Sunday, February 27, 2005
The Significance Of Online Promotions Via Simple Math
As my few readers know, we manage a website called MotorAlley, a place where consumers can research new cars and trucks and get price quotes in the comfort of their home; thereby saving time and money (time = money, money = saving time). Even in 2005, many Car Companies leave it to their dealers to carry the weight of acquiring profiles of in-market shoppers. Does this make sense?
Background
As a long time internet marketer, I've watched the development of the online business with fascination. Initially, many of the car companies thumbed their noses at "lead generation" falling back on the more comfortable notion of banner ads, links and promotions. The theory is/was, that a consumer would go to the dealer and buy their vehicle anyway...why pay for opt-in consumers and reward 3rd party sites for collecting profiles that will go to the dealer anyway?
Proposed Advertising Effectiveness Calculus
Of course, one could argue, the same is true for advertising. For example, for a certain Detroit manufacturer, 50% of sales come from the current owner body. Does that mean that 1/2 of ad dollars are wasted because that consumer visits their dealer already and receives their owner magazines, so why advertise to that 50%? Further, 90% of households don't actually purchase a new vehicle in any calendar year...so that math now says.....0.9 x 0.5 = 4.5 percent of households are a potential ad target for the message as a new car buying household that doesn't already get deluged with "owner offers." That means, at best, 4.5 percent actually are open for consideration in typical demographically targeted ad messages.
Interestingly, much of advertising even "misses" that 4.5% of in-market households for a number of reasons:
The ad calculus gets worse. In Allison-Fisher funnel research (as well as hundreds of focus groups), we've noticed an interesting trend. Car buyers can be easily influenced by a well informed product advisor. I've tested this theory on the phone with in-market shoppers. Spoke to a nice gentleman on the phone the other day. He had submitted purchase requests for a Honda CRV, Toyota RAV4 and a Subaru Forrester. He was genuinely unsure about what to do. He submitted at our site because his request at another site went "unrequited." That is, the dealer didn't call him. Because our "lead" was a duplicate to the same dealer, I told him he was out of luck with us as well, because his request would be de-duped, so he would not get a call. He asked my opinion and after some discussion he made his decision. I emailed and called the nearest dealer on his behalf and he bought the car, cash, the next day. His major concerns were, "my wife wants the moon roof and, David, do you think I should get an alarm?" I told him to get the moonroof, lose the alarm. You're in Arkansas.
The question in the aforementioned example (quite common by the way) is, what happened to the Ford, Chevy, and dozen other competitors of the small SUV world? He went straight to the aforementioned products because he was familiar with them and narrowed his decision quickly.
What To Do?
I like to say that it is easy to criticize the status quo. The hard part is to offer a sane, reasonable solution. We do this often but fight up the slippery slope of 80 years of Ad history. Direct consumer contact is expensive. Internet leads are expensive and they are "going to buy anyway." Calling consumers is inefficient. Mass marketing is cheaper on cost/thousand.
My response is simple...what do you do when nothing else works? We continue to educate about the in-efficiencies of both mass marketing vs. direct. Each have their place but properly applied, neither is expensive. Don't use mass to solve one to one ills...and vice versa.
More on this later...
Background
As a long time internet marketer, I've watched the development of the online business with fascination. Initially, many of the car companies thumbed their noses at "lead generation" falling back on the more comfortable notion of banner ads, links and promotions. The theory is/was, that a consumer would go to the dealer and buy their vehicle anyway...why pay for opt-in consumers and reward 3rd party sites for collecting profiles that will go to the dealer anyway?
Proposed Advertising Effectiveness Calculus
Of course, one could argue, the same is true for advertising. For example, for a certain Detroit manufacturer, 50% of sales come from the current owner body. Does that mean that 1/2 of ad dollars are wasted because that consumer visits their dealer already and receives their owner magazines, so why advertise to that 50%? Further, 90% of households don't actually purchase a new vehicle in any calendar year...so that math now says.....0.9 x 0.5 = 4.5 percent of households are a potential ad target for the message as a new car buying household that doesn't already get deluged with "owner offers." That means, at best, 4.5 percent actually are open for consideration in typical demographically targeted ad messages.
Interestingly, much of advertising even "misses" that 4.5% of in-market households for a number of reasons:
- Customer has previous, negative experience with brand. Close friend has a vehicle with a certain un named brand. He will never buy another. You've heard the story from a neighbor or friend, I'm sure. Everytime he sees the ad for his current brand name, his blood pressure goes up and he gets negative reinforcement. He tells many friends NEVER BUY THIS CAR...and NEVER FROM X DEALER
- They don't see the ad...most consumers don't watch TV to watch ads. I'm myself am an inveterate channel surfer...drives my wife crazy. I only watch shows and sports I find entertaining...which is little (e.g. European soccer games, NFL channel, History channel, Hockey, and occassional dramatic stuff like Brothers In Arms). One of my media friends feels strongly that he needs to run a TV ad 17 times before the avg. viewer registers it due to surfing, in-attention, etc. That sucking sound is your ad budget.
- They don't "get" the ad. Remember rocks and trees campaign to launch Infiniti? Or better, humor or avant garde creative that passes the targeted consumer like a ship in the fog (too clever and/or too arcane for the targeted customer).
- Dishonest Ads. "This is not your father's Oldsmobile...this is the new generation of Olds." NOT. It was your father's Oldsmobile...
- Unconvincing Ads. Let's say I drive Brand X. I like Brand X. Brand Y advertises their product. But I don't find Brand Y attractive and/or Brand Y's design and features don't interest me. Or, maybe I read a review somewhere that says Brand Y is not well executed. Bye bye, brand Y.
The ad calculus gets worse. In Allison-Fisher funnel research (as well as hundreds of focus groups), we've noticed an interesting trend. Car buyers can be easily influenced by a well informed product advisor. I've tested this theory on the phone with in-market shoppers. Spoke to a nice gentleman on the phone the other day. He had submitted purchase requests for a Honda CRV, Toyota RAV4 and a Subaru Forrester. He was genuinely unsure about what to do. He submitted at our site because his request at another site went "unrequited." That is, the dealer didn't call him. Because our "lead" was a duplicate to the same dealer, I told him he was out of luck with us as well, because his request would be de-duped, so he would not get a call. He asked my opinion and after some discussion he made his decision. I emailed and called the nearest dealer on his behalf and he bought the car, cash, the next day. His major concerns were, "my wife wants the moon roof and, David, do you think I should get an alarm?" I told him to get the moonroof, lose the alarm. You're in Arkansas.
The question in the aforementioned example (quite common by the way) is, what happened to the Ford, Chevy, and dozen other competitors of the small SUV world? He went straight to the aforementioned products because he was familiar with them and narrowed his decision quickly.
What To Do?
I like to say that it is easy to criticize the status quo. The hard part is to offer a sane, reasonable solution. We do this often but fight up the slippery slope of 80 years of Ad history. Direct consumer contact is expensive. Internet leads are expensive and they are "going to buy anyway." Calling consumers is inefficient. Mass marketing is cheaper on cost/thousand.
My response is simple...what do you do when nothing else works? We continue to educate about the in-efficiencies of both mass marketing vs. direct. Each have their place but properly applied, neither is expensive. Don't use mass to solve one to one ills...and vice versa.
More on this later...
