Why Marketing Based on Customer Data Delivers the Best Results
At the average dealership, the top 20% of customers deliver 79% of gross profits—first-party data helps you find and focus on them
Although creative is still an important component of marketing campaigns, it’s hard to dispute that marketing based on customer data delivers the best results.
For example, in the average dealership the top 20% of customers deliver 79% of gross profits. Meanwhile, the bottom 20% of your customers result in a net loss for most dealers.
Your marketing messages and frequency for these two sets of customers should be very different. Ideally, your marketing makes your most-profitable customers feel like the VIPs they are, and messaging is focused on retention.
As for the bottom 20%, why would you waste time or money marketing to them at all? These are the customers who will drive 50 miles to hammer your salesperson and sales margins when they buy a vehicle, then never return to you for service.
Do you know how to identify these subsets of customers in your database?
The importance of data collection
The first-party data in your DMS is created by direct interactions with your customers. This data is the best source of customer information, and is highly predictive.
Your first-party data is proprietary and unique to your brand, giving you a distinct competitive advantage. Only your data can give you insights into the type of offers that your customers will respond to.
The only downside to marketing based on first-party data is that the effectiveness is somewhat limited by the data you have on hand. Most dealers don’t have a strong data collection program.
At the very minimum, you should have the following data points on at least the top 20% of your customers:
- Physical address
- Phone number
- Email address
- Income range
- Media preferences
- Social media preferences
- Cars owned: year, make, model
To gather this data, you must allocate a budget and stress the importance of data collection. Some of the data can be obtained from third parties, such as from leads or registration data, and some can be obtained through the efforts of your employees.
Create customer models
Once you have your data, use it to create customer models of your most valuable customers. The more data you have, the more accurate your customer profile will be.
The first step to building a model is to identify the most valuable customers in your database. These are the top 20% I referred to earlier. To identify them, create a report that calculates annual gross profit per customer.
Once you know who your best customers are, analyze the data you have on them. You will see that they tend to cluster in certain zip codes, so a degree of affluence enters into the equation. You will know the degree of affluence by their income ranges.
You will also be able to calculate useful data points for marketing, such as how many miles they drive on average, frequency of service visits, and frequency of trade-ins. From these data elements, you can infer certain values, behaviors, and service expectations that your customers share.
Additionally, you might recognize that your best customers tend to drive certain trim models, such as a Chevy Tahoe LT or Premier versus a Chevy Tahoe LS. Or you might realize that households with teenage children tend to be good customers because parents prioritize safety.
Building a detailed customer model for your best customers allows you to create retention campaigns with messaging that appeals to specific customer segments. It also allows you to identify latent customers in your database that share the same attributes with your active customers, but are not currently spending or behaving like them.
Additionally, you will have a detailed profile for customers in your primary market area that make ideal targets for conquest campaigns. These potential customers are a knowable and addressable audience, yet few dealers attempt to gear marketing toward capturing them.
Why waste money trying to conquest customers who will not become loyal customers?
Marketing strategies to acquire and retain customers
The knowledge you collect on your customers helps to shape your marketing messages. Be purposeful with your marketing, reviewing every campaign from the perspective of your customers. How does this message relate to this person?
Once you have your messaging down you can focus on outreach. The best methods for attracting new customers and retaining current ones include:
- Dominate local digital. Only digital marketing allows you to tailor the right message to the right customer at the right time. Create coordinated messaging across all channels with digital ads, social media ads, email, and search/PPC campaigns. Research shows that it takes four to five touch points on different channels before a customer responds.
- Focus discounts on local customers. Many dealers mistakenly offer the largest discounts to customers that drive from a distance. The largest discounts should be offered to customers living within a 15-mile radius of your store, because these customers are more likely to be loyal.
- Invest in community activities and events. Find ways to increase your brand presence and dialogue with known locals. Take advantage of OEM programs that partner your brand with schools and other local organizations. The more people that drive your vehicles and interact with your brand, the more vehicles you will sell.
The key to successful marketing using first-party customer data is the effectiveness of your data collection efforts. Most dealers don’t allocate a budget to increasing the amount and quality of data they have in their DMS.
Those who make it a priority will reap the benefits, including higher marketing ROI and increased market share.
Scot Eisenfelder is CEO of Affinitiv, a leading marketing technology company serving a dozen automotive manufacturers (OEMs) and more than 5,500 franchise dealers. Prior to Affinitiv, Eisenfelder held positions as senior VP of strategy at AutoNation and senior VP of product management, strategy, and marketing at Reynolds and Reynolds.