It almost inevitably happens to established organizations. Car dealerships and automotive retailers are especially vulnerable. What starts out as a little paunch in their marketing spend quickly becomes a beer belly that looks like a keg.
Wasted marketing dollars are often the curse of an established company. And just like other types of fat, marketing fat has disastrous long-term consequences.
Marketing fat is defined as marketing expenditures and/or activities that do not generate sales or lower costs. Since numerous studies show a direct correlation between marketing effectiveness and corporate profits – marketing fat is a great indicator of the overall health of a business.
Your business runs on leads and sales supplied by marketing. Get too many of the wrong kinds of leads and your business is in trouble. Fail to get enough of the right leads and your business may close.
So how do you recognize signs of marketing fat? Take a look at the following:
- Hunches rather than crunches – When your marketing spend is based upon someone’s personal opinion or instincts rather than data, you most likely have fat in your marketing. Every marketing initiative (online and offline) should be measured and held accountable for producing results. Decisions about marketing spending should be based upon analytical data and testing results (number crunching), not the whims and fancy of the person having the most authority.
- Personal relationships – You’d be amazed at the amount of marketing dollars spent simply because the buyer liked the sales rep or the free sporting events tickets the rep gave them for an ad buy. Relationships are important and events are cool to attend but when they come at the expense of company profits, it’s time to change the diet.
- Your marketing mix – Your audience has moved overwhelming to online, social and mobile channels…has your marketing spend followed your customer’s behaviors? Take a look at your marketing performance analytics…where is your business coming from? How much is your cost per sale? What is your reach and opportunity?
- Egos – Business owners like to hear their friends and customers say that they saw their ads. They lull themselves into believing that because people commented on the ads, the ads must be profitable. Fat companies make this mistake. Of course a friend or business associate will comment on your ads or billboard…it’s the polite way to start a conversation. And it is an expected response for someone to comment that they saw you on TV or heard you on the radio. Don’t let flattery get in the way of measurement and data driven decision making.
- Same old, same old – Are you trying something new in your marketing approach or offers? Or is it business as usual? Are you testing things to find out what works and what doesn’t, or is your marketing foundation based on “getting it out there” and “hoping and praying” for results?
So how do you lose marketing fat? There is no magical formula, but it can be done and it is not as difficult as you might think. When you use the combinations of measurement, testing and analysis, marketing fat is quick to go.
Fancy pants marketing “gurus” and 3 martini advertising salesmen promise that more exposure will cure all ills. That is simply not true. Although exposure is important, simply improving brand awareness won’t increase sales. Targeted traffic that converts into your desired business action is the recipe for business success.
Cut your marketing fat by taking these actions:
- Understand where you are currently spending money - Generally the larger the company the less the understanding of how marketing dollars are being spent. Think back to when you first started out…I’ll bet you knew the impact of every single penny you spent, let alone the dollars. Bring that perspective now to your analysis of your marketing spend.
- Get baseline measurements on all marketing activities - You need to clearly understand costs per lead, cost per sale and conversion rate percentages in comparisons to other channels. Baseline measurements allow you to understand gains and losses.
- Find out where the “freebies” are - Ask your ad buyers and decision-makers to list all “free” things and gifts they get from media outlets. Make an executive decision about how to handle “freebies” within your dealership or automotive retail stores.
- Look at your marketing mix - Are you spending money where your audience is? Are you using the right channels, approaches and offers to appeal to your audience? Don’t do things simply because that’s how they’ve always been done.
- Set aside your ego – Sure, it’s nice to sponsor the Cubs but is it really worth $200,000 in promotional costs? What else could you do with that money? We know a guy that spent $80K last year for a very, very small sign in Dodger Stadium and he can’t trace a single sale to that sign. And yes, it may be fun to appear in television commercials but have you really looked to see if television advertising is cost effective? The junk yard is littered with fat, dead companies that wasted money because the owner got off on seeing themselves on TV or as a sponsor of a pro or college sports team. Save the ego-driven marketing for your competitor and leave the profit-driven marketing for your business.
- Regularly measure and inspect – Measure and inspect activities at regular intervals. Find out what is not working and take the necessary actions to make positive changes. You should measure and analyze marketing results with the same care you bring to overall Profit and Loss management.
- Test – Not everything works as planned, especially on our first attempt. Test and survey to find out what works best. Test images, headlines, offers, call-to-action efforts. Survey your target audience and customers…ask them what works best for them. Champions in any endeavor are constantly trying new things for improved performance. Make sure testing and surveying are part of your marketing best practices.
Marketing fat is a health risk to your business. The good news is that you don’t have to cut out all the fat at one time to see improvements. Take a look at your bank account and your P & L statement. Profits will always tell you the truth.
AfterMarketer Club is an automotive industry marketing agency that helps car dealerships and automotive industry retailers get the most out of their marketing dollars. Contact us to discuss how we might be able to improve your situation.