BOWIE, Md. — Target marketing outperforms mass marketing but tire dealers need to do a better job of effectively using their POS data, according to GfK Custom Research L.L.C.
Analyzing customer data and targeting marketing efforts toward high-value customers can improve profits, according to the research firm, which held a webinar, "Attracting High-Value Tire Service Customers," hosted by the Tire Industry Association on March 22.
Neil Portnoy, GfK's managing director of POS tracking for tires, said tire dealers tend to spend a lot of time retaining their existing customer base instead of expanding their customer base. This could be detrimental as, statistically, about 20% of a customer database is not delivering a whole lot of value or margin to the business.
"We want to be careful about spending our precious marketing dollars on these low-value customers," he said. "Wouldn't we be better off allocating those dollars to high-value customers and acquiring new high-value customers and growing our business that way?"
With target marketing, not all customers are equal or deliver the same value to a business.
Low-value customers only come in when they have coupons or discounts, they resist up-selling and they're not loyal to the business, Portnoy said.
Conversely, high-value customers seek help between coupons, are open to up-selling and they treat the dealership as their "go-to" shop for a multitude of services. They will also recommend the business to their family and friends.
"Everybody wants a good deal, but these people really value service and trustworthiness and that is the cornerstone of what a good tire dealer is," he said.
"We believe it's really important to identify and differentiate your high-value customers from your low-value customers. We want you to send customized offers designed to meet their needs.
"We like to say 'Send the right message to the right customer with the right discount at the right time using the right media.' That's a recipe for success. And then, of course, measuring the effectiveness of the campaign on the back end to get smarter so when you go back out next time, you can increase your ROI even more," Portnoy said.
The essentials for an effective marketing campaign are: to make the best use of the data collected by the dealership's point-of-sale (POS) platform; drive profit by bringing in more high-value repair customers into the bays; and target desirable vehicle owners with efficient, tailored messaging.
The key to a good marketing campaign is to also measure the effectiveness of the dollars spent after the campaign is over, according to Dave Stevens, vice president of POS tracking for GfK.
He listed steps for creating a marketing campaign using the sales data already available in a dealership's POS system.
- Access point-of-sale information and sort the data by categories;
- Group customers by their vehicle models or types so when analyzing car count, revenues and dates of service, a dealer can have a better understanding of what trends and service needs are specific to that group of vehicle types;
- Summarize the data to develop customer or vehicle profiles to find opportunities within a store or market;
- Decide on KPIs (key performance indicators) to identify an opportunity and attract a particular type of customer for a particular type of service;
- Implement highly targeted campaigns, digitally or via direct mail; and
- Measure the results of the campaign to determine if the objective was reached.
Stevens noted that dealers may determine certain vehicles might benefit from a specific, added service. By analyzing the trends in servicing particular vehicles each month, a dealer can gain insights and direction on where to target the marketing.
For example, if alignments are a profitable service, but only a small percentage of a dealership's mid-sized SUV clientèle get alignments, the company may consider developing a specific marketing campaign to mid-sized SUV owners by offering a discount on alignments with the purchase of tires or explaining the value and importance of an alignment to enhance the performance of their vehicles.
Stevens encouraged tire dealers to amplify their strengths. For example, if tires for full-sized pickup trucks drive the average ticket, then develop a message to entice pickup owners to come in for tires; offer a discount on alignments with the purchase of new tires; or pair services.
"Target to full-size pickup owners in order to drive that higher average ticket into your shop," he said.
If a particular vehicle segment is underrepresented on a certain service, such as oil changes, the dealership may want to target that particular audience to draw them into the store by pairing oil changes with tire purchases or other services.
The key is to develop an audience in certain segments that have similar behaviors that lead to specific purchase patterns, he said.