the aftermarket cannot include.)
  • Typical Weaknesses – The perception of many potential customers is that you are overpriced and not convenient.  Use comparison boards to show competitive pricing and stress the work that can be done on weekends.
  • Typical Opportunities – Customers are keeping vehicles longer, which means more (and often more expensive) service trips over the lifetime of those vehicles. Orphaned owners are looking for a new home, especially if they own GM or Chrysler vehicles.
  • Typical Threats – The aftermarket is still your biggest competition.

• Create a year-long marketing calendar
  • Utilize your database differently – Segment your customers into 4 categories: loyal, defecting, lost and older-year models. Throughout the year, focus on each segment with specific marketing initiatives.
  • Shoot for complete coverage – Put a promotional initiative in each month, and keep your message out there at all times.
  • Define your message – Take your SWOT analysis and create copy for your marketing and scripts for your writers.  Make sure you are telling customers why they need to come to your dealership.
  • Define how you market – Direct mail reminders, direct mail prospecting, coupons, e-mail, web, etc. All of your initiatives need to interact with each other in order to create a consistent message.

Those who learn and adapt from the challenges of this market will flourish.  Getting through the rough times isn’t easy, but having a plan is a great start. Good luck in 2010.

It is essential to know what e-mail is and what it can and cannot do. Be cautious when evaluating the seemingly attractive value of e-mail without also considering its return on investment as well as where it can be most effective. This is challenging because e-mail marketing comes with so many new bells and whistles that can have value to certain segments of your market. You must take three things into consideration when looking to e-mail to drive customers into your service department: What percentage of your customers is likely to directly interact and respond to an e-mail? How much return, in hard dollars, can you expect using e-mail, and how do you integrate e-mail into your current automotive marketing plan?

Now, more than ever, general managers and dealer principles are getting involved in service because it is the one department keeping their dealership afloat. If you are not prepared with the answers to the questions above, you might be forced to try experimental programs that are short-term solutions to a budget crisis that can have long-term effects on your ability to meet your numbers. Remember, those companies who cannot sell advertising for sales departments are now selling advertising to service departments with programs and promises that really should stay in the sales department.

Who is an e-mail customer? The typical auto dealership has e-mail addresses for about 21% – 35% of their customer base. This means that, on average, e-mail marketing is NOT CAPABLE of reaching up to 79% of your customers. Some dealers say, “We are going to replace our direct mail with e-mail.” If this is your intention, you must know that if you have 1,000 customers, an estimated 210 customers are actually getting your e-mail. Therefore you are not replacing direct mail by using e-mail; you are simply NOT reaching the majority of your customer base. You can’t hit your potential if you are not reaching 4 out of 5 of your customers!

Who actually gets your e-mails? Just because you send the communication doesn’t mean your customers are actually getting it. You can analyze e-mail reports to see how many customers have received and opened the e-mail versus how many of the e-mails are blocked, sent to a SPAM folders or not opened at all. Studies for service marketing currently put this number at around 29% of those e-mailed customers. This means from the 210 who received your e-mail, only 60 customers actually opened it. Your sales potential is severely cut because the customer is often not looking at what you have to say.

Who listens? The number of customers who actually respond and click through to your website is estimated at 6% of those with valid e-mail addresses. This targeted group is very interested in interacting with the offer or message. If these respondents click on the “schedule an appointment now” link, this is a strong indicator that the client is a prime candidate to be an e-mail customer. However, be careful, because approximately 25% of customers who have a unique click-through are doing so in order to unsubscribe from your e-mails. Of the remaining, most who click through do not interact on a monthly basis. Thus, it turns out that only about 1% of the customers who actually receive your e-mail will consistently click through all of the content. In our example, only 9 customers of your total list of 1,000 would interact with the offer on a regular basis.

Is e-mail the right tool? Yes and no—depending on how you want to use it, the message and the customer receiving it. Some e-mail programs are better than others, but even the best has its limitations. This is not to say you should avoid e-mail altogether but rather to determine its best use and avoid unrealistic expectations. More than ever, people are looking to interact with e-mail. E-mail works great for this market. And, if this market continues to grow, then your automotive service marketing strategy should respond by shifting more heavily towards e-mail marketing. In the meantime, keep your e-mail programs cost-effective by using them as a way to get out a general message. E-mail can help you stay in front of your customers and build brand loyalty.

You may think there is a huge cost reduction using e-mail, but what is the negative effect on your bottom line if you aren’t using it correctly? Every time a customer comes into your service department, they will spend $140 on average per repair order. A thousand dollars of savings in your marketing budget will be eliminated rather quickly if you see a reduction in business within your client base. Valid e-mail addresses tend to be attached to current and more loyal clients. Typically, direct mail responses for automotive service marketing within this segment (0-12 months) average around 15% with an ROI of $40 for every dollar spent. For your total customer base (0-24 months), responses average 9% with an ROI of $25. Saving $1,000 seems like a lot of money until you lose $20,000 in business because of improper market coverage.

While I don’t recommend using e-mail marketing as a total replacement strategy for more traditional forms of marketing, it can be a cost-effective marketing solution to reach the loyal, tech-savvy niche within your customer base. We offer both traditional direct mail programs as well as e-mail and have seen our best success coming from the two complementing each other. You should track every e-mail because the effectiveness of e-mail marketing will change and, in all likelihood, improve as the years go by. Effective data-trending can tell you which customers prefer e-mail and which prefer a more traditional source. The bottom line is to customize your marketing approach to the specific customer and maintain full communication coverage to maximize growth.

Turning to recent times, how would the “The Tale of Two Departments” read from an automotive dealership point of view? Last year’s economically revolutionary story addresses Dickens’ novel’s famous line, “It was the best of times, it was the worst of times….” In an automotive dealership, the tale is not the same from the sales and service perspectives, as the service department accounted for almost all of the profit in 2009 at the average dealership, according to NADA’s end of the year analysis. To get both sides of the dealership out of economic difficulty, dealership leaders must have the vision and the ability to adjust to the market. Dealership vision is greatly influenced by the dealer principle and/or the general manager, so it becomes vital that they learn what it takes to successfully come out of the revolution.

Most dealer principles or GMs have little-to-no active management or planning experience in the service department. Being a successful new or used car sales leader does not necessarily qualify you to run the service department because the two business models are completely different. However, if you take the time to get to know the two business models, you can better understand how you can take advantage of the huge service and parts sales revenue opportunities for this upcoming year.

Key Differences Between Departments:

Sales

• Larger dollar transactions, averaging $20,000
• High dollar transaction – low gross
• Emotional purchase
• Sells a commodity
• Purchase frequency is every three to four years
• Competitors are limited by franchise agreement
• Marketing has a price-sensitive approach

Service

• Average repair bill is $212
• Low dollar sales with an average of 46% profit
• Necessary purchase
• Sells a service
• Purchase frequency is every 3-4 months
• The aftermarket takes 70% of the business
• Marketing has a quality, fix it right, mentality

Market Potential in Service

The market is still dominated by the aftermarket which means there is growth potential.

Only 30% of customers frequent the dealership more than once a year. This means there is a lot of potential from customers who already know you.

There is still a dramatic fall-off after the fourth year of ownership. You have great potential if you perform better with this customer segment.

If you can change a common consumer feeling that most dealerships are inconvenient and costly, you will be able to further take advantage of potential growth within the court of public opinion.

The Right Approach

Be consistent — Service is all about retaining customers over the lifetime of their vehicle ownership in order to capture a healthy profit potential. It is also about extending that relationship from the loyalty to the service department into a purchase in the sales department. Most sales approaches are short-term. However, customers are in the service center for repeat visits much more often than in the sales department, so you have more opportunities to impress them with your dealership.

Talk value — Show more value for the investment to compete with the aftermarket brand. Sell the experience of doing business in a nice facility with amenities that customers cannot get from the aftermarket.

Talk price — Are you competitive on the three or four common services that your customers understand, like an oil change? You don’t need to discount everything, just discount enough to cause your market to question the stereotypes.

Talk “you” — Service industries are all about reputation because the product really is you, unlike a commodity. So, take the time to talk about your people, your services and your brand. Most service departments sell the quality of their service experience with factory-trained technicians.

E-mail doesn’t replace everything – Service has been such a lifeline this year that many new companies are looking to introduce “magic pill” programs such as total e-mail management systems to anyone looking to cut costs. Use e-mail to complement your current marketing but not in order to achieve total communications coverage — because it won’t. If not implemented correctly and strategically, you will actually lose money.

