U.S. dealers are struggling with declining profitability again this year, following a trend that began in 2005, and cost cutting will be a top priority.
For many dealerships, advertising is the first area to be cut, and there is concern that cutting back on advertising will mean fewer customers, only making the problem worse.
One solution could be e-mail marketing, which, by some reports, exploded in 2005 when dealers started e-mail marketing. One San Mateo, Calif.-based company called OnStation says it has sent out more than 2 million e-mails to dealers since last March.
Earl Hesterberg, CEO and president of Group 1 Automotive, the fifth-largest dealership group in the nation, credits email marketing company AutoRevenue with saving him more than $1 million in postage and direct mail costs.
Hesterberg said Group 1 harvested more than 200,000 e-mail addresses in 2005 and expects to triple that number this year. The company is focused on driving traffic to its services division.
“Service department marketing has lagged behind automotive marketing,” says Hesterberg, whose group now sends more than 200,000 e-mails to customers each month, achieving response rates four to five times higher than direct mail.
The benefits are far-reaching, according to Hesterberg: Email allows dealers to consolidate their databases and clean them regularly; it's easy for administrators to use, allows for customized messaging and precise targeting; and it's much cheaper than traditional advertising.
Meanwhile, OnStation has identified at least 40 different touchpoints a dealer has with a customer throughout what’s called the customer lifecycle.
As a result, the company has developed more than 40 customized messages that dealers can use.Another system, unveiled at the National Automobile Dealers Association convention, uses automated e-mails to help dealers sell special-order parts.
Unsold special orders are a big problem for dealerships, said Jeff Seif, general manager of Boardwalk Auto Center in Redwood City, California.
Automating the exchange of special-order parts with customers “can reduce this cost significantly,” he says.
Many of OnStation's campaigns focus on existing customers that dealers haven't contacted in a year or more. One Florida dealership re-engaged 585 inactive customers over a 12-month period, increasing service revenue by $210,000.
Email marketing is also becoming more sophisticated and no longer limited to basic service reminders. IMakeNews Inc., a Massachusetts company, has been targeting dealers since early 2005, with a monthly, lifestyle-inspired newsletter that has an average open rate of 40 percent.
IMN is beginning to experiment with incorporating video applications into e-mail, said Brian Epplo, group director for automotive services at the company, and he said the company will work to make video a strategic fit.
For example, some companies include two-minute videos advertising oil changes in emails, but Epro believes this is going too far.
“You'll start seeing video walk-around sales presentations of specific vehicles,” he says. Other than that, Epro wouldn't say anything about future applications it's researching.
