It may sound counterintuitive, but the best way to lose money, is to not spend money. Of course we all run into budget crunches from time to time, particularly during slower periods of the year. But as you start looking for cuts, there should be one area of your finances that remains untouchable: your marketing budget.
While it’s tempting to slash your marketing budget, not only should you avoid cutting it during down times, you should actually increase it, and here’s why.
Spend Money to Make Money
Cutting your marketing budget to save money will eventually lead to more cuts because your sales will decline. Consider this, if sales are already tight, how are you going to increase those sales if you cut the budget of the only vehicle attracting customers? The same holds true if you’re not spending enough on your marketing budget to begin with.
I budget between 5 percent and 7 percent of my budget each month to my direct mail marketing campaigns. That’s not 5 percent to 7 percent of my expected monthly budget, that’s the percentage of my target budget. In other words, I may expect to bring in $50,000 for the month, but my target is actually $80,000. The 7 percent marketing budget I spend is based on the $80,000 figure, not the expected income.
Marketing also does so much more than simply bring customers through the doors. Marketing raises your profile within the market you serve. I always put my picture or a picture of my family, or shop on my direct mail simply so my community becomes more familiar with me, who I am, and my shop.
Within your community, your biggest competition most likely comes from large national chains. The only advantage you have over those chains is your direct connection to the customer. Constant marketing keeps you visible and begins to build a bond between the community and your shop.
Another bonus to maintaining your marketing budget is timing. When I send out my direct mail campaigns, I know that only about 8 percent of the recipients will actually take the time to read my mailer and fewer than that will actually act on my offers. But each time I send out my direct mail, I reach potential customers. These customers may not have needed an oil change, or a tire rotation last month, but this month they’re thinking about it, and when they see my direct mail with my offer, they’re much more likely to walk into my shop for service.
This is where digital marketing often falls short. As a small mom and pop shop, if you pay to have your ad on the front page of a website, you may be in competition with much larger, national chains. With direct mail, my mailer may be the only shop ad they get that week. Every month, my direct mail campaign reaches customers that need my services and my offer may be the only one they see at the particular moment they’re considering having their vehicle serviced.
I hear the same complaints from shop owners every time the subject of direct mail marketing comes up. Many argue that it’s simply junk mail, or that sales don’t jump immediately after mailers go out. My response is that marketing is not a one-time deal. Sure, some may consider my mailers to be junk mail. But, as I mentioned above, if a person is considering getting work done on their car, my mailer becomes an invitation to take their car to the locally-owned shop that they’re already familiar with.
Slay The Giants
One of the other advantages you’ll receive from maintaining or increasing your marketing budget year-round is that it allows you to stay ahead of your competition. During the busy summer months, it’s tempting to cut your marketing budget because business is so good. And during the slower winter months, it may seem like a good idea to reduce your marketing budget to simply save a little money.
Again, it’s never a good idea to cut your marketing budget. When business is going strong, your marketing efforts are reaching more customers who are already considering getting their car serviced, which means more sales. During the slower months, your competition is likely cutting back on their marketing budget. This means your competition is losing customers to you. Your marketing efforts are reaching customers who suddenly aren’t inundated with marketing from your competition. Either way, you’re driving more sales.
Make Them An Offer They Can’t Refuse
If you find your direct mail or other marketing efforts aren’t attracting the numbers you want, take a look at what you’re offering potential customers. Most shops don’t like doing discounted oil changes, but my shops offer them at lower cost simply to drive customers through the door. Once you attract customers, it’s all about the retention rate.
I’ve found that my best-performing shops have about a 75 percent retention rate. These shops couple quality repairs and maintenance with excellent customer service. As a result, about three-quarters of the new customers that walk into my shops return when they need more expensive work done on their vehicles. While I may not be making any money on the oil changes offered in my direct mail, I know that most of those customers will form long-term relationships with my shops, which will positively impact my overall sales.
Simply put, if you’re not getting the sales bump from your marketing efforts there could be a handful of reasons why. The solutions lie in the volume of marketing you’re investing in, or in the discounts you offer potential customers, or even where you are focusing your marketing efforts. None of the solutions involve cutting your marketing budget. Instead, you should take a closer look at your marketing strategy. No matter where your shop is located, if your marketing isn’t getting the results you’re looking for, make a better offer and you’ll see the spike in sales you were expecting.
Research Your Community
Before you launch your marketing campaign, get a firm grasp on the demographics of those who live nearest to your shop and identify the likeliest candidates to use your services.
Unlike in years past, direct mail marketing isn’t simply a shotgun approach to customer outreach. Today, we have the ability to target exactly who we want to receive our direct mail, thus increasing our potential success. You may decide to target potential customers based on their family income, their location or you can even decide to send mailers to customers who drive a specific make and model of car.
Determining the right audience for your marketing campaign is half the battle and can make the difference between success and failure. Again, don’t use poor targeting methods as an excuse to trim your marketing budget.
Ultimately, how can you expect to catch a fish if you don’t cast your line? Marketing is the biggest advantage you have over larger chains, and cutting your marketing efforts will drive customers to your competition. Those are customers you will never get back.
If you reduce your marketing budget, you will lose sales 100 percent of the time. That leads to cutting staff, which leads to poor customer service and ultimately to you closing your shop. The benefit of saving a few dollars on marketing simply doesn’t outweigh the long term risk of potentially losing your business.
