The secret to marketing with loss leaders

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!

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