During challenging economic times, nearly everyone in the tire and automotive service industry asks the same nagging question: “How much should I really be spending on advertising?”
In truth, the answer to that question should be another question: “Are you spending or investing?”
If you see advertising and promotion as spending, then the logical answer is to spend nothing. Advertising is a discretionary cost, not a fixed one. Regardless of the economy, you need to pay for things like electricity, water and phone service, not to mention products and employees. Advertising? When things get tight, discretionary budget items are the first to go.
If you see advertising and promotion as an investment – allocating and spending money today to create a brighter future – such a budget item is not discretionary. Investments are made to receive a return – ROI, as they say – where the money invested generates more down the line. When things get tight, investors might trim a little but they maintain their presence.
Whether you’re just spending or taking a thoughtful investment approach, advertising should not be done wildly or blindly. With traditional media taking a beating and consumers getting beaten down by more and more inputs, it’s more important than ever to avoid the old-fashioned shotgun approach to advertising and promotion.
Just as a shrewd stock market player does his research and places his investments in specific high-yield arenas, today’s advertising/promotion model is a sharpshooter’s rifle, with each element tightly focused on specific targets. It takes a targeted, coordinated approach to generate sales today and build your brand for tomorrow.
Short- and Long-Term
Like stocks, advertising/promotion investments can be short- or long-term, depending on when you expect the returns to materialize.
In the old days, tire dealers used newspaper and radio ads as short-term investments, expecting immediate gains. Phone directory ads were the long-term part of the portfolio. The dealer would sign his phone directory contract and hope someone’s bad luck would lead them to see it. Then the dealer would spend the rest of the year faxing ad copy to the local newspaper and radio station, watching the ads pile up but having only a gut feeling for if they were generating new sales.
That rather simple overview illustrates two key things: Most dealers had no real advertising/promotion plan, and they had no way to assess success or failure. They just cast money onto the waters and hoped the fish would come. They had no idea if there was a net gain in sales because of their ads, if they were creating a lasting positive image in the minds of drivers, or if they were building relationships with all-new customers. They could only compare money spent on ads with sales.
The use of coupons on print ads and the advent of more coordinated coupon packs and direct mailers gave dealers a better feel for their ad/promo ROI. And because dealers weren’t alone in demanding greater measurement tools, each new short-term promotional breakthrough brought new and better ways to weigh ROI.
Today, though, the short- and long-term landscape has changed dramatically. While still short-term investment choices, newspaper readership and advertising (especially from tire dealers) is down, and radio station stratification has made it more difficult and expensive to consistently reach a broad demographic. Coupons, packs, shoppers and even self-generated newsletters and direct mail remain strong short-term bets. On the long-term side, because of the Internet, phone directories are becoming irrelevant to consumers and dealers alike.
Today, long-term promotional investments require an entirely different time horizon and evaluation. These promotional investments include television (network and cable) advertising, local/regional magazines, website development, and the rapidly growing category of social media – Twitter, Facebook, YouTube, blogs and more.
While short-term investments scream “Buy Now!” long-term promotional investments should be made to educate consumers about products and services, elevate the image of your dealership, and build a community of customers where the sharing of information and ideas is the primary focus.
Keep in mind that long-term tools don’t bring short-term results – and vice versa. If this month’s numbers are not meeting expectations, don’t expect image advertising on television, websites or social media to do the trick.
Short-term promotional investments are about persuasion, while long-term investments educate, enlighten and build.
Start With a Plan
As with most successful business practices, advertising/promotional success begins with a strategic plan – at the very least, a basic business plan.
A basic business plan should include sections such as your mission statement, a strengths/weaknesses/opportunities/threats (SWOT) analysis, target market segment(s) identification, competitive assessment and objectives for the coming year. From this, you should be able to derive specific customer groups to target – and how.
For example, one of your objectives may be to minimize store traffic peaks and valleys, making sales and staffing more predictable. The promotions you could put against that might include targeting senior citizens for weekday morning appointments, increasing your share of women customers, or offering early bird specials leading into the peak spring and fall tire purchase seasons.
Having an effective and efficient advertising/promotion program must be grounded in knowing what target group(s) you want to reach. This is a difficult area for many dealers. Some just want to sell tires and service/maintenance to anyone with a car and some money. The problem with this approach is that if you are trying to be everything to everyone, you end up not being anything special to anyone.
A dealer’s target market(s) should be based on a number of factors, including location, vehicle type, age, gender, income, education and the aspects of a vehicle these people consider most important – safety, appearance, performance, cost of ownership, etc.
Progressive dealers today recognize the need for two categories of target markets: maintenance and growth.
Maintenance targets are existing customers that offer little upside in terms of sales growth. In the past, there has been a tendency to take this group for granted, and this can quickly result in slippage. Ads/promos to this group should reinforce their prior loyalty, and inform them about new products or services you may have added. Many dealers take note of the radio stations their customers have their cars tuned to when they come in for service – an important source of intelligence about their media use. Or you could chat them up at the sales counter or waiting area to get a feel for their interests, the TV shows they watch, what they read and how active they are with social media.