Track your results — Use programs that allow you to measure the results of the program. It is much easier to do in service than in sales.

Know the rules of co-op — Co-op rules for service are a bit more complicated than in sales, but if you want money back, you need to know them. If the manufacturer’s program is performing poorly, it makes much more sense to waive the free money in order to work with a solution that brings in more customers.

Segmented marketing — Your loyal customers are different from your current customers, who are different from your lost customers or prospects. Technology allows you to separate these customers and market to them based on their behavior. This can ultimately bring in more customers and a better return-on-investment than had you implemented a less customer-targeted mass communication.

Rely on your service manager — Tap into the expertise of your service manager rather than attempting to implement a marketing strategy that, while effective in other areas, isn’t informed by a comprehensive understanding of service departments. Again, sales and service are different, and your marketing approach needs to reflect that. Your service manager can play a key role helping you develop a sound strategy.

If you commit to the general philosophy of avoiding running the service department like you would the sales department, you can learn how to create a successful service vision for 2010. Remember, there is a lot of potential for “the best of times” with service growth, but there is also a lot of risk of the worst of times if you don’t do it right. Get to know the difference, and your vision will be one that allows you to be a true leader in 2010.

Chuck Patton: Pat, how have the expectations of service managers changed over the years?

Pat Arnotte: Years ago, the service manager was the best technician in the building. That couldn’t be any further from what you need right now to run a successful service department. You might get lucky and find a person with the entire package, but right now, you need to be a marketing genius in the service department to drive traffic, because that’s the hardest part of the job right now. If you’ve never done it before, or can’t figure it out, you’re going to fail. The No. 1 job of a service manager is to drive traffic in the door. From there, obviously, you need to be able to get the work done and make the customer happy, but if you can’t get customers in the door, you’re going to fl at out fail. The market is too tough and competitive right now; you’re competing against PepBoys and National Tire and Battery. They have big ad agencies doing their marketing for them.

CP: How does a local shop compete against that?

PA: You’ve got to have a consistent marketing plan, and understand what happens when you deviate from that plan. Your customers must be in tune with what you’re sending them. If you’re going to send them a postcard with specials on it, you’ve got to do that consistently every month or two so they know to expect it. We run mailings six times a year, and our customers will call us and ask, “When is the next mailer coming out? I need service and I want to see what specials are out.” My first question is “What do you need done? I might make up a special for that.” You can make a special for them to get them in the door. Being consistent with your marketing is crucial. We do an in-house reminder program. We send out close to 4,000 different reminder cards per month. The customers will come in with three or four postcards in their hand and say, “I need to get this stuff done.” Our goal is to prep them for what they’re going to need on their next visit, selling them on that next service and letting them know how much it’s going to be. Everything we do is about having the customer prepped so that they’re coming in pretty much knowing how much money they’re going to be paying on that visit. They know that on their previous visit, so they can put away $300 or $400 for their next service.

CP: What are some of the most common mistakes of service managers?

PA: Scheduling is the biggest problem. A lot of people base their schedule on their shop, and you have to do that to some extent. But, if I’m going to load up my shop by bringing in 15 customers between 8:00 a.m. and 8:15 a.m., and I only have three service writers, I’m wasting the opportunity of having the service advisor in the lane with that customer for upsells. We have two shots with every customer: one at dropoff, and one after the technician looks at the car. I don’t want to waste either of them, so we schedule the appointment based on the advisor’s availability first, and shoploading second. I want to make sure that when the customer comes in, they have enough time with the advisor so that they’re not thinking they’re rushed, and the advisor has enough time with them so that they can make all the recommendations needed and not feel the pressure of another customer, or a line of 10 cars out the door.

The second biggest mistake for service managers is that they don’t track every little thing they possibly can. The more reports you run, the smarter you’re going to be. I could tell you things that are going on in my service department, not seeing them with my eyes but just looking at the numbers and seeing what’s happening. When you know what to look for, you fi nd things. I have a guy with a $5-an-hour lower effective labor rate than the others in his department, and I saw why. Every customer was getting discounted. I can see that he’s running discounts off a discount code, or double-discounting, and that’s why his effective labor rate is terrible. I spoke with him two days ago, and his rate is already up $1.

CP: Pat, leave us with some good advice.

PA: Be consistent with your marketing. Come up with a plan, and stick with it for a year. You can’t do a mailer and after two months say, “It doesn’t work.” A lot of owners and GMs are used to the way you market the sales department. Those guys send out a mailer for sales, and all of a sudden, they sell 40 extra cars from it. You don’t get the impact from a service mailer that you do from a sales mailer. Staying with a consistent marketing plan is something you have to do; no matter what you try, you’ve got to stay with it. My first boss told me this, and I’ll stick to it until the day I die: The worst system running 100 percent correctly is better than the best system in the world running at 10 percent efficiency.

The challenge is to address a common dealer’s question: Could a dealership take their e-mail customers’ names out of their direct mail list to save money? We wanted to see the response from customers who received e-mailed promotions instead of direct mail promotions.

Approach

We decided to look at several dealerships and track whether those who opened and clicked on an e-mail promotion in one month would continue to open and click on e-mails over the next six months, suggesting a heightened level of interest due to the interaction with the marketing piece. If a large enough grouping of customers could be shown to interact with the e-mails each month, it could be suggested that a dealership could exclusively send e-mail promotions.

Results

After the end of the review, an interesting trend appeared. While an average of 6% of customers who received just an e-mail promotion clicked on it, an even smaller portion continued to click in the following months. On average, 17% of the original 6% of just e-mailed customers continued to click over the next six months. The core group of loyal “clickers” represents only 1% of all customers who receive your e-mails.

This suggests that the people who clicked in the first month are less likely to click the following month because a portion of those people used the first month’s coupons for servicing. These customers would click again a few months later—only when their vehicles again needed service. This inconsistent behavior, due to a given customer’s current need, creates a very small core of loyal monthly e-mail “clickers.”

1,000 Person Story

Using an example of 1,000 customers and the results of our experiment, we would ask the dealer the following questions:

• Of the 1,000 customers, you only have 200 e-mail addresses. What do you do with the other 800 customers?
• Of the 200 customers who have valid e-mail addresses, 184 will receive the message (the others will bounce back).
• Of those 184, 12 will unsubscribe. That will leave 172 people.
• Of the 172, 12 will click through the message.
• Of the remaining, most who click through do not do so on a monthly basis.

Conclusion

It is clear from the results that marketing only to those customers who respond with an e-mail click is dangerous to your marketing strategy. The dealership may have saved money, but it was simply because they did not mail to the majority of their database. E-mail is an excellent addition to heighten results with other marketing initiatives, to extend a dealership’s brand and to target customers who prefer e-mail promotions. We would advise curbing expectations of using only e-mail (in place of other forms of marketing) with a given customer without knowing whether or not that customer responded with a repair order. There is a lot at stake if you consider direct mail is associated with $40,000-$60,000 for every 1,000 communications sent.

A more effective strategy might begin by asking your customers to find out which ones would prefer e-mail over direct mail. Follow up a service order with a short survey on customer satisfaction, and include a question asking if they would rather be sent e-mails exclusively.

Chuck Patton: Pat, tell us a little bit about your background, and how you came into this industry.

Pat Arnotte: Well, my mother was actually a controller in the car business for more than 40 years. From the time I was 12, I washed cars in the summertime until I got a driver’s license and started to deliver parts and work my way up the parts side. At 22, I was a parts manager, and was parts and service director by the time I was 26. I’m 43 now, and have been doing it ever since.

CP: Tell us about your dealership, Porter Automotive Group.

PA: We’re located in Northern Delaware, and are part of the Philadelphia market. Our group includes Nissan, Chevrolet, Hyundai, Ford and Mitsubishi franchises. Our Nissan store is the store I originally took over seven years ago. They were No. 6 in a district of 10 stores in customer-paid labor. That store is now the No. 2 customer-paid dealer in the whole New York region, or the eastern region, which runs from Maine all the way down to the bottom of the state of Delaware — that includes all the Philadelphia, New York and Boston stores, and our sales volume is nowhere near what some of the other stores are. We do a very good job with retention.

CP: Describe how the changing market has changed the way service departments do business.

