It might be one of the oldest marketing methods in the book, but the humble direct mail piece might be ready to make a serious comeback.
Our digitally enhanced world hasn’t been very kind to direct mail– often relegating it to the bottom of the marketing heap due to high costs – both in printing and postage – and environmental concerns about the viability of using such a method in the electronic age.
But a recent study of over 200 US dealerships using personalized direct mail for strategic, targeted campaigns (read: minimal print runs and minimal postage costs), calls into question this thinking.
We know dealers spend hundreds of dollars advertising and marketing the cars they sell (NADA puts that number at $616). This spend is often done to attract new customers through traditional advertising, third-party leads, pay-per-click advertising, website lead optimization, etc.
However, any marketer worth their weight knows it’s usually easier and far less expensive to retain current customers than to fight to acquire news ones. In fact, conventional wisdom says it costs as much as five times more to acquire a new customer versus retaining one. And, of course, the high lifetime value of automotive customers is nothing to scoff at – between car purchases, F&I products, service visits and referrals, the value of a single customer can easily run into the six figures and, depending on brand, even higher.
It’s a wonder so many dealers ignore the potential profits sitting in their own database, just waiting to be mined.
The dealers in this study all used database-mining techniques to find customers who are currently ‘in-equity’ in their vehicle – meaning their current vehicle is worth more than they owe on it—and thus likely both in-market and in a position to purchase a new vehicle with little or no out of pocket spend.
And all of them reported ROI and conversion rates that far outpace their other marketing channels by using their dealership’s data, combined with information pulled from the OEMs and used car pricing resources to create personalized, targeted direct mail campaigns to reach these in-market prospects.
The process to unearth these in-market, often orphaned customers isn’t necessarily easy and may require a third-party resource, but the results are well worth it.
There are a variety of database mining and equity marketing solutions dealerships can use on their own – including CRM tools with equity-mining functionality baked in, dedicated equity-marketing software companies, and dedicated full-service equity-marketing solution providers.
There are some drawbacks to these types of self-service solutions: CRM tools can be notoriously complicated, time consuming and difficult to master, while the dedicated software programs rely heavily on salespeople to make contact with a prospect.
And both of them lack a strategic, targeted direct mail marketing component that delivers regular and consistent communications to the customer base at appropriate times in their ownership lifecycle, and also ties offers to current manufacturer incentives, making them particularly relevant to the customer.
Instead of depending on sales staff to reach out to these ready-to-buy prospects, all dealers in this study employed a full-service equity marketing solution using personalized, targeted direct mail as the first point of contact in their in-equity marketing campaigns – followed up by email and calls. And the impact was significant.
The targeted direct mail campaigns that deliver the strongest results were customized to focus on the specific needs of the dealer. For example, a “Year-End Clearance Event” helped move end-of-year overstock; or if there’s a need to move a certain model, then campaigns focus on this; and, if a dealer is looking to fill up their lots with certain used vehicles, campaigns target these specifically.
This study looked at over 200 dealers using turnkey data mining equity marketing over a two-year period, analyzing thousands of separate campaigns. The results were an average cost per sale of just $112 per new vehicle sold.
Results of Targeted Equity Marketing Campaigns*
- Cost-per-sale average: $112 – considerably less than other marketing channels
- Incremental sales per campaign:
- 40 = top 10%
- 29 = top 25%
- 13 = average
- Gross profit: additional $422 per customer versus first time customer sales – a full 28% more profit!
* Over 200 dealerships nationwide
Because these are very targeted direct mail campaigns, the average campaign size is only 1,200 pieces – while typical direct mail campaigns usually hit between 5,000-10,000 customers – and each campaign resulted in 13 sales on average. Even better results were experienced by the top 10% performing dealers who averaged 40 sales per campaign; while the top 25% performing dealers typically hit 29 sales per campaign.
Postal cleansing software means deliverability rates are extremely high (usually above 90%…and always many times higher than e-mail deliverability). Similarly, open rates are also extremely high (and again, much higher than e-mail…the common refrain one hears these days is that inboxes are far more clogged than mail boxes).
This study also showed higher gross profits on each car sold – an average of $422 more when compared to a first-time customer sale – clearly illustrating that retaining current customers makes fiscal sense. In addition, these equity campaigns result in trade-ins of vehicles that have likely been bought and serviced at the dealership, so trade-ins sell through much faster than typical pre-owned vehicles: 64% of trades sell at retail within 30 days of being on the lot.
Perhaps it’s time to reconsider direct mail in your marketing mix. Not old school direct mail, but highly targeted direct mail, customized based on current incentives and the inventory you need to sell and acquire in trade, and personalized to customers who are both in market and in a position to purchase a new or newer vehicle based on the equity in their current vehicle. As the results of this study show, the ROI and incremental sales make it well worth exploring this often overlooked marketing tactic.