By Duane Sprague

Mass media is more costly and less effective as it becomes increasingly fragmented with more and more options for the consumer. If you can afford the best placement, you can't afford the saturation, production quality and talent that will compete for attention with the Coca Cola, Nike, and Budweiser ads. All 30 second spots are not created equal. A typical dealership ad campaign will be swallowed up in the sea of mega-buck campaigns from the global giants who spend hundreds of millions in the same media you spend hundreds or tens of thousands.

Because of the average dealership’s budget constraints, production quality and market research suffer. Most dealership ads are of a less than desirable quality. And consumers have therefore rated dealership commercials and newspaper ads as the very poorest in taste, quality, credibility and retention. In fact, a dealership ad is more likely to be muted or turned past than any other. In a focus group with dealers themselves, we found the same feedback. They thought poorly of their own ads, but did not have the budget or resources to do any better.

In the mass media game, only great advertising is profitable. Anything less is typically a waste of money. However, great advertising does not need to be expensive.

"Everyone has recognized that mass marketing will not work."
-Christine MacKenzie, manager of corporate advertising, CHRYSLER CORP.

The experts, industry analysts, consultants and manufacturers are saying the same thing. Concentrate your resources on retaining your customer base for additional sales over their lifetime. Make them happy, and new customer acquisition will come in the form of referrals and word of mouth.

"It is the incremental business coming from customer referrals and retention that will pay a much greater dividend to dealers."
-Earl J. Hesterberg, NISSAN Division Vice-President and General Manager.

Considering the new prospect pool is not growing at a significant rate in most market areas, and the cost of new customer acquisition is four times higher than retaining a satisfied customer, retention makes sense. When we factor in the lifetime value of a single customer as per Mr. Pohanka, a former NADA president, and chairman of Pohanka Automotive Group, each customer represents $325,000 in automotive and service purchases to the dealer over their lifetime.

"If we can retain a portion of defectors, the leverage is huge."
Philip Guarascio, Vice-President, General Manager, Marketing and Advertising, GENERAL MOTORS.

Because retention is so critical, the age of database marketing has arrived. Database marketing is a sophisticated method of targeting your customer base with personalized messages, offers and advertisements that will dramatically increase retention, referrals, and lifetime value.

Database marketing is narrow casting your promotional offer to those people who are most likely to respond. It is targeting a very specific message that addresses the needs and hot buttons of your customer base, be backs, referrals, and those people in your area who are in the market to buy. Database marketing means reaching the people who count, rather than counting the people you reach.

Database marketing consists of a computer system and specialized software that will allow you to store, sort, and categorize your customers according to numerous criteria. It allows you to create a profile of your very best customers, the top 20% who are responsible for 80% of your profitability, and treat them with extra good care, as well as attract more people like them.

A database program will allow you to predict changes in automotive needs for each customer based on the ages of their children, family size, family type, income, occupation and interests. This means the right offer arrives in their hands at the right time.

With database marketing, you can use the mail to target a specific offer to specific people who are in the market, or interested, in that particular model or type of vehicle. Naturally your response rates go up dramatically, and your marketing costs are reduced, because when you are reaching the people who count, you have a warm prospect to begin with.

Some of the benefits of database marketing:

· Develop high gross new customers by profiling your best past customers
· Generate quality ups by targeting those people in the market
· Increase the retention rate of your customer base
· Increase referrals
· Increase service revenue and frequency of vehicle purchases from customer households
· Bridge the gap from suspect to customer with personalized follow-up
· Reduce media advertising expenses
· Reduce the dependency on sales people to follow-up