PA: One of the craziest things I’m seeing right now is the number of customers who wait while their vehicles are being serviced. When a customer comes in and waits, you really can’t sell them as much work as you can when they drop off their car. Maybe customers realize that, or they have more time, or more people are not working. The number of waiting customers used to be about 25 percent. It’s now more than 50 percent, and it’s pretty steady across the board with people I’m talking to. If you want volume coming through your store, you need to bring in more of these waiting customers. The more waiting customers you bring in, though, the harder it is to load up your shop, because you’re constantly pulling techs off of big jobs to get these customers in and out. It’s just really tough with the waiters.

CP: How have the marketing needs of service departments changed in recent months?

PA: There have been big changes. Things that have worked in marketing for years just aren’t working now. We’re trying to come up with new and different ideas to drive some traffic through marketing, but there isn’t a “get rich quick” scheme like there used to be. I used to be able to throw out “20 percent off” in a direct mailer, and my shops just flooded with work. Right now, will it drive some traffic? Sure, but not like we were used to.

CP: Why do you think that is?

PA: The customers want to get in and out fast and not spend any money. Even when you show them that their brake pads are metal to metal, some people just don’t have the money and aren’t buying. I’d like to compare the amounts of tickets over $1,000 this year to those last year at this time. I think we’re doing a lot more of those tickets than we were before, but what we’re not getting is that mid-range, the $300 – $500 maintenance jobs. The customers aren’t getting the 30,000 mile service – they’re just getting the oil changed.

CP: What opportunities exist for dealers that are easier to realize than they might think?

PA: The biggest thing that I see most dealers not utilize is their own database. They have names, addresses, phone numbers, years, makes, models and mileage. In my stores alone, we have information on 22,000 people. What I do with that information is what drives traffic in my store. I talk to service managers who say, “I bought a Polk List.” Why would you buy something when you have plenty of information on your own to extract from your own database.

Mine it! You can do model-specific mailers, mileage-specific mailers, “lost-souls” mailers – whatever you want. It’s information you already own and can easily get. Data mining is what really can make you a fortune if you can figure out how to do it. Next month, we’ll conclude our interview with Pat Arnotte, and talk about the changing expectations of service managers, some of the most common mistakes service managers can make, and some words of advice.

1. Represent a significant perceived value for the consumer
2. Be easy to use
3. Offer a discount on the dealership’s primary services

That’s why offering 2% off probably won’t bring customers in your service bays and an offer with a laundry list of exceptions in fine print, such as “only valid on Tuesdays and Wednesdays,” will go straight from your customer’s hands into the wastebasket. However, we recently noticed a trend that on the surface seems to defy rule number 3, or at least suggest that rule number 1 trumps rule number 3.

Premiums, also known as gift cards, can provide a greater perceived value and increased response rates among customers when marketed appropriately. For example, in our marketing for a large import manufacturer group in the Midwest, we include a co-branding offer several times a year for a free gift card with any service of a minimum amount. The mailer would feature the premium offer, the logo of the cross-promotional partner (examples include Target or Lowe’s) and selected coupons.  Members of the Traffic Builders team contact the cross-promotional partner and follow any protocol to use the logo and order the gift cards.

The low-price oil change offer and the variable discount offer along with the other standard offers are very popular and receive a great response. But the free $10 gift card offer has been successful in bringing in both regular customers and those who have not serviced with the dealership in a while. Gift cards can be the loyalty incentives that can make all the difference.

In a study conducted a few years ago, nearly half of consumers polled stated they participated in a program that offered loyalty incentives. Eighty percent of those consumers indicated that they do more business with a company because they offer incentives. If you would like to explore how a gift card incentive offer can bring in additional customers to your service department and make your customers service with your dealership more frequently, here are a few ideas to help you plan:

1. Determine the goals of the promotion – Do you need to breed loyalty among your current customer base, or is your chief problem the large percentage of customers who come in once before defecting to another dealership, or worse, the aftermarket? Take a deep dive into your database and determine the greatest opportunities for growth. Are you hoping to reward your loyal customers? Design the piece as a gift to demonstrate customer appreciation.
2. Select your target audience and tailor your message to them – Is your database heavy with customer names who have not serviced their vehicles in 9 months or more? Design the direct marketing piece with graphics, messages and offers specifically speaking to them, inviting them back in and providing a gift card if they choose to service with you.
3. Select the best cross-promotional partner - Is there a popular big-box department store across the street from your dealership? It may be a natural fit to offer a $10 gift card from that store which consumers can use while they wait for you to service their vehicle. Are you hoping to attract younger consumers to your service department? Consider a gift card for an electronics store. Is your clientele more mature? Perhaps a restaurant gift certificate is more appropriate. Choose the gift card carefully because this offer only works if it meets the criteria outlined earlier in rule number 1 – it represents a significant perceived value for the consumer.
4. Measure the results and let them guide you for future promotions – Too often we base our marketing decisions on what looks pretty or what we personally like when the actual measurable returns should be the only determining factor. The most beautiful marketing programs have been known to fail. It is critical that actual response data is captured and analyzed to create effective future promotions.

How can all of the service departments in a group work smarter together than they do working individually?  Will it save them money? You are ahead of the curve if you have spent time thinking about these questions. There are some very strong benefits to acting as a group such as cost savings, a consistent message, efficiency and the ability to manage the goal of growing a dealership. The payoff can be big, but not every dealer group has the resources to pull it off.

Elements you must have in place to make a group promotion work:

1. Strong leadership – A good leader over each of the dealerships who can sell the benefits to the service managers and execute with success.
2. Flexibility – A company that can take into consideration different co-op requirements, varying demographics of product lines and the ability to gel multiple service managers into one strong mission.
3. A big picture plan for the year – You can do more damage than good with a “Let’s try it once” mentality.
4. Open culture of change – More than likely many of the franchises are going in different directions.  If they are to join together, somebody has to do something different.  That is not easy.

If you have these elements, then a group promotion makes sense.  Here are some direct benefits:

1. Cost – Group promotions allow for more pronounced marketing cost efficiencies, as well as some innovative marketing options you couldn’t afford on your own. If you bring volume to the table, marketing agencies can pass along their cost savings to you.
2. Brand – Your competitor is now, more than ever, the aftermarket.  With lost sales as they are in this recession, your dealership and the aftermarket are going after the older vehicles more than you ever have.  What are you doing to sell your dealership and not just the manufacturer?  A manufacturer’s program can be designed to fit more of their interests and fewer of yours.  Sell your brand and sell it the same way every time.
3. Control –If you execute a year-long marketing plan, positive results will usually fall right in line. Items to keep a handle on include coupon discounting, eliminating wasted advertising costs, overexposure in the market, etc.
4. Results management – It is impossible to take a headcount if everyone is moving.  If you have a plan, then you can analyze the results, return on investment, costs, and profit. Better yet, review the results every time you run a promotion.

Pulling off a group promotion is extremely difficult unless you have the right team. It comes down to the team you build and the team you hire.  If your internal team does not gel and cannot be lead, then it will not work.  If you hire a company that cannot show you exactly how to administer and execute it, it will not work.  But if you can have both, the impact can be game-changing.  Most dealers can use that bit of job security today.

Who is a loyal client?

How do you measure loyalty?  Is it through Customer Satisfaction Index scores?  Some manufacturers measure it by the number of customers who come back after the purchase of their vehicle.  Some dealerships judge just by feel of things.  This means they listen to the customers and look at their monthly numbers.  This is actually not a bad idea, but not good enough for a marketing agency that is responsible for growing numbers.   You need a good measurement of loyalty before you reward a loyal client.  We recommend a very simple measurement that looks at the frequency or potential share of the customer: Is a customer coming to you for all of their scheduled maintenance?  Dealerships are shocked at how much potential they have within their customer base.  We use our Database Diagnostic ™ to show this potential.  Based on the results of our dealers, we estimate that about 65% of most of customers only come in about once a year.

The Red Carpet strategy!

What do you do to roll out the red carpet for your clients?  Retaining your service clients needs to be priority one, post-economic troubles, because it is the best bang for your buck.  If you have lost 30-40% off your new car sales this year then you have a lot fewer Units in Operation to mine from for service business.  Some rewards programs you might be looking at might include gift cards, free oil changes, car wash privileges and “Frequent Flyer” programs.  Some work better than others but be sure your reward program is a good value and that you doing a good job at selling it.

How do I market it?

