6 Elements of a Successful Direct Mail Campaign

by Denny Long

We’re all looking for an advertising campaign that just sells vehicles with little or no work.  Unfortunately, it’s unlikely you’ll ever find that program.  It’s a lot of work to convert Special Finance or Buy-Here, Pay-Here leads into sales.  But if you really focus on the individual elements of the lead conversion process using pig-headed discipline, you can make it seem easy.  Let’s look at the 6 elements and how, with a little focus on each, you can greatly increase your return on investment.

Response Rate – There are many factors that come into play when it comes to response rate.  Target audience, offer, timing, and competition are some of the main factors.  What you do to get response will also affect the other elements.  For example, if you offer gifts or a chance to win a prize, you may increase response, but you’ll greatly decrease the closing ratio.  There are many documented cases where dealers have tried deception to get response.  This is not a good idea since it will lead to fines and lawsuits (see Tom Hudson’s recent articles in this magazine for an idea of what this can cost you).  Worst of all it will lead to a bad reputation for your dealership which will have a negative affect on all of you advertising.  I have a nice collection of articles about dealers receiving fines well over $200,000.00 because they thought they could get away with deceptive advertising – DON’T DO IT!  Target the right prospects with the right offer and you’ll get a good response.  I’ve seen BHPH promotions get a 10% response rate without gifts or giveaways.  Special Finance dealers can do very well also.

Contact Ratio – This is the percentage of the leads received that someone actually talked to about an appointment.  This is where the work starts.  I can’t tell you how many stories I’ve heard about a dealer getting a great response, but not selling any vehicles because the salespeople didn’t contact any of the leads.  You pay good money to generate leads so don’t let anyone drop the ball on this.  Call early and often until you contact the prospect.  If you really want to increase your contact ratio, have your calls answered live and go for the appointment right away.

Appointment Ratio – How many of those you talked to say yes to an appointment?  Again, this is an important number and should be tracked.  Make sure you create a script that everyone uses to ask for the appointment.  This is where great training and discipline really make a difference.  You should roll play with your scripts until they are perfect.  Remember, practice doesn’t make perfect, perfect practice makes perfect.

Show Ratio – How many of your appointments actually made it to the dealership?  If you did a great job setting the appointment, you should do well here.  This is an area where it is OK to offer an incentive for keeping their appointment.  It will be well worth offering a $10.00 gas card just for coming in.  You should make a confirmation call before the appointed time and a follow up call immediately if the appointment is missed to go for a reschedule.  It’s unlikely you’ll sell any cars to people that don’t show, so do everything you can to get them to show.

Closing Ratio – I’m sure your already pretty good at this since you do it every day.  Obviously this is an area that should be tracked and trained on regardless of what advertising source generated the lead.  It’s all about having the right mix of vehicles and lenders, but most of all having the desire and ability to close sales.

Gross Per Sales – This element proves that each of these elements contain its own group of elements.  Did you buy the right cars for the right price?  Do you have the right systems to match the buyer with the right vehicle and the right lender?  We’ve seen many dealers raise their gross per copy by over $1,000.00 just by using software that handles the matching process of hundreds of vehicles in a matter of seconds.

What an Increase in Each Element Means to the Bottom Line – Improvement in any of these areas will trickle down to an improvement to your return on investment.  After all, advertising should be viewed as an investment and not as an expense.  Many dealerships have made the mistake of cutting this investment like it was an expense during the current economic downturn.  Many of those dealerships that make that mistake won’t be around for the economic upturn.  Enough about me philosophies of advertising, let’s get back to improving on your advertising investment.

The chart below starts of what many may consider as average performance for each of the elements, but I believe there’s room for improvement.  We start with a 1.00% response rate, a 60% contact ratio, a 50% appointment ratio, a 50% show ratio, a 50% closing ratio, and an average of $3,000 gross per copy.  What’s really interesting is that if you improve any of the elements by 25%, the bottom line results are the same.  You start of with a 281.25% return on investment that gets increase to 351.56% return on investment.  Either way, it’s a lot more return than you’ll get with any bank account.  But if you increase all six elements by 25%, you increase your return on investment to 1,072.88%.  Let’s convert that to what really matters – MONEY!  You start off with a total gross profit of $22,500 and increase that number to $85,830.69.  WOW!

long-chart-6-elements

It’s plain to see that focusing on improvement of any and all of these essential elements will greatly increase your return on investment.  This means that the training and discipline it takes to make these improvements will have a huge return on investment.  Here’s the really big bonus – you can apply what you learn working on improving direct mail results to all of your lead generation investments, like Internet Leads and television leads.  Good Luck and Good Selling!

Denny Long is President of Credit Mail Experts. He has over 30 years of experience in the automotive industry and is known as the top expert in sub-prime marketing. In those years Denny has written hundreds of helpful articles that have been published in World of Special Finance, Auto Dealer Monthly, and the BHPH Report.