Introducing First Party Audiences for Auto Dealerships
It’s always cheaper to keep a customer you already have than to acquire a new one, but that hasn’t always been true in the automotive industry. While today’s dealerships invest heavily in digital marketing to move their inventory, existing customers represent a shockingly small share of monthly revenue. And it’s no mystery why. The tactics for engaging known customers have been costly and widely ineffective—until now.With Driven Data’s First Party Audiences, auto dealerships can target their existing customers more effectively and affordably than ever before. Here’s what inspired us to build First Party Audiences into our digital marketing managed services platform, and how this revolutionary tool works.
First Party Audiences for Auto Dealerships: Origins and Opportunities
In 2018, we ran a study on the data we collected from our dealership clients over the course of 2017. These dealerships were all utilizing Driven Data’s reporting platform, which collects data from a dealer’s CRM, DMS, inventory, website, and social in order to provide a single integrated dashboard. This study revealed a shocking trend:
Only 17% of monthly sales involved customers who had purchased from the dealer in the past.
That means the average dealer has to put in a serious effort to acquire brand-new customers, who represent a whopping 83% of revenue.
More than that, service loyalty rates were only 77%.
While that’s a much better number, it still represents a significant amount of lost business from existing customers who have been lured away to third-party service shops.
These numbers signaled to us several opportunities to help improve the digital marketing efforts of our dealership partners:
- Improve Customer Retention Rates: First, we wondered if there could be a better way for dealerships to target and engage with their existing customers. CRM automation has been a key tactic for this, but they are often poorly executed and subject to human error. Dealerships need a consistent way to keep their customers in their purchase cycle regardless of who their salesperson is at a given time.
- Retain Service Market Share: According to a 2017 CDK dealer study, 40% of dealership service customers defect to independent shops within a year after their warranty expires. Combined with our own findings that only 77% of customers remain loyal to their dealer’s service department, we realized that most dealerships are missing a major opportunity to compete with third-party shops who know how to target their customers.
- Make Better Use of Customer Data: Throughout the course of our study, we determined that the average dealership creates over 12,000 rows of data each month. Yet hardly any of that data was being used in monthly digital marketing. When we considered how much it costs to earn a sizeable customer database in terms of years multiplied by average ad spend, we realized the untapped potential of better incorporating past customers into digital marketing.
- Reduce Overall Cost of Engaging Past Customers: Finally, as we reviewed our data, it became apparent that a major reason for the ineffectiveness of current marketing tactics for existing customers was cost. Even though past buyers only made up 17% of monthly revenue, the direct mail campaigns typically used to engage them cost around $0.80 to $2.00 per piece—with limited analytics to measure engagement.
The Driven Data Solution: First Party Audiences for Facebook
With these many opportunities to improve dealership digital marketing to existing customers, we set out to create a solution for the digital age. Each day, Driven Data processes over 400 rows of new data per dealership, including information related to leads, sales, service, inventory, and appointments. With this data as the fuel, we developed a predictive modeling program with the ability to create custom first party audiences for Facebook, an industry first.
When it comes to targeting existing customers with dealership ads, Facebook is an ideal platform for several reasons. Email typically has an open rate of 10-12%, but Facebook ads are impressed nearly every time within a user’s Facebook feed. While a single piece of direct mail or an email only has the potential to be seen once, Facebook’s ads can display to customers multiple times. Facebook continues to have the highest levels of usage and engagement compared to other digital advertising platforms and, perhaps most critically, performs at a cost per click of around $0.30 to $0.50 for our audiences—much lower than direct mail’s cost per item.
Now, we use machine learning to update or generate over 600,000 customers each day into highly targeted audiences for use in our automated Facebook advertising platform, including (but not limited to):
- Sales Predict
- Service Predict (loyal)
- Service Predict (not loyal)
- CRM active leads
Driven Data can predict when customers who already exist in your database are in the market for a vehicle or due for service and add those customers into custom Facebook audiences at the right time for targeted advertising. We combine all the information from each customer’s previous purchases from your DMS, as well as inquiry data from your CRM, to provide ready-to-market audiences. Our platform then generates targeted ads automatically built around each customer’s purchase history and specific interests based on where they are at in the customer journey.
The Future of Dealership Paid Search and Social: Driven Data
With this automated approach to engaging existing customers at the right time, with customized content, and at the lowest cost, Driven Data is set to empower dealerships to increase repeat business while dramatically lowering costs.