The best form of advertising is word of mouth.  The best way to get the word of mouth benefit is to work on a strategy every day with your service team.  But how are you selling your customers on your dealership? Whenever I say this, most service managers roll their eyes because they know they need to sell themselves better but they don’t always have the time to formulate a vision on how their service team can grow or execute a plan.   Your service marketing provider should help you with this.  They should be competent enough to advise you on today’s marketing choices just like your master technician knows more about the technically advanced automobile than the average consumer does.  Automotive marketing agencies like Traffic Builders should not be selling you a product like they did when I started Traffic Builders 16 years ago, but rather a promoting themselves as a service.  Part of that service means advising you on a complete automated strategy so you can make time to train the staff to make the numbers.  If you believed in your staff enough to hand over your company’s money then make sure you get your money’s worth.

First put it in writing and teach it to your team.   The spoken word is heard but the written word is understood.   You are developing what we call a value proposition.  Ask yourself, what do you offer that your competitors (the aftermarket) do not?  Your position needs to be better value for a fair investment.   Once you have determined your position, call it a program and give it a name.  If it isn’t a loyalty program then it is only a standard practice of the dealership and the customer won’t see the additional benefit.   After the program is established, you need to get a consistent message out to the public. It means you need to keep a consistent message with every piece you send.  Here are few examples:

Reminder programs – This is your core opportunity since it targets loyal customers.  Take the time to remind your customers of your value and the loyalty program you offer.  You need to brand the program and the dealership and not just the manufacturer.  Remember they can be loyal to the manufacturer without being loyal to you.

Mailers – Preach the same message but shorten your words and make it more prominent within the content of the mailer.  Even though this customer may not be as loyal as a customer on a reminder program, they still need to know that your dealership provides value for the investment.

E-mails – Few dealerships marry their e-mail marketing with their regular marketing or direct mail.  Using e-mail alone is less effective than using it with direct mail for several reasons. E-mail often does not get seen nor do they get opened except by the customers who value e-mail as their primary mode of communication.

The big picture of how Traffic Builders can advise you on how to reward your customers comes more in the message than the act.  The typical dealership we work with has an experienced service director or manager who has a vision for what they want to do in the store, but lacks the time and experience to relate that to what they want to do outside the store.  They have hired a marketing agency to bring in customers by selling them on what your dealership can do for the customers that others cannot.  Hold your marketing agency accountable so you can make time to reward the customer.

“I have a secret list of prospects in your area that gets around the laws.”

“I can replace direct mail with e-mail communications and save you thousands of dollars a month.”

“This mailer got a (place promised percentage here) return at a very prominent dealership.”

There is not to a magic-pill solution to increasing service revenue. With our years of expertise, we have developed a unique year-long program that will make much more impact than any new idea that is on the market today.  Here is what we research for every one of our dealers:

1. Can we tie every idea we have into a repair order generated so we can track impact or sales trends?
2. Are we showing month-over-month growth?
3. Can we create a one-year “magic plan” that shows significant growth over last year?
4. Can we be the expert that our dealership partners expect and manage the creative marketing systems that work?

Many service managers work within a restrictive business structure.  The restrictions may be come from a corporate office or may be self-imposed.  Either way, our recommendations often do not fit in that type of culture. Examples of restrictions include:

1. There is a heavy emphasis of running a manufacturer’s program in order to get your “back scratched” when it comes to a manufacturer’s requests, such as warranty issues.
2. Marketing is considered a gross cost, so you try to save pennies per piece or hundreds per month when there are thousands per day at stake.
3. The service manager does not have control or influence over the marketing budget therefore going outside the norm would never be approved.
4. Change is considered too risky.

We understand the situations and almost every dealership at one time or another has experienced one or more of these. However, if you are ready to look at a completely different approach to marketing your service department, think about a strategy based on your dealership growth opportunities.

Success was a numbers game. Previously, a service department could depend on new vehicle sales to continually feed the customer pool. And if they weren’t capturing enough of those new potential customers, they could look to steady flow of warranty work and internal work to keep service bays full. If they experienced a slight dip in RO traffic, a quick fix was to send out a coupon mailer with an inexpensive oil change.

Success is a service game. Dealers now need to fight their way to the top by examining their processes and innovating new methods and a new mindset to position themselves in the black. These dealers will recognize their service department as the place where their future sales stability lies. These dealers will think past the immediate, and ignore the inflated promises of getting 50 new customers this weekend with a one-hit promotion.

Service Coupon Mailer Mindset vs. a Service Marketing Program Mindset

The dealers who explode with success will be the dealers who stop thinking “How will I increase business this month?” but rather start running a strategic well thought-out service marketing program for the year. A “service program” is built upon the understanding that, like any successful diet and fitness routine, these campaigns and efforts are long-term commitments. Long-term commitments require conscious preplanning, innovative thought, consistent behavior and examination of progress. Not all mailers are “just a coupon mailer.” The foundation of an intelligent service marketing program mindset is grounded by practices built on frequency. Frequency involves several communications, designed to uniquely address different customers based on their service behavior. While the method of using a mailer to reach a customer with an offer is still the most effective way to touch a customer, it is important to understand the difference between a simple service coupon mailer vs. an intelligent service marketing program.

Planning and Frequency

The most obvious difference is that a program plans out further than the next 30 to 60 days. A service marketing program will provide a long-term written plan of not just what service offers will run next month, but rather which offers will run to which customer groupings for the rest of the year, and the plan will provide a method for measuring and adjusting the message as customer behaviors shift.

Reach vs. Frequency: Understanding the Difference

“Reach” is the number of customers that you market to, and “frequency” is the number of times you touch each customer with your message. In a world with an unlimited ad budget and a huge co-op account, you would maximize both reach and frequency. However, since most dealers live in a world stripped of co-op and a shrinking ad budget, we must make a choice between reach and frequency. In real situational terms — do you mail to your entire customer database three to four times a year, or do you mail to a part of your database more often? A successful service marketing program will provide a strategy to maximize your reach and identify target markets based on the needs of your dealership. When faced with the choice between reach and frequency, the golden rule of advertising is: Reach without Frequency = Wasted Money.

The service coupon mailer mindset was determined to mail to as many customers as they could, not worried about details such as the validity of the address, if the recipient still owned the vehicle, how far away they live, if they were just at the dealership recently, etc. A service marketing program mindset knows that, undoubtedly, one of the biggest wastes of marketing dollars is promotional activities that are implemented without adequate frequency — there are no “one hit wonder mailers.” A “program mindset” is grounded by the basic belief that:

• Frequency demonstrates Consistency
• Consistency breeds Familiarity
• Familiarity creates Confidence
• Confidence cultivates Trust
• Trust is why people buy

Dealers are achieving record months in this down economy. Amazingly, we work with and talk with many dealers out there that have achieved record months in service and parts gross sales over the recent months.

Yes, that’s right — service departments with record sales months in May, June and July 2008. How is that possible? Isn’t the economy terrible? Aren’t sales way down? This impressive success has occurred because the message being conveyed in the marketing programs was consistency, confidence and trust. Strategically targeted mailers were sent out as a part of a planned program that:

• Was consistent and planned six months to a year in advance by examining existing customers and their servicing behavior
• Was sent to markets that were segmented so that mailers with relevant messages went to targeted customers
• Were directed by the dealer (not their manufacturer) and achieved through a professional marketing partner
• Always kept a consistent branding image and sold the value of the dealer’s brand (their relationship) — not just the manufacture brand.
• Were campaigns that communicated confidence and care of the customers and created a trusting relationship

Success is a service game. Achieving results will be attributed to the trust that you build with your customers and the consistent way that you communicate with them. Examine your service marketing and proactively take steps to turn it into a strategic program, giving it the same amount of attention and effort as the amount of absorption you expect your service department to carry over these down sales times. Changing the mindset in service marketing will go a long way to building long-term success.

The new angle on this old argument is that now the excessive cost gap is predicted to become one of the widest in history. Consumers are looking for cost alternatives to address the economic woes and the aftermarket “low-cost” brand is the mindset of your current and perspective customers, like it or not. How do you plan for this impact when your service department is currently knee-deep in issues? Internal work and warranty is down, cars don’t need servicing like they used to and the pressure is on for you to handle the burden of the decrease in dealership profits.

