Highly focused ad campaigns can mean big returns on a small investment

By Kati Knowland, Senior Staff Writer
December 01, 2004

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Zero percent financing. Inventory liquidation. Everything must go. No money down. These advertising catchphrases are blasted to customers through television, radio, direct mail, print advertising, e-mail and the Internet. With advertisements reaching audiences through an increasing number of channels, it is starting to take more than a clever slogan and a few seconds of airtime to bring in customers.

Sometimes, less is more when it comes to an advertising budget, because dealers who use a well-planned, targeted advertising campaign often spend less but see a greater return on investment than dealers who blast every media channel with the same ad.

Focused advertising has been the ticket to success at Linnehan's Used Autos, the top used vehicle dealer in Maine, which recently drastically reduced its monthly advertising budget by determining which campaigns were successful and which were not bringing in customers and allocating funds accordingly.

"We really have tried to dial in our ability to track the results of our different marketing programs, and calculate which ads are positively contributing to our net profits, based on a cost per sale amount," said Ryan Linnehan, the company's marketing and promotions director. "As a result of this focus, we have been able to eliminate many of our advertising sources that were not providing sufficient ROI, and have trimmed our monthly advertising expenditures from a high of around $70,000 a month to currently less than $10,000 a month."

Best of all, the company has made this drastic reduction in its advertising budget without negatively impacting sales. While the stores may have made a few more sales when the advertising budget was at its height, the expenditure far outweighed the gain, according to Linnehan.

"I think the best decision we ever made in regards to our advertising is the dramatic reduction in our advertising budget, without it affecting our sales," he said. "We may have had a few more sales when we were spending big bucks each month advertising, but we realize a much better net profit now, by forgoing the few extra sales, along with the large expenditures we had in order to realize those sales.

"It all boils down to majoring on the bottom line, and from my perspective, I'm just as happy, probably happier, spending $60,000 less per month than I would be generating an extra $60,000 in revenue."

Linnehan said that the company has done away with a lot of the traditional advertising mediums, like radio and television, and have instead begun to focus ad dollars on classifieds advertising magazines with specific to their area.

"We have found the best ‘bang for our buck' is the weekly shopper magazines that every area seems to have," he said.

In addition, the company has started to focus its attention on its existing customer database, developing ongoing relationships with customers and increasing the company's reliance on repeat and referral business. After six years of development, the company has nearly 45,000 names in its database.

"I believe that our database management is absolutely crucial to the success of our companies," said Linnehan. "Approximately 50 percent of our business comes from repeats and referrals.

"We feel strongly that if we maintain and continue to develop our relationship properly with this group, we will be able to generate plenty of sales to keep us happy for a long time."

After cutting out most "conventional advertising," in the form of TV, radio and newspaper, Linnehan's is left dividing up its advertising budget evenly between ads in the weekly shopper magazines, a newsletter and other direct marketing to their customer database, and maintaining the visual appeal of their lot.

The dealerships don't go to an ad agency for help with their advertising. Linnehan said that the company has tried different types of agencies in the past, and while they have their pros and cons, Linnehan's prefers to take a hands-on approach to handling its own advertising.

The best way for other dealers to follow in Linnehan's footsteps, with a successful, but not necessarily pricey, advertising strategy, is to be sure to track the results of each type of advertising and make sure the money invested is generating sales.

"My family has been in the auto business for over 50 years, and sad to say, we haven't always done as good a job in this area (tracking the results of advertising) as we could have," said Linnehan.

Today, the company has a centralized Business Development Center, which is responsible for handling all incoming sales communication - whether it is a phone call or an e-mail - and tracking which advertising source has produced the lead, he said.

Each company ad features a unique toll-free number, which allows the person answering the phone to identify which ad customers respond to. Linnehan said that the results of this research were very educational and occasionally unexpected.

"Just because I designed what I think is a knockout ad, doesn't mean that it will necessarily be effective," he said. "By being able to intelligently review the results of our advertising effectiveness in an objective manner, I was able to pinpoint where our ad dollars should and, more importantly, should not be spent."

E-Mailing It In

At Linnehan's, one key to advertising success has been developing a database of existing customers and then maintaining a relationship with those customers in order to boost customer satisfaction and thus repeat business.

One way to make use of that customer database is through e-mail, according to Bill Nussey, author of "The Quiet Revolution in E-Mail Marketing" and chief executive officer of Silverpop, a technology and services company specializing in e-mail marketing.

"There is a lot of misunderstanding and misperception about how e-mail can be used," said Nussey. "The serious users have stepped away from using e-mail as an advertising tool, and are instead using it as a tool for relationship marketing."

