Challenge
To increase customer frequency through a cost-effective direct marketing program for a medium-size import dealer in the Midwest. On average, just over 18% of a dealership’s customer base comes in three or more times a year. The dealership needed to increase customer frequency in order to increase profits and retain clients more effectively.
Approach
We suggested the dealership begin running our service reminder program, which signals customers to come in by: reminding them of upcoming mileage and time-interval scheduled maintenance and/or reminding them of declined recommended maintenance from a previous service visit. The approach was unique to what they had been doing because the letters were personalized to customers’ specific vehicle needs, contained dealership pictures and represented the dealer’s brand and logos. The dealership included this program along with their other direct mail initiatives in order to build their brand using the familiarity of the staff and facilities to drive in customers.
The reminder program components:
- Welcome/thank you letters: These letters are a way to build customer loyalty by showing appreciation for a customer’s business and to encourage them to return.
- Reminder letters: These letters remind customers when it is time for their vehicle to be serviced. The goal is to increase the frequency of customer visits, therefore increasing sales from current customers. Coupon specials and an amenities section within the letters are customizable.
- Recommended letters: By targeting the current customer base with customer-specific recommendations, these letters generate high RO response rates and revenue. Forty percent of customers walk away from recommended services, so these letters are an effective way to keep the dealership’s name in front of them.
Results
Service mailer response rates for this dealership during the first quarter of 2009 are consistently between 11–14%, while reminder letter responses are at least double those figures, at 21-50%. For the same period, the reminder letters returned at least $45 for every $1 spent.
| RESPONSE RATE | |||
| JAN 09 | FEB 09 | MAR 09 | |
| REMINDER PROGRAM | 21% | 50% | 23% |
| SERVICE MAILER | 11% | 11% | 14% |
| RESPONSE % INCREASE | 84% | 336% | 69% |
| RETURN ON INVESTMENT | |||
| JAN 09 | FEB 09 | MAR 09 | |
| REMINDER PROGRAM | $45 | $113 | $59 |
| SERVICE MAILER | $32 | $37 | $46 |
| RETURN % INCREASE | 41% | 205% | 28% |
Summary
Based on the results, it can be concluded that reminder letters can be a vital component of a comprehensive marketing strategy. The reminder program yielded a larger increase in response and return on investment than service mailers alone. As the dealership continues the program throughout the year, it has the opportunity to convert infrequent customers into repeat customers by upselling, providing top-notch service and building trust. The next step would be to measure retention over the next 12-month period and compare the numbers one year from now to get a more in-depth view of the impact.