The growth target group is about maximizing up side. It’s all about long-term relationships with sets or sub-sets of consumers – either once-in-awhile customers or all-new buyers you’re trying to attract. These are people you can build product offering, service mix, facility amenities and advertising around. But you need to do some investigating first.
Every form of communication is number one in something. It might be consumers over 55 with graduate degrees and incomes in excess of $150,000 who watch TV between 2 and 4 a.m. It could be busy moms who text or use Twitter a lot during the day, or single professionals ages 24-35 who research purchases on the Web.
Knowing as much as possible about growth targets will help dealers evaluate the cost and effectiveness of the various media that can be used to communicate with these people in the way they want to be talked to, at the time they want to be talked to, and via the communication vehicle they most utilize to get information about tire and service purchases. Otherwise, you will find yourself wasting time and money.
With objectives and targets in place, the next question is how to generate results. Without clear objectives and targets, companies struggle to take an investment approach to advertising/promotion and end up spending in hopes that it will do “some good.” The objectives define what you want to accomplish, and targets define what specific customer types will get you there.
It Comes Down to Value
An oft repeated theme from tiremakers, distributors and dealers is the need to stand out from the crowd, and that’s because the consumer market is simply not growing; sales and profit growth means taking customers away from someone else.
Jason Williams, executive vice president of Jack Williams Tire, based in Moosic, Pa., said that today one theme has to be value – but it will be your customers who define that. “We try to promote the fact that we are a family business that you can trust with your car.
“Our emphasis is to have a different look and feel to our message. Today you simply have to be unique,” Williams says. “Gifts with a purchase and instant rebates are approaches that have worked well for us.” Jack Williams Tire also uses its customer information system to send e-mail follow-ups to customers and remind them of scheduled maintenance.
Williams says the dealership has moved more of its dollars from phone directories and print ads to online and social media, and has shifted the budget from newspaper and radio to television. Given today’s highly fragmented audience and the effective reach TV provides for a high percentage of its 25 store locations, it makes sense.
Tire manufacturers are taking a similar perspective. “Rule number one is to stand out from the crowd. You have to grab their attention away from your competitors,” says Michael Fluck, director of brand and retail marketing for Bridgestone Americas. “Rule number two is keep the message simple and consistent with your brand and your products.
“Tires are a product that some people may not find quite as exciting as other categories, so we are always looking to find new and innovative ways to stand out,” Fluck says. The challenge in the tire distribution channel today is to become the purple snowflake in what seems like a blizzard of advertising that has a mind-numbing sameness. Bridgestone relies heavily on input directly from its dealers and significant market research to achieve uniqueness. It also uses sports marketing (sponsorships of the NFL, NHL, MLB, IndyCar and golf events) and major events like the Super Bowl halftime show and the NHL’s Winter Classic to achieve top-of-mind awareness.
Travis Roffler, marketing director at Continental Tire the Americas, says his company’s advertising approach is totally value-based. “The key to driving traffic to our dealers is to look for ways to increase value while not degrading our brand with excessive rebates.” Continental looks for driving-related gift-with-purchase options such as GPS units. “We call such offerings as having ‘trophy value.’ Many times while the customer looks at or uses the GPS they will remember when and how they got it and think of Continental.”
Sales Channel Approach
Challenging economic times should shift the distribution channel’s perspective from “sell to” to one of “sell through.” Price incentives to get dealers to stock up on certain lines and sizes are not nearly as effective as they once were. With working capital tighter than ever, dealers are very careful about tying up significant sums in expanded inventories, even for short periods of time.
Brian Decker, tire marketing manager for distributor US AutoForce, sees a shift in dealer interest from price discounts or gifts with increased purchases toward POS kits and local flyers that tie into national tiremaker promotions.
One point manufacturers and distributors make clear is that they strongly encourage dealer input regarding the promotion programs they provide. Decker says this is a focus of the survey they do at US AutoForce’s annual dealer meeting. US AutoForce also makes extensive use of its dealer council in structuring promotions.
According to Roffler, Continental uses input from its group of Gold Distributors and Gold Dealers, and Bridgestone’s Fluck shares a similar perspective in using field conversations, e-mails, phone calls, dealer meetings and surveys to solicit such input. Heavily invested in social media, Falken Tire Corp. creative manager James Yim says his company gets immediate feedback and input on its campaigns and events via Twitter and Facebook.
An issue dealers should keep in mind if they are to hit their return on investment targets is the need to take a proactive approach with distributors and manufacturers. By the time dealer meetings take place, programs for the coming year are already finalized, with only minor tweaks possible. Dealers should take every opportunity to tell their tire suppliers what they need, as well as what is and isn’t working with present programs.
Dealers are asking for more tools, help and support than ever before, according to tiremakers and distributors. This assistance includes providing creative services, ad and flyer slicks with space for the dealer’s logo, and product videos for both staff and customer viewing. Many of the requests for creative assistance are rapidly moving from traditional communication vehicles like TV, print and radio over to website and social media design.
