This seems to be a hot topic in the auto industry right now and I feel the best way to answer this question is to look at the facts and let them speak for themselves. When it’s all said and done advertising dollars should be spent on what generates results! If it works, it works, if it doesn’t then stop it. First, let’s take a look at what I call “Wasted Distribution”.
The concept of wasted distribution is rather easy to understand but the fix is a harder problem. You are not alone in this struggle. 80% of retailers lose advertising dollars through wasted distribution and struggle to grasp what will fix the problem.
First, let’s understand wasted distribution. Every retail store owner and every auto dealer has a commerce circle. As an example, would you expect a customer to drive 450 miles to purchase a vehicle or product from your retail location? Obviously the answer is no. This person is not in your commerce circle, therefore if you spend advertising dollars on them it is wasted distribution.
Now a harder question, where exactly does that radius stop? That is what EVERY retail operator needs to figure out. What is my commerce circle? A retailer’s commerce circle is simply the miles around their location where 85% of their business comes from, or can reasonably come from. This includes both single location and multiple location owners.
In heavier populated areas that number is often around 3 – 10 miles. Any farther than that and they will be passing by 10 other stores just like yours that are closer to their home and are more convenient. In more rural areas that number may extend out 20 – 40 miles. Traveling miles through open farm land is nothing but a daily ritual to them.
In either scenario, the idea is that you NEED to identify your commerce circle (where 85% of your business comes from) to ensure that you aren’t wasting advertising dollars. Paying for huge numbers and huge exposure (you’ve heard marketers touting their “reach”) sounds great, but more than likely will have little effect on your day to day sales and traffic.
Take a look at mass media coverage area. Your radio, TV and newspapers justify prices by showing you their wide coverage area and all the viewership/readership numbers. If they cover a 65 mile circle, you are essentially paying for 70% of consumer exposure that will never even consider becoming your customer.
Their reach can be wide, but what your business really needs is more depth with your customer. That is what the modern consumer wants, depth. Getting below the surface of just being another number shows you care about the individual’s business. So if you find your commerce circle is 10 miles out from your location, this is where you should put 85% of your advertising budget. Keep pounding and pounding that circle until every home, business, and person within it knows your name very well. Retail owners need to understand this VERY QUICKLY or they will spend themselves out of business.
The answer: Don’t spend another dime on large market media advertising. Instead, buy only targeted advertising that is focused on you commerce circle. (Not an easy task.)
Here is a great exercise for all retail stores and auto dealers. This can be done for all mass media such as TV, Radio and Newspapers. Go to your newspaper’s website and look at their published rate card.You will find on it the general circulation numbers for the paper. Now, look at a specific breakdown by area and city. (If they don’t publish it on the web, ask for a copy.) Look at the specific paid distribution to residential / homes in your commerce circle. The low numbers will probably shock you.
Here is a specific example:
We will call this newspaper “XPaper,” even though it is a real paper not far from us. Their circulation is stated as approximately 30,000. However, when you look at the actual town the paper is from, and you look at residential paid delivery, that number drops to 9400.
Yes you heard us right. The number of home owners and residents in their own town that actually pay to have the paper show up at their door is only 9400. Out of this number not all of these consumers may be in your commerce circle. While a full-page ad sounds like a great price to get your message to 30,000 readers, when you breakdown the actually cost per home in YOUR commerce circle, it can often exceed more than $1.25 per day / per home.
HOW DO YOU FIX THE PROBLEM?
1. Truly identify the 85% of your business’ commerce circle. Remember, it is 85%, not 100%. Find out where most of your business comes from.
2. Use only advertising that can guarantee 85% of their coverage in that area.
WHAT IS THE TOP CHOICE FOR CAPTURING THAT EXACT MARKET?
How can you target every homeowner/residence/ business within a 5 – 30 mile commerce circle and get your message to all of them? Look for the common factor. Each one of these homes/residences/businesses has one thing in common. They all have a mail box and the USPS has a list of them all.
Mail to them and mail to them often.
We have to chuckle a bit when we first take on a new client that is struggling with advertising. The reason we find it humorous is because they always answer our questions the exact same way.
Q: How often do you use direct mail?
A: We do a mailer about 3 – 4 times a year.
Q: How often do you use newspaper ads?
A: Every week, all the dealers around here do.
Q: Have you ever had someone call 100 homes within 5 miles of your store and ask them if they subscribe to the paper?
A: No, we just assume that most get it.
Q: Have you ever had someone call back the same 100 people and ask them if they have a mailbox?
A: That would be stupid, they all have one.
Then we simply shut up and stare at them. If the light bulb doesn’t go off, we make them find someone to call. We actually make them hire someone to call 100 – 200 homes within 5 miles of their store and ask them if they subscribe to the paper. Dealers are shocked to learn the results. Most of time the results will fall between 15 and 35% of the people within a 10 mile radius of their store subscribe to the paper. Yet they are putting 85% of their budget there. Dealers quickly learn from this exercise that more than 65% of the people in a 10 mile radius of their store never even get a chance to see their ads.
Direct mail should be used heavily by all retailers as it is the most effective way to target an exact radius and get their message to that audience guaranteed.
Here is a great question we ask dealers when they ask us about response rates.
Dealer: What response rate should I be getting to my direct mail?
US: A better response rate than your newspaper. What was your response rate to last week’s newspaper ad?
Dealer: We don’t figure out response rates to newspaper ads.