The dealership’s primary market (a vehicle younger than 3-4 years old) has been decreasing by more than 30 – 40% per month for over a year, and we probably aren’t at the bottom of the slide yet. The depressing picture needs to be painted because you can’t move forward with a solution until you truly realize what the problem is. Moving forward, there is an optimistic view you can incorporate into your plans.

Companies that are thriving in this economy, such as Wal-Mart and Costco, are doing so because they are lower-cost alternatives to higher-priced tickets. A service department is always a favored cost alternative to buying a new car. The aftermarket knows this well, which is why they are kicking it into high gear. But value is always in the hearts of your consumer and it should be argued that no cost savings is worth the low value that a mom and pop shop can bring to the quality of the service provided. But are YOU making that argument?

So why are customers going to the independent shops? They say it comes down to three simple principles… dealers are not conveniently located, are perceived as too expensive and do not provide enough quality personal interaction. You can’t build a new dealership on every street corner, so maybe the focus should be on being price-competitive and branding your dealership as having great value and strong personal interaction. But how do you do that?

Ask yourself: what are the key values you provide that would justify any perceived higher cost and how can we show the customer you are cost competitive? Essentially, this is the one/ two punch in today’s service marketing and the core of how you should communicate to your customers. You have to tell the story of those values to show what you offer for the perceived increase in cost. Consumers make purchases every day where they spend 34% more for a product or service. Ask the grocery shopper in your family if he or she purchases the cheapest or generic product every time. The answer is typically that someone is willing to pay more if they perceive that there is value in return.

This value in your dealership’s automotive service standards may be going largely untold. Do you educate your customers on…

• Some of the pitfalls of receiving poor and/or unguaranteed work
• Getting stranded on the highway
• Bad gas mileage from a poor performing engine
• The inconveniences of having to keep coming back for service
• Having to pay for more service because of bad quality labor or parts
• Safety considerations for bad service work

Do you promote your most positive features:

• Your facility investment for customer comfort
• Guarantees available only at the dealerships for labor and parts
• Extended hours for their convenience
• Highest standards in trained technicians to fix things right the first time
• A friendly staff and waiting area
• Loaner cars and shuttle service for customer convenience

According to the 2008 JD Powers Service and Usage Retention Study, dealerships are narrowing the gap in customer satisfaction as compared to the independent shops. Dealerships are making customers happy, but are you doing a good job of selling that value to those who are willing to listen? Here is a top 10, best practices list you can start right now.

1. Let your customers know you are price competitive the minute they come in. Create a price comparison board for the main services offered. (Some manufacturers will help you do this but make sure you follow the protocol.) Pick only the regular maintenance projects such as an LOF or rotations. Create a late-model pricing schedule to be sure you are price competitive.
2. Make it a point to show, in bold, what services the aftermarket shop said they could not do.
3. Post an easel right in the middle of your drive. Get a dry-erase board and post it on the wall as well. If you can create dry-erase boards for service writers’ desks too, that is a plus. This gives the appearance that you are regularly on top of staying price competitive for your customers so they don’t have to shop you.
4. Start an “Experience the difference” campaign – be sure to let the customer know what amenities they are able to get at your store that they cannot get with the local shop down the road.
5. Expand those amenities – Extended hours were probably a requirement by your manufacturer, so go outside the box and create 2009 amenities: Free car wash booths, free oil change programs, bonus bucks towards the purchase of a new vehicle for full-service records, loaner vehicles for all, ladies’ day manicures while you wait or Father’s Day carwash kits.
6. Polish your lounge – Take the time to make the experience good for everyone.
7. Price comparisons in your couponing – post the latest grid in your marketing campaigns to let the not-so-loyal or lost customers know you are more cost effective.
8. Establish your value statements but have no more than six – What are the six values that mean the most to your market and let them be heard. Be sure one of those six is your people. Use the personal relationships you have between your staff and your customers as a product you provide every day.
9. Run a value-added brand campaign – How many mailers, reminders or emails do you send out per year? Take your six values and preach them over a year-long, repetitive campaign until your customers sit up and listen. Stay with a focused message that a customer experiences in all stages of exposure to your organization. If you need to compensate for recent sales losses, start with mining customers who defect after they are out of warranty.
10. Teach the people who preach to the people – Your writers should memorize the six value propositions that your organization offers. Every time a customer comes in, challenge your writers to tell the customer about at least one proposition. Create the script and tell them to say it.

The important thing is that you know your market and where you stand before you decide where to go from here. If you were asked right now why a customer should service at your dealership instead of at the garage down the street, could you spit out a convincing message without hesitation? Dealerships absolutely offer a price-competitive service in their markets but perception is reality. You are more likely perceived as more expensive than the aftermarket and you must do something about it. Successfully facing the aftermarket means creating a map to show value and competitive cost as landmarks to drive in business. Moral of the story: Know who you are, tell it and sell it!

According to a recent study by the Automotive Aftermarket Industry Association (AAIA), vehicle repairs cost an average of 34% more at a new car dealership than at independent repair shops. They argue that this is leading to 11.7 billion dollars of excessive costs annually to consumers.

One of our dealers, a large import dealer located in the southern United States, decided to address the issue of being cost competitive, without sacrificing profitability. The first part of his challenge was to utilize a cost-efficient means of keeping his name in front of customers and enticing them back into the dealership, despite perceived higher cost.

The second part of the challenge was to retain new customers. Being cost-competitive is great, but really showing the value of the dealership is the key to turning one-time customers into regular customers. What value proposition could the dealer create that would justify perceived higher cost?

Solution

The dealer asked us to create a mailer offering a $19.95 oil change. The shop is the number one store (of that particular manufacture) in that region in paid-customer work. On subsequent mailers, the dealer continued to offer the $19.95 oil changes. To sweeten the deal, he chose the rock-bottom price of $9.95 to put on a lost customer postcard, which was mailed at the same time as a regular mailer that featured the $19.95 oil change. Customers are considered to be lost when they have not visited the dealership in 24 to 36 months.

To overcome the second part of our challenge, the difficulty in retaining customers, the dealer turned his focus to branding his dealership as having great value and strong personal interaction.  This dealer has eight technicians, most of whom are master technicians. Each technician performs an oil change and a multi-point inspection. If he sees a problem, he assumes the role of a consultant and shows the customer. He will either take the part up front or pull the car around. Allowing the customer the courtesy of a visual inspection and presentation of damaged parts/systems fosters credibility. If the technician can tie the work to performance or safety concerns, he will further increase the likelihood of an upsell.

Side benefit: The customer can gain exposure to the entire dealership and perhaps that customer will buy a car from the dealership in the future. The relationship begins at your service department and the goodwill continues.

Results

The dealer brings in over 10 million dollars in revenue per year. His one-time customer visits are high (which is true of each dealer in his region), but his number of customers who visit five or more times per year is still higher than his competitors’ in the region. In one case, his average of customers who visit five or more times is almost eight times as much as another dealer. In fact, his customer count, number of visits and revenue are all highest in his region.

Typically, a dealership spends a little more than one percent of their gross sales advertising — but how they spend it is changing dramatically. Consumers want more information and they want the information directed to them, for them and about them. This is why traditional marketing is changing so dramatically.

According to NADA, a little more than 10 years ago mediums like direct mail and the Internet didn’t even have their own piece of the pie. They will soon grow together as more than a projected 25 percent of the total expenditure by the end of 2008. The greatest example of success within these two mediums is occurring in service. Internet and direct mail are most effective when they are targeted to the customer, for them and about them.

The service department is your largest resource for tracking customer behavior due to multiple transactions that are taking place per year. If you take advantage of this

resource, Internet and direct mail messages can be customized and specific to the customer the way they like it. Almost every manufacturer has a service-marketing program that makes it easy to target consumer frequency and persuade the customer to increase their loyalty. Some dealers are hesitant about this advertising communication and underutilize the investment. Some manufacturers might influence you to use their national program, stressing that you must stay in front of your customers. This is the right approach, but what is your message once you are in front of the customer?

The key point of this phrase is your customer. You are there to bring customers into your store to service their vehicles. Then, you want to encourage them to buy their next vehicle from you. So ask yourself who “you” really are, and what you need to do in order to maintain a positive impression. This positive impression does not exist if the customer doesn’t perceive it. What percentage of your one percent of sales are you spending on building your brand within the market? What are you doing to extend a positive impression on clients? Cheap prices do not always build strong positive impressions to everyone.

