Marketing and advertising expenses are part of any business. In auto repair, marketing efforts focus on two primary objectives – customer retention and customer acquisition. Further, marketing expenses tend to rise and fall in correlation with business volume. In times when business is good people tend to be less concerned with marketing. Conversely when business is slow people will pay more attention to marketing. The result is that marketing expenditures tend to increase when there are less funds available. Thus the importance of developing and maintaining marketing plans becomes increasingly important. And since the availability of resources for marketing is dependent on business revenue it’s important to make sure they’re being used effectively. Effective marketing will increase sales, reduce sales cycle times, lower sales costs, increase profit margins and facilitate long term relationships with customers. So measuring the cost effectiveness of marketing is essential to success.
Half of the money I spend on advertising is wasted … the trouble is I don’t know which half … John Wanamaker
Measuring Sales Increase and Reduced Cycle Times
Effective customer retention marketing should result in an increased number of visits with shorter periods of time between. Thus existing customers should bring their vehicles in more often for recommended services and/or incentives based on marketing efforts. Actual ratios can vary based on a number factors but any shop should be able to establish a baseline by which to measure results. If the optimum percentage of customers visits within the desired frequency and sales goals are reached then marketing efforts are working.
The effectiveness of customer acquisition marketing is measured by the number of new customers gained within a given time period and the readiness with which they agree to do business with your company. The easier it is to win business when a prospective customer makes initial contact is a reflection of the effectiveness of marketing. So there are 2 primary measures of customer acquisition marketing. First is the measure of the number of inquiries made within a given time period. And second there is the capture or conversion rate. This is measured by the ratio of inquiries or quotes versus the number that become sales. As in retention marketing the anticipated volume and ratio can vary according to circumstances but a shop should be able to establish a baseline for evaluation purposes. If the desired goals are reached then customer acquisition marketing is effective.
Evaluating the Impact of Marketing on Sales Costs and Profit Margins
Effective marketing whether it is focused on acquisition or retention will result in increased sales volume and better profit margins without increasing sales costs. In other words front line personnel will spend less time in the sales process because much of the relationship with the customer has been built through marketing. They’ll be able to win business without incentives as marketing has enforced the value of the service offering thus resolving cost concerns in the customer’s mind. The result is that sales people can handle greater volume for better margins thus reducing the sales cost of each transaction. Providing quality sales support is critical to establishing long term relationships so it’s important to consider this factor when evaluating this aspect of marketing impact. So if marketing efforts result in greater sales volume, improved profit margins and quality sales support without increasing sales expenditures then marketing is having the desired impact on sales costs.
Measuring the Impact of Marketing on Customer Loyalty
Establishing and maintaining long term profitable relationships is the key to success in the automotive repair industry. Customer loyalty is measured by the average lifetime and average lifetime value of customer relationships. If marketing is effective in this area these values will both be trending upward over time. So the measure of these factors is to compare them to the same measurements in a previous time period. In making this measurement it’s important to include business that was stimulated by the same marketing efforts.
Making the Most of Marketing Evaluations
The primary purpose of evaluating the effectiveness of marketing efforts is to maximize marketing expenditures. It’s important to record the source of business to support these measurements. And when the measurements are taken the result should be improved allocation of marketing resources. If a marketing strategy or campaign is effective it may make sense to direct more resources toward it. Conversely if marketing doesn’t achieve the desired results a reduction in expenditures may be warranted. Measurement of the effectiveness of marketing should be done on an ongoing basis and adjustments should be made based on results.