So, we are often asked; “Jesse, what are dealers doing online?”. Not are they doing eCommerce (well maybe that too) – but more along the lines of Digital Marketing. You know – that scary unknown that to most is voodoo snake oil. Let’s pause a moment and look back in time.
Years ago, I vividly remember a healthy sized dealer telling me in precise detail how predictable the flow of business was because of what is now considered traditional marketing efforts; primarily the newspaper. Those ½ or full page (or more) ads promoting the “Big Event”. Each week/month seemed to have the endless array of “Big Events”. Today – dealers are looking for that “digital equal” to “bring them in” with the same result. Let me tell you – it can absolutely be accomplished, but it is a completely different landscape!
Time to put on the consumer hat. Let’s take a journey together. Now for each of us the journey can and will be different. I’ll do it one way, you another. Others – yet a different way. Welcome to the“digitally empowered consumer”. (Remember – your consumer hat is on. You are one of them – what device are you on now…)! Think about making a major purchase. Let’s pick something fun. How about a new sofa! (I’d say boat – but let’s stick to a relevant good).
How many people impulsively “buy” a sofa. I would say none. There is obviously a “need” for that sofa – thus the purchase. Yes, you may feel a bit of impulsiveness when you get to the actual transaction of the sofa – but you probably didn’t just buy a sofa for buying a sofas sake. Maybe even a bit of buyer’s remorse. Stop and think about your entire journey to that moment. Compare it to if you have a cut; you buy a band-aid. That “sofa” journey was a long process that started when you repainted a room that you spent months on prior to painting just contemplating the color; let’s not talk about the endless visits to the social channels comparing flooring choices and feedback from others and then to Lowes or Home Depot to look at swatches….. finally, months later that perceived need for that sofa! Business hat on – the traditional marketing efforts we leveraged (the newspaper) looked to toss that wide net and bring in consumers at the “credit card out” stage. Ready to purchase now. “Sale Sale Sale” – come to our store. Traditional success was then measured in the purchase happening. Find as many consumers as possible, convert some of them into customers. A very defined (and logical?) path. But consumerism today – that journey you just reflected on above – as a business you hope to be part of the conversation that may or may not become that eventual purchase; online or in-store. Never forgetting the digitally empowered consumer journey is not linear! So how would you ever put a marketing strategy around that?!?!?! How? You do things different!
Here are a few pointers.
The web is a numbers game – however don’t blindly spin the wheel! Too many business owners throw good money after bad with the hopes that whatever it is just “goes away” – or in the case of Digital Marketing; just produces those magical results. Stop. Time to know a couple things and work some math so you have a foundation for numbers-based decisions! For example; Customer Acquisition Cost (CAC). Do you know what this is for your business? Good for you if you said yes. I’ll gamble and say most have not. Grab last year’s financials and fill in this example with your numbers. “OK, last year I did $4M in sales. That was from 8100 sales invoices (individual sales for clarity). However, a bit more digging – 20% were from repeat customers. My total marketing costs for the year were $120,000 all in (meaning EVERYTHING I associate with getting the businesses from a marketing perspective. That is signage, advertising, popcorn and pizza for the big sale, the dunk tank for the grand reopening, yes – everything). Now a few assumptions about what made repeat customers – customers again, you “deduct” that the actual 8100 orders for the year and you get about 6400 new customers. OK, not that I needed all that for my CAC (Customer Acquisition Cost) – but it will be nice to have in a bit 😊. You spent $120K last year – again all in for Marketing. You had 6400 unique customers. It cost you $18.75 per customer ($120,000/6400). Cool. Ever looked at that for your business? Now let’s have a bit more fun. Remember those revenue numbers. $4M divided by 8100 or an average ticket of about $494. Run the math for the previous year. Same exercise.
You expect to grow – but keep budgets the same. FAIL! Or worse, do more with less. I am a huge advocate for making the most of every dollar – but using actual data to drive decisions. However, marketing (engagement) is always a leading activity – no matter how safe the decision – marketing is still a risk. Build it and they will come?! Spend it and they may or may not. I have seen to many times where a business owner wants more revenue and wants it at a lower cost. Absolutely. Strive for operational efficiencies. Maximize staffing. Fully burden assets. But marketing drives business. Especially online! Now that we (you) calculated your CAC above. Wouldn’t it make sense to work the numbers backwards to see what that equates to for a marketing increase for your “growth expectations”. What does it mean if you want a 10% increase in business – lets break it down using my example: ($4M X 10% = $400,000 in increased sales; then divided by the $494 avg order = 810 Sales Invoices; then times the repeat customer factor of 80% (reduction for that repeat customers trended average #) = 648 unique new customers; then times the $18.75 CAC = $12,150 in increased Marketing Budget. So the total marketing budget for the “growth” year ahead is $132,150! Numbers driven decisions. Very rough example – but you gotta love it!
Know your industry. Know your products. Know your customer! What is the average consumer buying cycle for a durable good like a sofa? Again, thinking today’s consumer. I bet it is 6-months (or more) before there is a chance of you selling a sofa to that prospect. Again, the room gets painted. The house sold and then a new one purchased. The move is done. Taxes are in. Kids off to college. You get it. No impulse here. Yet leaders view marketing as a sprint. What happens if you advertise this month and then stop next month because you didn’t see immediate results? Wouldn’t it make sense to stay the course for at least the average buying cycle – so the 6-months? Again, number driven decision. Using my example – the “smartly executed” marketing-spend of the “growth revised” engagement budget of $11,012 a month ($120K + $12,150 = $132,150/12 or $11,012 a month) will put you on a smart trajectory. If you know the average is 6-months for the happy couple to buy that sofa, knowing based on real fact that they will indeed research and burn the internet up until that point – you hopefully get my point. Today’s marketing activity is not a fire and forget. It is not an explosive sprint – not a one and done. The “engagement” flywheel must spin consistently – always applying constant pressure. Man, feels like Jim Collins. “Breakthrough”! Stay the course. Measure and adjust. The tools are there (a topic for another day).
- Know your numbers so you can play the numbers game. Figure out your Customer Acquisition Cost so you can make numbers-based decisions.
- Marketing (engagement) is a leading activity – spend the trend! Traditional marketing is now part of a much bigger effort for your business. Learn how to put the right financial commitment around the right marketing (engagement) strategy.
- Don’t quit too soon! Of course, learn – adapt – measure – adjust. Welcome to new marketing. But have the tenacity to stay the course. Know thy consumer!
- Finally – ask! There are a lot of great resources available to businesses. But don’t be too quick to latch on to someone who has the right buzzwords. Ask for references. Tell them to show you actual results. Not just more reports and presentations!
Retail marketing to today’s consumer (again – you) is about being part of the conversation early. Your business has changed. So has the consumer. Time to go meet them where they are at.