The secret to marking with loss leaders
Whether you have tried it in the past, your currently doing it, or you have always said no to the idea, marketing with loss leaders (such as oil change coupons) is extremely common in the automotive industry. Direct mail marketing in the industry is big business and when you have a huge segment of the industry taking part in a particular form of advertising, its important to take notice and evaluate the potential effect it can have on your shop. I hear it all to often when at trade shows, or strategizing with existing customers. "I spent 10k on direct mail, and it didn't work." Or adversely ill hear "I spend 5k a month on direct mail market, and it works amazingly well." So what is the difference? Why is it amazing for some, and a complete failure for others? What I want to prepose to you is that although there is no silver bullet in the world of marketing, and certainly there is no one form of marketing that will double your business over night, it is possible that through some common mistakes, your marketing dollars could be going out the window.
First time customers are not profitable
While this isn't the case in every situation, for the most part, your first time visitors are not going to be profitable, and not just because you offered a $29.99 oil change. Even if you manage to sell a $300 ticket, you are probably still not making money. The standard new customer acquisition cost for the industry is estimated to be around $225 - $250. That means just to get that customer to walk in the door you are in the hole about $225. If that customer comes in with a coupon for $29.99 oil change, after parts and (and if you are paying labor on those) you are still in the hole about $225. Weather its an A level technician or a GS, you are still in the hole. Now lets say you manage to develop some initial trust and you are able to sell some necessary maintenance on the vehicle and manage to walk away with a $400 ticket. Not terrible for a first time customer who is just checking you out. Well... once you take in account your acquisition cost... labor, parts, warranty... you are still not doing much better. So what do you do?
Second visits begin profitability
If we are not experiencing the level of profitability on the first visit, then getting the customer back in the door should be our #1 priority. Jay Baer tells us in his book "Hug Your Haters" that while 80% of business feel they offer exceptional customer service, only 8% of customers agree. This means that while we all feel like we are doing a great job for our customers, their perception is different. This means that we have to go above and beyond just fixing broke cars if we are really going to see our shops revenue increase.
Follow-Up for Profitability
Often times when I ask shop owners about their follow-up practices I hear the same thing. "We don't followup on oil changes. Its just not worth it." I believe that this is one of the biggest mistakes a shop can make, and here's why. When new customers come in and bring one of your coupons with them, they are doing so to check things out. They are seeing what your services are like, if you are friendly, reliable, and if you care about them as a customer. Customers can get a successful oil change just about anywhere, so why go to you?
So here we are: you have mailed the coupons, the customer comes in, and we do the worst possible thing. We dismiss them as "just an oil change." But it isn't just an oil chance, its a job interview. They are looking to see if you are their new shop. It is imperative that at this time you really wow the customer! It may feel excessive to followup on a first time oil change but I assure you it is not. This is the time to earn the customers trust. You must take the time to go above and beyond their expectations. More so than what another shop in your area may be doing. Call them, write them a personal note, or connect with them on a personal level. An email thank you is not enough anymore. You can get that when you leave a department store. Its time to get personal!
Follow-Up. Can't I do it in house?
The question is the same one every shop asks me, or at least asks themselves. There are actually a lot of reasons why it makes sense to outsource your customers followup process. I got this question through a customer of mine from AutoShopFollowUp.Com. Here is the response I gave to him.
1. Consistency - This is the biggest answer. The reason why shops don't use the secretary, or service writers? Because it doesn't get done. It may get done for a bit, but at the end of day, in the shop, all team members are going to go towards whatever fire is burning the brightest. This isn't a dig on team members its just the reality of running the day to day of the shop or any business. There are so many distractions every day that your admin doesn't have the time to make an additional 200 phone calls, write 200 thank you notes, invite people to leave reviews, followup with the reviews, and send out incentives for doing so, on top of all their other duties. This is nearly a full time job in and of itself.
2. Outside Review - Part of the reason you called me back is because you were concerned about the dropping car count, and finding out if there was a reason within the shop, or something that could be changed. We are an unbiased third party. You will get exactly what the customer has to say about their experience from us. We have no reason to ever try and make things look better or worse than they actually are. We can be unattached and their answers and it wont hurt our feelings, so we never get frustrated because they are not talking about us. This is a common problem for shops that do it themselves as everyone wants to look as good as they can to their employer. I have had a few shops actually end up making staffing changes because of the feedback from customers. These are extreme circumstances obviously, but none they less they never would have known if they never asked.
3. We're trained for this - One of the other struggles shops have is that the goal isn't to "just make some calls and send some thank you cards," its to create personal connections and long lasting relationships. This is a difficult task that most people are not equipped to handle. It takes time on the phone and a certain personality to be able to call someone up and get them talking. To be able to make that connection with people in a 5 minute phone call is tricky to say the least. It is a very specific skill set that takes time, training, and some natural know how. That is what we do, it is our specialty. We have had customers stop in to shops when they didn't need service just to meet the girl they spoke with on the phone. We are really good at this. Its what we like to do and gets us excited. For most staff in the shop who get assigned this job, it is looked at as just that. Making some calls, and sending some cards. And you are not going to get the results you are looking for.
4. We are very cost effective - If we do the math and look at what it would actually cost to hire someone to do this, we are very cost effective. In fact, we are cheaper than if you had to do it yourself. Just think of the staffing the time alone, cost of cards, postage, training... not to mention not having to manage the process yourself. What is your hourly rate? Just the time it would take you to manage this and make sure it is getting done effectively would cost you more than our pricing. Your time is more valuable used else-ware.
5. Our return on investment is huge. It speaks for itself. One of our shops here locally who was kind enough to share all his numbers with us had astounding results. His customer retention improved by more than 60%. How many customers who aren't coming back now would you need to save to pay for this program? What would a 60% improvement do for your business? Now what about online reviews? Now we are driving new customers in the front door, and shutting the back door at the same time. This customers return on investment was over 1000%.
I know this was a long answer to your question, and maybe more than you were looking for, but I want you to know how serious we are about what we do. This program works, or we wouldn't do it. The program itself was designed with the owner of an auto shop to meet his needs and for it could be as effective as possible.
I hope this helps!