Building brand does not typically happen in the service department. You invest those dollars in staying competitive on price. That may never change. However, increasing service loyalty tends to be more about convenience, time and quality in addition to cost. So, it makes sense to focus your service marketing around yourself in order to build brand and drive customers in. Here are some short rules:

• Talk about you, not your manufacturer’s line — This is the No. 1 problem with most manufacturers’ service mailing programs. They want to talk about them. This may build loyalty to the vehicle, but that does not ensure they will come back to your store to buy versus the guy on the other side of town.
• Move the needle, not the metal — You are interested in selling services that are profitable and move the needle. Your manufactures’ program can be focused more on moving metal — parts. Keep your offers focused on services that make sense for the largest audience, and not just the highest parts gross.
• Know who you are and what you want to be — It doesn’t take an expensive survey to understand what you do right and what you do wrong. Every dealership should have managers and leaders who know what image needs to be in the community in order to attract customers through trust. Know this and sell it, just as much as you sell discounts.
• Keep your logo and tag lines consistent — You don’t need a professional advertising agency to make up a tag line such as “quality is never compromised.”
• Plan for the year — Most service managers aren’t trained in marketing, so be sure there is a plan for how the dealership is going to be branded for the year. Once your automotive marketing plan is created, they can focus on what truly makes the dealership money — managing people and customers.
• Hold on to the notion that your service department is also your public relations department. The average dealership has between 5,000 and 7,500 customers who have visited their service department within the past 24 months. If you regularly direct market to these customers, at least quarterly, you are getting between 20,000 and 30,000 impressions in one year. Great branding needs to be a byproduct of successful direct marketing. If you are not taking the steps to build a positive customer impression, then there will not be a successful direct mail program.

Consistency is the key. Consistency is about building a positive relationship over time with your clients. It is not about beating up your customers and your wallet until you finally realize there is no value being built. Consistency isn’t about a magic pill, but rather emphasizing the relationship you have to offer your customers.

The definition of retention, as given by Random House, is simply to keep possession of or to continue to hold or have. The bottom line is to understand that retention is profitable… very profitable.  So much so that every automotive dealership should make it priority one. Your goal should be to create a process that earns a larger share of customers over the long –term and not simply a share of the market in the short-term.  If you are on pace for the long haul, you will still see a lot of short-term benefits.  You must approach one customer at a time and feel confident that they are your customer for life.

The direct marketing business always discusses repetition or frequency as a means to retain a customer. Retention does not just mean you reach out to your customers a lot or mail a lot. It also means you have a consistent, simple brand message that resonates in your market.  That message must appeal to your market, and brand your dealership over any other.  The predominant message in the automotive world is price, price and price, especially in the service department.  However in your business model, you have been constructed to be more focused on value and quality but your marketing may not be conveying that to your customer.

Here is a quick approach to achieving maximum retention in your market.

1. Know what your customers think you do wrong, and preach and do the opposite.
2. Know what you and your competitors do right, and preach and do the same.
3. Create 6 simple messages that will resonate in your market and build the brand you will need to succeed in your market.
4. Take your message across all marketing mediums with consistency.
5. Sell it to your customers and to your staff face-to-face.

Warning: shameless self promotion below.

Traffic Builders covers all four of the above steps except #5… that is up to you.  We have several core communications that cover the behavior cycle of customers:

1. Loyal customers receive mailers or service reminder/recommended letters
2. Infrequent customers receive  mailers, postcards and e-mails with moderately priced coupons
3. Defecting/lost customers receive postcards with more aggressive coupons

Our reminder program focuses in on just the retention aspect of building business.  We help the dealerships figure out what message needs to be preached and brand that across a program.  It repeats the “custom” process and approach on which we were founded.  What this means is we are here to sell your dealership and not just the manufacturer or the recommended schedule.  Your consistent message must appeal to your market and brand your dealership over any other. Selling the manufacturer or a recommended schedule are appealing loyalty motivations but when the dust settles at the end of the month, your customers are loyal to you, your staff and your brand.  Whatever program you choose should take this into account.  Put pictures of your staff, your facilities and your logo on your marketing pieces (and not in black and white!).  Most importantly repeat the message that about your value.  Embrace the stereotype of not being the cheapest and become the “value for your dollar” dealership.

What is the payoff? Most dealers that we begin work with have unbelievable potential for growth.   When we perform a database diagnostic at an average dealership, it shows that the number of customers who do business only one time per year is about 63 – 70% of the total databases.  So if you have 10,000 names that have serviced with you this means 7,000 serviced with you one time only within the past 12 months.  If you are able to bring only 20% of these 7,000 one-time customers in a second time, then this would mean an additional $252,000 of revenue for the year.

The diminishing UIO is a particularly interesting indicator because it tends to first affect the service department. If your service department is hurting, then it’s like using a cracked bat when you come up to the plate. We all know the secret is out—the backend is profitable. But service departments are panicking now because their core base of customers (those who have vehicles within warranty that are younger than three years) has been dwindling for about 18 months or so, depending on which market they are located.

Do the math with these national trend numbers:

• Number of vehicles in your database – 10,000
• Number that leave per year – 2,000 or about 20%
• New units sold every year – 1,300
• New service customers every year – 700
• 30% decrease in sales over 12 months – 390 units
• Lost service sales potential sustained over 18 months – OUCH

It doesn’t add up to an increase! And doing nothing will make these numbers a reality for you. As the market continues its trend, dealerships that acclimate to change, or keep their eye on the ball, will have a distinct advantage. In a single month, indicators of change may be small and you don’t always see them in your net profits. You may be reacting to the immediate pain that a 30% – 40% sales decline is bringing to the dealership but is that enough? Many projections say a recovery will be in the fourth quarter of this year for much of our automotive market. This is typically when service is not at its best. Can your dealership be competitive if you have just “reacted well”? Are you planning on how you will react now to improve conditions six months from now? Dealers who do will recover significantly faster than the people who are stuck in reaction mode. You must new find ways to drive up the UIO and find ways to get a larger share of the customer base.

Don’t be discouraged because the opportunity is there! The good news about the residual effect of this market is that sales and service will become a more cohesive unit to take more share of the market and the customer base. More emphasis and budgeting will continue to be put on the backend because the realization that service is truly profitable will be internalized. In turn, loyalty levels will rise along with new car sales. Extreme conditions tend to make you more aware of the economic climate around you. Strong dealerships understand that an investment in service is an ultimate investment in the sale of the customer’s next vehicle. If you believe in that principle then it might make sense to analyze how the most recent sustained drop in sales is going to affect you moving forward.

Every service manager should be expected to have a “work smarter” plan rather than a “work harder” plan. Dealerships are looking to hire service leaders who know how to run a business. If you don’t have a plan, then don’t plan to work.

Take a snapshot of the database – define and get to know the total opportunity of customers who have serviced 0-36 months.

Answer the following questions:

1. How many loyal customers do you have?
2. How many of them come in more than once per year?
3. What typically have been your best and worst months?
4. How many e-mail addresses have you collected?
5. What are your primary zip codes?

Create a plan first to drive in your customers more often. The typical dealership has about 65 % of their customers only servicing once per year. This is an opportunity. If you are already doing reminders, then change some things up to increase your customer frequency.

Plan your promotions around the up and down months. Plan your prospecting efforts on good months when the fish are biting and plan your service clinics with new and loyal clients when times are tougher, to level out the losses.

Incorporate your e-mail into your other programs, but don’t depend on it. E-mail and direct mail are not interchangeable yet. Most dealers only have emails for about 30 – 40% of their database. Blasting quick messages for mid-week discounts can elevate the profits for a week and ultimately make a more profitable month.

Track anything and everything all the time. Each customer should fall into categories based on behaviors. Those categories determine how you market to that person and they change every month.

Know who you are and preach that with repetition. Consider also who you are not, in the eyes of your customers, and get better at becoming what your customer needs.

Ultimately you need a new strategy. Driving in more sales from a larger share of your customer base should be number one. It is the least costly plan to reach the market and will have the most immediate impact. Then concentrate on prospecting for lost customers who have not serviced with you recently. This is not easy, but having the vision is the most important part. Most dealers hire out for their marketing. If you do, you need to know that the company you are working with has a program that matches your vision to best compete in your market. Be the expert at what needs to be accomplished with your new strategy and the “how” it gets done will fall easier into place.

