Challenge
It is an all-too-familiar scenario in almost any business setting: do more with less. A parts and service manager was asked by his general manager to reduce the advertising budget by 25%. The challenge was to analyze the advertising in a given time frame to determine the consequence of reduce the budget.
Approach
This can be examined both from a general marketing perspective, as well as a results-oriented perspective. It’s a given that by having the dealership’s message in front of his customers on a frequent basis is more likely to ensure success than a one-time mailing because frequency is a basic marketing and advertising principle that would be violated if this dealer decided to reduce his monthly participation. Since reducing frequency could not be recommended, the dealership explored reducing the mailing list size by 25% (per promotional period) to reduce the costs.
Results
In this case, the dealership could save $1,383 per promotional period on front-end costs by reducing the mailing list by 25%. However, using a standard forecasting model, it was found that by reducing the marketing cost by 25% could mean a potential reduction of up to $60,000 in total repair order customer pay dollars per month. In this case, on average, $142,383 of this dealership’s RO dollars are generated from customers who receive mailers. Reducing the marketing budget during a recession, even for a month, was not a safe way to cut costs.
Simply put, would it be worth it to “save” $1,000 if you are potentially sacrificing $60,000?