Roffler says today more consumers do their product research on the Web and then go visit the dealer. “People always said that when it came to retail, the three keys were location, location, location. In 2010, we see a shift to product, product, product. It has come so far that when they cannot find one of our most popular tires at a retail store, consumers call us and want to know why we did not make more of them.”
Are You Social Enough?
As the ad/promo mindset moves toward generating a return on your investment, social media will play a larger role. Tire Review will devote an entire article to this topic in an upcoming issue, so this section will only provide a brief overview on the shift in resource allocation that is taking place at a very rapid rate.
There are several reasons for this shift away from traditional media and 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. This difference is particularly pronounced when one looks at the results for consumers under age 30, a segment that will spend a high percentage of their disposable income on their cars – particularly men.
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 dealer 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.
With its sponsorship of Grand-Am racing and Major League Soccer, Continental has moved into a new frontier of targeted consumer communication. People who own a smartphone may not realize it, but that device sends out a signal; another device at the race or game site can find those signals and send a message or popup directly to attendees, inviting them to reply and get information about special promotions Continental is offering. This is clearly one of the emerging areas in consumer communications that will take us into an entirely new world of focused electronic promotions and data capture.
Recognizing the shift in dealer investments, other tiremakers are also assisting dealers with social media. Bridgestone now provides its dealers with a 20-minute presentation on the keys to social media success. The theme of this program is that dealers should not simply dabble in social marketing, they should embrace it. As Fluck emphatically proclaimed, “2010 is the year of electronic and social media.”
US AutoForce has taken a similar approach in fostering social marketing. Already, four seminars with national speakers have been made to 450 of its dealers, with topics ranging from an introduction to social media to establishing a productive website to reaching Gen X and Gen Y consumers with social media.
One word of caution regarding e-media: websites and social media are not set-it-and-forget-it activities. We have seen hundreds of dealers with active Twitter accounts and Facebook pages who do little or nothing to keep them fresh. Same with websites. Consumers consume, and opinion leaders do so quite often. If you don’t put something fresh in front of them on a regular basis, you’re accomplishing nothing with e-media.
The Next Level
With deeper pockets, tiremakers have made good use of long-term ad/promo investment to promote new products and technologies and generally work at “top-of-mind” consumer recall. Increasingly, though, tiremakers are using such long-term media to communicate more often and more directly with consumers. They inform customers of their new products and motorsport activities, educate about their product development process and quality, match customers to specific tires and dealers, and link up loyal customers and “leader” consumers for special events and communication.
And now it has gone to another level altogether. Falken’s Yim has been heavily involved in many of his organization’s progressive promotional activities. As the devices consumers use to communicate and acquire information advance, Falken has made extensive investments to keep pace. In early April, Falken launched its new mobile marketing site designed specifically for smartphones – m.falkentire.com.
“We want to make it as easy as possible for customers to find our tires and do business with us,” Yim says. “This site will help them come into a dealer already fairly familiar with the Falken brand.”
Now, some Falken 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, video – whatever – will complete the product message.
“Our goal is that they leave this site with all the information they need to be fully informed and ready to make a purchase decision.”
Goodyear and Nitto are also experimenting with the new barcodes and mobile websites. Because it literally turns one-dimensional print materials – POS stands, brochures and ads – 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.
Dealers with more favorable locations and a stronger and longer brand reputation can get by with fewer investment dollars than a new dealer with less-than-ideal visibility. The previously discussed support that dealers receive from the brands they carry, in terms of co-op dollars, website traffic generation and promotional programs and materials, 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/pro-motion is the fuel for your business, and you will only go as far and as fast as the “octane” level you choose and the miles per gallon you can maintain. Without a constant stream of persuasive communications, your dealership will end up on the side of the road.
While much of any organization’s ad/promo budget will be focused on growth targets or 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. It’s called word-of-mouth advertising.
Experts recommend that at least 25%-30% of an ad/promo budget be devoted to your maintenance market. Given that the average dealer loses 3%-5% of their customers per 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 65%-70% 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 minimum.
So, how much should you budget for advertising and promotion? Well, that’s a difficult question. Some dealers 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 dealers 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. So, if you gross $1 million per year, that’s a budget starting point of $50,000. 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 from other dealers, mass merchants, company stores, etc. 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 out what that investment return is in real dollars can be difficult.
As has been mentioned, some media are easier to track returns 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. Bridgestone, for example, invests heavily in research to track movement in what it calls the purchase funnel – from awareness and familiarity levels to changes in marketshare the brand enjoys.
Another ROI tracking technique is customer information files. These help a dealer evaluate the true value of a customer. A half-price oil change and tire rotation coupon may only deliver a $20 dollar sale today, but what if that person with the coupon is a first time customer, and over the next five years that same person spends $1,800 dollars on tires and service with that dealer? And what if that person has a favorable experience and recommends their family and friends go to the same dealer? 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.
The widely used term today is to “drip” on your target customers. Your newsletter safety tips on wiper blades or low tread tires today may not have much of an impact, but the next time rain comes, you will have already planted the seeds of success.
The ROI Challenge
Taking an investment approach to advertising and promotion will require a major change in thinking for some dealers, and only a minor shift for others. To get 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 it is easy to say 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.