by George Lucas
U.S. Learning, Inc.
In the September/October issue of Shop Owner, we introduced the “new” art of advertising in a modern market, and presented strategies automotive repair shop owners can use to corner their market, maintain loyal customers, and expand their shops’ value and customer base.
This month, we continue to explore the modern art of advertising through social media, long-term investment, budget management and ROI.
Are You Social Enough?
As the ad/promo mindset moves toward generating a return on your investment, social media will play a larger role.
There are several reasons for this shift away from traditional media to social media. First, numerous studies show that people spend more time on their computer than they do watching television or listening to the radio.
Secondly, social media provides a better ability to track results. While exposure numbers are readily available from media salespeople, it is difficult to measure how many people actually focus on a newspaper, TV or radio advertisement. Of the coupons a repair shop mails, what percentage survives the trash can? It is much simpler and more precise to measure hits on a website, or the number of friends, followers or fans on Twitter or Facebook.
A third reason for the growth in e-based media is the shelf life of the investment. A TV or radio spot airs and is gone after 15-60 seconds, and a newspaper ad lasts only as long as it takes for it to land in the recycling bin. In contrast, e-media investments last until circumstances dictate a change. A website or blog waits for direct customer contact 24/7/365. When changes are needed, it takes just a few minutes, a few keystrokes and a download or two. With little or no additional investment, the communication piece is fresh and current.
One word of caution regarding e-media: websites and social media are not set-it-and-forget-it activities. We have seen hundreds of shop owners with active Twitter accounts and Facebook pages who do little or nothing to keep them fresh. The same applies to websites. If you don’t put something fresh in front of customers on a regular basis, you’re accomplishing nothing with e-media.
The Next Level
With deeper pockets, product manufacturers have made good use of long-term ad/promo investments to promote new products and technologies and generally work at “top-of-mind” consumer recall.
And now it has gone to another level altogether. Some organizations are implementing progressive promotional activities to communicate and acquire information in advance, such as launching mobile marketing sites designed specifically for smartphones.
To access these sites, company ads and promotional materials carry a special 3-D barcode. Consumers can use their smartphone cameras to scan the barcodes, which (with the appropriate software) will take them straight to a specifically designed mobile website. There, additional product information, photos, interviews and video, will complete the product message.
Because it literally turns one-dimensional print materials into a full interactive experience, this technology bears watching.
Setting Your Budget
Your ad/promo budget may be set based on the dollars allocated last year, what you feel you can afford, matching a direct competitor’s estimated spending, a percentage of prior year sales or, best of all, based on the store traffic/revenue objectives for the coming year.
Shop owners with more favorable locations, and a stronger brand reputation, can get by with fewer investment dollars than a new shop with less-than-ideal visibility. The support that shop owners receive from the brands they carry, in terms of co-op dollars, website traffic generation, and promotional programs, must also be factored into this equation.
The number one thing to keep in mind when setting ad/promo investment levels is that advertising drives sales, not the other way around. If you set your ad/promo budget based on a percentage of prior year sales or on gut feeling, one small downturn in results can easily lead to a slide into oblivion.
As sales and profits drop, one of the first budget items to cut is advertising. Have that happen a few quarters in a row, and a cycle develops where decades of building awareness and reputation can be destroyed in a matter of a few months.
Look at it this way: advertising/promotion is the fuel for your business, and you will go only as far and as fast as the “octane” level you choose and the miles per gallon you can maintain.
While much of any organization’s ad/promo budget will be focused on growth segments, don’t neglect retention segments when it comes to budgeting. While they may be low-growth customers, their long-term relationship with your business is still important and they can provide word-of-mouth advertising.
Experts recommend that at least 25%-30% of an ad/promo budget be devoted to your maintenance market. Given that shop owners lose 3%-5% of their customers every year – often for controllable reasons – this group shouldn’t be ignored. In addition to targeted ads, other productive vehicles include thank you notes, service reminders, birthday cards and even in-store customer appreciation events.
On the flip side, the remaining 70%-75% of your ad/promo budget should be dedicated to long-term growth, with activities poised to attack your specific targets. And, certainly, a portion of that part of the budget should be dedicated to e-media – a new or refreshed website, a Twitter account and a Facebook fan page at the minimum.
So, how much should you budget for advertising and promotion? Well, that’s a difficult question. Some shop owners are quite aggressive all year long, and budget accordingly. Some take a seasonal approach, packing their ad/promo dollars into key points of the year. Some owners set a percentage of sales as their budget target. And some set their budget based on preferred activities. TV and radio generally cost more than newspapers, while e-media is less expensive to set up but requires vigilant updating.
In general, experts advise budgeting 5%-7.5% of gross sales for advertising and promotion. Because every market is different, you may have to play with that percentage over the course of a few years. If you are in a highly competitive market, you may have to allocate more to build your name and differentiate your business. Having less competition means you can spend less and focus on reinforcing your brand name and image.
Many Happy Returns
Measuring the ROI of advertising and promotion is always a mix of art and science. The budget that supports those investments is known, and the investment takes place at designated points in time. But figuring the investment return in real dollars can be difficult.
As mentioned, some media returns are easier to track than others. Bar coding on direct-mail pieces and coupons can clearly identify the source of the business. Website hits and fans on Facebook are not sales themselves, but are an indication of the following your e-media is generating.
You could go all-in and spend a ton on more detailed impact research. Some companies invest heavily in research to track movement in what it calls the purchase funnel – from awareness and familiarity levels to changes in market share the brands enjoy.
Another ROI tracking technique is keeping customer information files. These help a shop owner evaluate the true value of a customer. A half-price oil change and tire rotation coupon customer may deliver only a $20 sale today, but what if that person is a first-time customer, and over the next five years that same person spends $1,800 on services with that shop? And what if that person has a favorable experience and recommends his/her family and friends go to the same repair shop? Suddenly, the return on that coupon has multiplied into thousands of dollars.
The key to growing the returns from promotional dollars is not found in only looking at one-time sales. Instead, it’s a factor of generating ongoing visibility.
Dr. Lucas is an executive vice president at U.S. Learning, Inc. (www.uslearning.com) in Memphis, TN. For more than 25 years, Lucas has been a speaker, trainer, consultant and field coach. His primary areas of expertise include business-to-business negotiation skills, sales and business development, marketing strategy and leadership skills.
The ROI Challenge
Taking an investment approach to advertising and promotion will require a major change in thinking for some shop owners, and only a minor shift for others. Getting the desired returns from that investment requires the use of a logical process:
• Start with a business plan.
• Identify and clearly define target segments for both retention and growth.
• Establish specific objectives for the plan period.
• Determine what you want to communicate (keep it simple) and how to most effectively and efficiently get your message across (the media you will use).
• Understand and appropriately utilize the funds and resources available to you from manufacturers and distributors.
• Set your budget for both short-term sales results and longer-term brand image building.
• Identify specific activities and investments to advance web and social media, particularly if your target markets include younger, more educated consumers.
• Tie results back to objectives, recognizing that this is not a precise science. While you might think this is too hard to do, if you don’t make the attempt you’ll always be spending, not investing.
• As you move into the next planning period, consider what aspects of your ad/promo efforts are working and where there is room for improvement, and be proactive in sharing this information with your manufacturers and distributors.
Finally, keep in mind that developing an effective advertising and promotions program is a journey, not a destination. The better you use the steps above, the more you, your team and, most importantly, your customers, will enjoy the trip.