‘What big meeting?’ you say. The big meeting when the dealer principle or general manager comes into your service office and tells you that times are tough, and that you need to majorly cut your budget. You planned on using the scalpel, and instead, are required to use the axe. You say, “Hey wait, my department is doing better than any other, and I am the only one driving in traffic to the store.”

Traffic Builders has the privilege to work with many owners and GMs who truly support their service departments and value the impact they make. We also have many other service managers who say that upper management leaves them alone, never steps foot in the back or knows nothing about the service department. For many years, that may have been a good thing, but in today’s market that reality is gone for most dealers. As a leadership team, all departments must support each other even if it requires a short-term sacrifice.

All is not lost, though. You can prepare for a logical discussion on why you should strategically cut and not make sweeping changes. This simple list will get you ready to have a strong, effective conversation to show your strategy to continue to grow your business without cutting out strong monthly traffic.

Get prepared with your marketing plan – Most dealerships don’t have a formal plan, but it will be easier if you have at least itemized your spending. Use your dealership’s marketing spending history as your guide. Break out what you are doing with the manufacturer vs. aftermarket solutions and what results you have measured, if any.

Cut the fat, keep the muscle – Now that the numbers are in black and white, get the scalpel. Identify those things that need to be cut because they are not working. Maybe you are double-mailing to your customers or have an employee you should have gotten rid of a long time ago. Don’t waste too much time cutting things that save you very little per month.

Sell the things that you want to keep – Print out anything you can show to justify your expenses. This could include performance reports, sales on a machine or results-driven services you pay for.

Sell the negative as well as the positive – Motivation for keeping your expenses are simple. They help grow your business or they help you avoid losing money. Not only do you need to show what kind of progress each expense creates, but you also need to show a possible negative impact if the investment goes away.

Lop off the ends – Driving in new or lost customers to the dealership is an important mid-term and long-term goal for service success. It is also the most expensive repair order to require (even though the repair order is typically $200.00 more than those from loyal clients). So, temporarily cut back your marketing on customers whose last service dates are 24 months or more. Mail to them every six months rather than every other month for now. Then when times get better, refocus your efforts on database building vs. database retention and frequency.

Discounting – Stop it! – Many dealers itemize their discounts in the advertising field. Even if you do not have a discount service department, itemizing discounts will hurt your bottom line. Ask yourself; what is the perceived value of the discount, not the real value. The service manager’s opinion doesn’t matter because, you know too much. Only discount the common service and leave the rest competitive with the aftermarket around you within a 15 – 20 mile radius.

Sell them on your numbers – Most of our customers are right around or slightly above where they were last year. Be brave and put all the numbers out on the table. More than likely your department is doing better than any other department. You may be the only one holding any profit.

Use the logical close – Every sales department has his or her own unique selling system and close. Use a logic analogy for your close. If you had a mortgage payment on your house that you were having trouble making every month, what would your solution be? Would you cut the $20.00 monthly dry cleaning bill, or would you look for expenses that have a larger impact? Our most aggressive dealership spends less than 7% of their total marketing budget on the service department. So when you try to cut costs for the health of the dealership, don’t go after the lowest expenses that have the most positive impact on the dealership.

Service is the strongest part of what is keeping many dealerships going. Your dealership may have a well-liked service manager whose customers come flooding in. However, it may also be because in today’s economic market, we have seen glimpses of success in segments that offer cost-alternatives to the market. Service is a cost alternative to buying a new car. Dealers must take time to justify their plans so they will continue to have the resources that make an impact on the dealership, the employees, and the service manager. Service personnel in general are hired to independently make a profit in the back end. Respect the fact that the front end is very different than the back end, and educate your owner and general manager about those differences. Just choose your operating tools carefully.

To increase customer frequency through a cost-effective direct marketing program for a medium-size import dealer in the Midwest. On average, just over 18% of a dealership’s customer base comes in three or more times a year. The dealership needed to increase customer frequency in order to increase profits and retain clients more effectively.

Approach

We suggested the dealership begin running our service reminder program, which signals customers to come in by: reminding them of upcoming mileage and time-interval scheduled maintenance and/or reminding them of declined recommended maintenance from a previous service visit. The approach was unique to what they had been doing because the letters were personalized to customers’ specific vehicle needs, contained dealership pictures and represented the dealer’s brand and logos. The dealership included this program along with their other direct mail initiatives in order to build their brand using the familiarity of the staff and facilities to drive in customers.

The reminder program components:

• Welcome/thank you letters: These letters are a way to build customer loyalty by showing appreciation for a customer’s business and to encourage them to return.
• Reminder letters: These letters remind customers when it is time for their vehicle to be serviced. The goal is to increase the frequency of customer visits, therefore increasing sales from current customers. Coupon specials and an amenities section within the letters are customizable.
• Recommended letters: By targeting the current customer base with customer-specific recommendations, these letters generate high RO response rates and revenue. Forty percent of customers walk away from recommended services, so these letters are an effective way to keep the dealership’s name in front of them.

Results

Service mailer response rates for this dealership during the first quarter of 2009 are consistently between 11–14%, while reminder letter responses are at least double those figures, at 21-50%. For the same period, the reminder letters returned at least $45 for every $1 spent.

Summary

Based on the results, it can be concluded that reminder letters can be a vital component of a comprehensive marketing strategy. The reminder program yielded a larger increase in response and return on investment than service mailers alone. As the dealership continues the program throughout the year, it has the opportunity to convert infrequent customers into repeat customers by upselling, providing top-notch service and building trust. The next step would be to measure retention over the next 12-month period and compare the numbers one year from now to get a more in-depth view of the impact.

As consumers become more technologically savvy, many new avenues of contact become available. One of the possibilities is using e-mails in conjunction with traditional mailers. E-mail coupons are common for tangible consumer products, but how effective are they when accompanied with a traditional direct mail piece?

Approach

One of our medium-sized dealers sent out about 4,500 mailers each month. To reach his tech-savvy customers, he decided to accompany his mailer with an e-mail campaign. We had e-mail addresses for about 15% of his database, so we sent an e-mail to those customers about three weeks after his mailers were sent. The e-mail was an electronic version of his direct mail piece, featuring the same design and offers.

Results

In March and April of 2009, e-mails were sent out to approximately 15% of the total mailing list. There was an increase in the repair order dollars’ average of 29% for the two months the e-mail promotion was used. After factoring in the nominal cost of the e-mail, it was revealed that the average return on investment increased $2.80 for the promotions that had e-mails. If the customer acted on the e-mail coupon or just the reminder the e-mail provided, the customer did visit the dealership, which boosted the ROI. The case study determined that the use of e-mail with direct mail is a more profitable tactic than just using mailers alone.

A service manager wanted to create a compelling e-mail message to accomplish two goals. He wanted to bring in more customers to celebrate his dealership’s grand opening and increase traffic during a slower time of the week. The idea behind an e-mail blast is to have it follow a mailer, to remind customers that a promotion is running. Typically, a dealership will see its highest number of repair orders during the beginning of a month as a result of a direct mail promotion. In the first 12 days of January, the dealership lost an average of 7.3 customer-paid repair orders each day. In addition, there is a trend of declined coupon usage in winter months. For this month, the dealership’s repair order drop-off was particularly severe.

Approach

An e-mail blast was sent on the 13th of the month, highlighting a grand opening special. An e-mail blast is a quick turnaround marketing initiative that can fit the needs of a time-sensitive (or urgent) situation. It was a one-day-only offer of a free oil and filter change and 27-point inspection (limited to the first 200 appointments) from 10:00 AM to 3:00 PM. It was targeted toward one manufacture, and customers could call or schedule an appointment online. The offer was strong and the sense of urgency was high, due to the limited number of available appointments.

Results

After the e-mail was sent, the 200 appointments were filled in 45 minutes. Of the 4,337 e-mails sent, 28% were opened. For the rest of the month, repair orders only dropped an average of 2 each day, compared to the previous average of 7.3. The dealer’s average repair order for this month was $215.79. By slowing down the repair order drop-off, the dealer created business where they previously had seen fewer customers. The dealer was not losing customers at the same rate as at the beginning of the month, therefore he retained $1,146.37 of revenue each day, yielding an additional $16,049.23 for the month.

In this time of ever-increasing postal rates, it can be a challenge to follow all the details of executing a successful direct mail campaign. As a market-savvy consumer, you know that getting your name out there is all about the frequency. So you plan ahead, set your budget, and keep the mail pieces rolling, but how can you be sure that the mailers reach the intended targets?