One of the biggest problems with e-mail is that a lot of people start an e-mail marketing campaign and use e-mail the wrong way, as a prospecting tool, he said. This means that consumers end up with inboxes full of unwanted e-mail, and they start deleting all e-mail they get from someone they don't recognize.

Nussey said that dealers can use e-mail as a tool to develop relationships with customers, rather than trying to move cars off the lot directly through an e-mail advertising campaign.

"Dealers can provide post-sale support and build an active relationship with their customers," said Nussey. "They can set up an automated e-mail campaign that send relevant e-mail to customers over the lifecycle of the car."

He suggested that dealers could send a reminder to get the oil changed and perhaps a coupon for having that service done at the dealership to customers who bought a car three months ago. Follow up e-mails with maintenance reminders, car care tips and other information can help ensure a customer is satisfied with the car buying experience.

For many dealers, however, the biggest challenge when first starting an e-mail marketing campaign is building a list of e-mail addresses, said Nussey. And since this is such a challenge some marketers go about it the wrong way.

"People think that since it costs about the same to send an e-mail to 20 people as it does to send one to 200 people, they should just throw a bunch of names on the list," said Nussey. "They start using bad practices to add names, and it just doesn't work."

Instead, Nussey said that dealers should be patient in building their lists, and realize that even with only 20 names, it's worth it to go ahead and send the e-mail.

In order to build that list of names, Nussey said the best thing to do is to incorporate capturing e-mail addresses into everything you do. Each time a customer comes into the store or visits the Web site, give them the opportunity to provide their e-mail address.

One way to make this address-capturing process more successful, said Nussey, is to think like the consumer and make sure they know the information you are going to send them will be relevant to them.

"A lot of the time, customers go to the dealer's site and they're nervous about giving their e-mail address," he said. "One trick is instead of saying ‘Sign up for our newsletter,' ask customers to provide their e-mail address if they are in the car-buying cycle and let them know that you will be sending them relevant information, great sites for car information, auto insurance and so on. Tell them that you will automatically stop sending them the information in six months.

"This communicates to the customer that you have a solid idea of their needs and a solid idea of what is going to be relevant to them."

The next step for a dealer getting into an e-mail marketing campaign is to really step up and make sure the information you send is relevant and valuable to the customer, said Nussey. This means investing a little more time and energy than it takes to simply send out a list of the cars sitting on the lot.

"There is an expectation that since e-mail is cheap, you shouldn't have to put a lot of time into it," said Nussey. "People gawk at an e-mail program that costs $500 a year that requires 10 hours of preparation, but they're willing to spend much more time and money organizing a direct mail campaign. But e-mail is unparalleled in ROI. It's so inexpensive … it's probably one of the least expensive ways to maintain a relationship with the customer."

Nussey's advice to dealers is simply, "Roll up your sleeves and be relevant." He said that dealers should always lead with the information that will be valuable to a customer, whether that's list of car-buying tips or car care information, and then follow that with information about the cars they have for sale or the big promotion they're running this week.

"Think about it like a relationship with a friend," said Nussey. "If all she does is talk about herself and what she wants, you're eventually going to start avoiding her, not taking her calls. But if she cares about you and gives you information you can use, you are going to have a strong friendship. Right now, everybody's e-mail is about what you can do for them."

He added that building a successful e-mail marketing campaign will become increasingly important, as the volume of legitimate mail goes up, and customers have to start to choose which companies they are going to build an e-mail relationship with.

"There will be a shift in thinking, businesses will do more targeting and segmenting with their e-mail campaigns," said Nussey. "No one does that in e-mail right now because it's an inexpensive medium; they just send it to everyone."

Advertising 101

All dealerships need to invest in some form of advertising, whether it's through shopper magazines, e-mail, television, radio, direct mail, the Internet, newspapers or any other of a host of advertising options. But investing wisely in targeted campaigns is much more effective than flooding the airwaves with expensive advertisements.

According to Allan Horn, chief executive officer of Allan Horn Productions, a marketing and advertising company in St. Petersburg, Fla., there are five steps to determine the best advertising plan for a company: Determine who and where your most likely customers are, determine the best ways to get your message to your prospects, determine the most economical ways to transmit that message, create effective materials for the medium or that you intend to use and finally, evaluate the effectiveness of your advertising.

"Every business needs to advertise," said Horn, "because if your customer base does not grow at least at the rate of inflation, you are losing ground."

One of the most important steps in the process is to review the results of all advertising to determine its effectiveness. Horn said that it is vital to a dealer's success to carefully survey the customers coming in and determine what attracted them to the store.

"Chart the cost and the results, but bear in mind that not everyone that sees or hears your advertising is in the market for what you offer at this particular moment," said Horn. "Effective advertising has a long-term cumulative effect, so what you do in your advertising today might still be bringing you customers three, six or 12 months from now."

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