An international luxury car maker wanted to improve the effectiveness of their direct marketing programs and activities.
To do this they need to know both the effectiveness of each program in generating high quality leads and how effective each dealer was in making use of the leads
Once these measurements were made they were able to dramatically improve the effectiveness of their direct marketing expenses
The Measurement Problem and the Solution
High end automotive manufactures spend many millions of dollars in direct marketing programs and events to generate sales leads for their products. A prominent manufacturer , who was generating approximately 250,000 leads annually, contacted IDE to put in place systems to measure the effectiveness of each program and event as well as how effectively these leads where being utilized.
IDE developed systems to collect, clean and organize all of their prospect information, as well as, their new vehicle sales data. IDE then established a monthly reporting service where every vehicle sale was matched against prospects that had been generated by all of their marketing programs, including their Web site. This matching had to be exact as these measurements would form the basis of decision making on new and existing programs and evaluating each dealer's performance in utilizing the leads that they received. IDE's proprietary matching methodology guaranteed a 99.5% accuracy in matching sales to prospects (this compares to an industry average performance of 50-75%).
The performance of every program was provided in interactive management reports to authorized managers and available on special secure Web applications. Each program and activity could be evaluated directly against all others with conversion percentage as the key metric. In this way, programs were measured for their ability to 'sell cars' not just their ability to generate prospect names.
Each lead or prospect was passed to the appropriate dealer for
follow up sales activity. IDE was able to measure which dealer was
actually responsible for each sales conversion of a lead. An
interactive Web application provided key managers with exact
information on how well each dealer was doing in converting the
leads that it received. IDE was able to show what percentage of the
leads going to a dealer were converted to sales at that dealer
and what percentage were converted to sales at another dealer that
did not receive the lead. In this way, IDE was able to provide a
direct measurement of how well each dealer was utilizing the leads
that it received.
The Results - Direct Marketing Events and Programs
Over the course of 3 years of measurement, the conversion percentage of leads generated from all marketing programs and activities increased by an overall average of 58.5% (an increase from 3.95% conversion rate to 6.26% conversion rate). For the same expenditure on direct marketing programs, this manufacturer was able to dramatically increase the effectiveness of its investment in direct marketing. In absolute terms, this increase represents a yearly increase in sales of over 5700 unit sales. At a conservative estimate of $10,000 net profit per unit, this increase represents a yearly bottom line improvement of $57,000,000.00.
This result is even more startling in light of the fact that the measurements showed that commonly held assumptions about which programs where the most valuable were found to be incorrect. In one case, a program was about to be terminated because of a general feeling that it was not a good bet for the company. This program turned out to be their most valuable and high performing event activity. Other programs that were 'felt' to be very good were found to be poor sales performers.
The success has been so significant that now new programs are run in
a 'test' mode with a statistically significant test sample and
measured for their conversion performance abilities before a
commitment is made to implement an expensive program.
The Results - Dealer Performance
Measurement of several hundred dealers showed some very interesting results. A small percentage of dealers were converting as high as 7% of the leads that they received at their dealership. The overall average was approximately 2% conversion rate. A significant percentage of dealers were converting 0% of the leads supplied to them. This broad range of results showed clearly that the leads generated were of very good quality but that most dealers were not following up on the leads in any meaningful way. This meant that the prospects were purchasing their new vehicle, more often than not, at a dealership other than the one that was receiving the lead. This was a surprising result but one that indicated that there exists a great potential for improving the responsiveness of the dealers by managing the process more closely.
IDE proposed and designed a Web based service that provided dealers
with higher quality information. Along with the prospect lead
information, IDE supplies historical information such as data about
previous purchases and the history of participation in other
marketing programs and activities. This Web based application
service also provides a mechanism for dealers to provide feedback on
what actions have been taken to convert the lead to a sale. This
feedback mechanism provides a powerful tool for market managers to
monitor the follow up of dealers.
The very act of measuring this performance has provided the opportunity to dramatically increase effectiveness and profit by putting in place systems that cost a tiny fraction of their benefit.
You get what you measure.