Here’s the other challenge: According to the United States Postal Service, over 40 million Americans change their address annually, which creates formidable obstacles in maintaining a high-quality mailing list.

Approach

To maximize the effectiveness your dealership’s promotions, you should have all of your mailing lists checked against the National Change of Address (NCOA) list every time. The NCOA standard requires a list to be checked every 90 days, and although having the list checked every time is time-consuming and more expensive, the benefits far outweigh the added cost. There are also several other processes that need to be followed in order to avoid sending messages to customers who are highly improbable to respond. Not all marketing partners cleanse information the same way. Some partners avoid meticulous efforts because they only lower the volume mailed and therefore lower the invoice that can be sent.

Results

It makes sense that updating change-of-address information to your mailing lists significantly reduces undeliverable mail pieces. That means more money stays in your budget. Running mail lists through NCOA can save almost 10% of your direct mail budget by eliminating mail to incorrect addresses.

Here are some actual examples showing the savings for three of our customers from January through May 2009. Although the dealers vary in size, their NCOA percentages are similar. “NCOA Moves” means the number of old addresses that were switched to updated addresses. “NCOA PCT” reflects the percentage of addresses we changed. Again, the investment-to-return ratio is almost 8 to 1 and over a year’s time. That adds up.

Addressing environmental issues and making “green” benefit a dealership.

Approach

Kerry Collision (affiliated with Kerry Toyota) in Covington, KY, is one of the first collision centers in the region to embrace the green initiative. Tom Dolan, service manager of Kerry Toyota, says getting internal support for the green process was easy. “Lots of people really wanted to get onboard to make this happen. Being green is where it’s all going to go. The environmental issues are coming to the forefront.”

Marc Carmado, manager of Kerry Collision, is working with Tom Dolan of the Kerry Toyota dealership to promote his green initiative. The We Auto Go Green™ logo is on each Traffic Builders-produced mailer for Kerry Toyota, along with Kerry Collision’s own “Gone Green” logo. These visuals help to remind their customers about Kerry Collision’s contributions to the green initiative.

Carmado says the highlight of their green initiative was waterborne paint. In September 2008, Kerry Collision switched from using solvent-borne paint to waterborne paint. Waterborne paint, in which water is the major ingredient (98%), emits less organic solvent into the atmosphere. For Carmado’s team, who usually paints 125-130 cars per month, that’s a lot less toxicity in the air. “We’ve reduced our pollutants to almost nil,” says Carmado. “It was a decision that I made for the shop. I think we have a three to four–year jump on upcoming national emissions changes.”

Carmado says cleaner air and a healthier work environment are just a few of the benefits of waterborne paint. Waterborne paints are nonflammable, and according to www.autobodypro.com, some paint companies promote the waterborne paint as having the ability to blend that meets or exceeds that of solvent-borne basecoats.

Making the decision to switch to waterborne paint turned out to be easier than executing it. Minor adjustments were needed to convert to waterborne coatings; even storing paint that will freeze is a change. “It’s a different set-up, a new way to learn to spray it. We had to retrain our guys and there was more waste at first, but it was worth it,” says Carmado. “This was a team effort and everyone was on board.”

Kerry Collision also recycles all of its leftover plastic, metal and light bulbs. A local vendor takes Kerry’s recyclables and sells them. Carmado is glad to donate those items that will benefit someone else. “It’s just another way to give back to the community.”

Results

“We are getting a lot of positive comments, especially from the younger car owners,” says Carmado. “They can see, from the green walls in our shop to the marketing efforts, that we are dedicated to the green cause. This is just something I can do to help the environment, and I’m proud of what we’ve done.”

It is an all-too-familiar scenario in almost any business setting: do more with less. A parts and service manager was asked by his general manager to reduce the advertising budget by 25%. The challenge was to analyze the advertising in a given time frame to determine the consequence of reduce the budget.

Approach

This can be examined both from a general marketing perspective, as well as a results-oriented perspective. It’s a given that by having the dealership’s message in front of his customers on a frequent basis is more likely to ensure success than a one-time mailing because frequency is a basic marketing and advertising principle that would be violated if this dealer decided to reduce his monthly participation. Since reducing frequency could not be recommended, the dealership explored reducing the mailing list size by 25% (per promotional period) to reduce the costs.

Results

In this case, the dealership could save $1,383 per promotional period on front-end costs by reducing the mailing list by 25%. However, using a standard forecasting model, it was found that by reducing the marketing cost by 25% could mean a potential reduction of up to $60,000 in total repair order customer pay dollars per month. In this case, on average, $142,383 of this dealership’s RO dollars are generated from customers who receive mailers. Reducing the marketing budget during a recession, even for a month, was not a safe way to cut costs.

Simply put, would it be worth it to “save” $1,000 if you are potentially sacrificing $60,000?

The challenge was to grow business from areas previously designated as “poor” retention markets, which in this case meant bringing customers in from previously untapped zip codes.

Approach

Based on Urban Science’s manufacturing reports, it was identified that 10 zip codes in the dealership’s region had not yielded customers. A mailing list was created to show how segmented targeting would be effective. Customers received a 45-day direct mail piece with a winter-driving focus.

Results

The postcard was mailed to 7,500 dealership repair order names and prospect names from the 10 targeted zip codes. The targeted customers resulted in a 9.37% response rate with 704 responses. ROI for the mailer was $40.23 per dollar invested.

An analysis confirmed that segmented marketing lists can work successfully. The accuracy of the 10 targeted zip codes was also confirmed. During that 45- day period, ROs from the targeted mailing areas made up 8 out of 10 of the top responding zip codes for that month.

In this case, because they cut back on marketing to all regular customers in order to target the untapped 10 zip codes, they saw that some of their regular customers did not come in. This supports the idea that direct mail is an important trigger, even to loyal customers.

It comes down to making sure that results drive your marketing. The dollars up front should NEVER be figured without the return in the back end. If consumers thought that way, we would rush out and tell our financial advisers to buy only the cheapest stock they could find, and not necessarily the stocks that would yield the best return. So what is the best way to utilize e-mail, and how can its cost efficiency help me in today’s market?

E-mail yields a strong rate of return for three reasons: It serves a part of the market that shops and communicates heavily through the digital world; it can be a very inexpensive up-front investment and therefore can yield a strong return on investment; and if you do it right, much like direct mail, it can be tracked.

Our finding is that e-mail is a good fuel additive but is not strong enough to fuel the marketing engine by itself. E-mail has limitations within certain segments of the market. There are three technical or cultural filters that every e-mail goes through: invalid e-mail addresses, junk mail/spam filters and lack of participation with e-mail ads and coupons. Our clients typically receive interaction from less than 10% of their collected e-mails, but that interaction is strong. Here is where your mindset should be:

1. Use it as an additive to compliment your other marketing, but do not think that just because the customer gave you his e-mail address that he will automatically respond to your e-mail.
2. Use it to drive customers to your website to determine who is interacting with it.
3. On your website, make sure you have an easy option to click to schedule an appointment. Provide a discount if the customer schedules online. Remember, tracking is a unique benefit and you need to use it.
4. Make sure it interacts and is consistent with your other marketing, including discounts, branding, terminology, customization and expirations.

The Traffic Builders’ program automates all the above and more. We have focused on a core group of amenities at a lower price point. Some items that will soon enhance our e-mail product:

1. E-mail blasts for a way to fill your service department during slower times
2. Name interaction that automatically removes customers who interact with e-mails from your direct mail programs
3. Opt-out database interaction is the automation of opt-out names that you have entered into your database.

The real challenge is when you look at e-mail marketing from a larger picture. How many customers have bought from you within the past 1 to 36 months? These are your primary sales and service customers. What percentage of those customers are you effectively reaching with e-mail?How are you marketing to the customers who are not responding to e-mails or do not have valid e-mail addresses? You must have full coverage. If you bought car insurance only on your car’s front bumper, then you take the risk of getting hit anywhere but that front bumper and not being covered.

Traffic Builders can promise you two things. We will obsess about what works, and we will be the experts for you so you can manage your shop. Traffic Builders would not have taken on e-mail if we did not believe it was a viable solution. At the same time, we do not believe e-mail is going to take over direct mail, but rather it will focus on a specific consumer niche. There is surely another technological advance coming that will dominate. As soon as we find it, we will let you know.