US: Why not?
Dealer: Because we don’t know exactly how many people actually got the paper or saw our ad.
US: Blank stare. (Waiting for light bulb to go off.)
Direct mail is the only form of advertising that is held accountable for response rates / percentages. Why? Because it is the only form of advertising that allows the retailer to actually know exactly how many people got their message.
The real and most important question they should be asking is:
What is my TRUE cost per household in my commerce circle? How many times have we seen this happen…A dealer runs a 4 day, full-page ad and spends $10,000. He has 65 people respond to the ad and in his mind the ad worked. The next week he spends $10,000 on a mail drop and has 158 responses. “That was less than a 5% response rate, I was not happy with the mail.”
Understand that response rates are important, but true commerce circle exposure is the ultimate measure. Learning how to say “no” to wasted distribution is one of the first things you need to learn. You can do it in a polite way, but you must learn how to do it.
Here is a great method that is a very nice and intelligent way of saying no. When approached by advertising sales people, simply use the ‘85% rule’ line. “We now put 85% of our advertising dollars in our commerce circle. This means that we only buy advertising that is limited to a 15 mile radius from our store. If your coverage is broader than that, we would not consider it.”
Now remember, these are sales people. They are trained to accept a ‘no’ as the road to the sale. If they continue with pressure to buy, take them to this level. “Here’s what we will consider. Tell us what percentage our commerce circle makes up of your total distribution. We will pay that percentage. If our circle is only 20% of your coverage, we will pay 20% of your rate. The rest is wasted distribution.” Stick to your guns and tell them you are serious. Sooner or later they will get the point. Every day we hear the cry of retailers and auto dealers across the nation. “My advertising is not working.” Yet they keep repeating the same mistakes over and over.
Remember what Benjamin Franklin said, “The definition of insanity is repeating the same action over and over, expecting different results.” Force yourself and your business to spend every dollar in the right place.
The Evolution of a Dinosaur –From “Direct Mail” to “Mailology”
I don’t believe direct mail is even close to dying, but it does need a facelift.
Direct mail has been a staple in most dealerships monthly ad budgets for over four decades now. Matter of a fact I have a copy of a mail piece framed in my office for a Ford dealer in NJ from 1926, and honestly with the exception of the vehicles and art work not much else has changed.
Direct Mail vs. the world
Direct mail works. The reason it has been used by so many dealers for so long is because of ROI. Statistics show that direct mail has outperformed all of its prehistoric competitors consistently for decades when comparing ROI. In a study for Advertising Age, Lightspeed Research determined 42% of marketing professionals said direct mail is the best advertising vehicle for providing ROI. Direct Mail beat out a second place internet and Digital Marketing who received 19%, with TV, cable, newspaper, and radio all coming in at anemic single digit numbers! Direct mail also won out when asking how consumers preferred to receive information weighing in at 31% with nearest competitor following at a distant 24%.
Though it boasts the top spot with more than double the percentage of its nearest competitor, direct mail faces the need to make a change very quickly. In an era where technology rules, “Direct Mail,” without change, would most certainly face extinction. We’ve seen it happen with many other prehistoric advertising vehicles such as television, radio, and newspaper. With the growing uses of DVR’s and Sirius XM radio, and now with vehicles becoming equipped with Pandora radio, TV and radio commercials have lost much of whatever little punch they had…but unfortunately they haven’t lost the cost (still weighing in at the most expensive). Then there is the newspaper that has an average reader age of 59, while most major domestic and import makes have an average buyer age of 39. So they’re not even hitting the majority of your buyers at all. If they happened to get lucky and hit a correct age buyer they would have to get even luckier to have that customer read the section where their ad is listed and then pick them from the lot of dealers in the same section. NOW THAT WOULD BE WHAT I CALL GETTING LUCKY!
So how does direct mail evolve?
The birth of “Mailology”
When you have something that boasts the ROI that direct mail consistently does, it is hard to keep it down. Winners have a way of rising through the adversity and the ash heap of extinction. Just when you think it’s over and you’re looking at the end of an era…It evolves! It only makes sense right? You take a product that American’s pick as the number one way they prefer to receive advertising, you take the top ROI producer, and you give it a makeover. That’s right, you take “Direct Mail,” a prehistoric Dinosaur by itself, and you deliver it in a way that consumers wish to receive it. You give them the ability to respond using the conveniences that they are accustomed to using on a regular basis. There you have it…the birth of Mailology! Imagine receiving the mailer and then having the ability to choose your preferred method of response. Whether you want to walk-in, IVR phone (24/7), text, online, email, or even by using a QR code? It is revolutionary. Mailology even sends out a call 24 hours prior to the mailer arriving letting each customer know to look out for your mailer. This creates “Top of Mind” awareness that separates you from every other dealership (dinosaur) in the mailbox, and that’s just the start.
ROI in your PMA
So what is the result? Let’s just say that when you take the top ROI producer (direct mail) and add all of our “Smart Components”— turning it into a lean, mean, advertising ROI machine —the results are what you would expect. When you turn your direct mail into Mailology, response rates double, sales triple, and customer retention grows exponentially.
So, if you’re asking yourself “IS DIRECT MAIL DEAD? I say, don’t make assumptions and do your homework. Use real numbers and have someone help. Defining your commerce circle should be done immediately and your changes should be swift. The results of your work will save you HUGE amounts of wasted dollars, and MAKE HUGE ROI for your ad dollars.