June 8/15, 2015; Volume 30/Number 1
By Jim Augustus Armstrong
(Second of two parts)
In part one of this column I shared statistics gathered by polling 65,000 consumers across the U.S. and Canada who bought flooring from one of the 1,300 dealers in the My Flooring Warranty program. Every consumer was asked, “What prompted you to buy this time?” Here is a recap of the top five answers:
- A referral from one of your past customers: 50.6%
- I drove by your store: 8.9%
- TV or radio ad: 3.1%
- Social media: 2.2%
- Internet search: 2.1%
The vast majority of dealers are spending the lion’s share of their time, energy and money on strategies that only produce 2% to 3% of their business and have no marketing plan that capitalizes on strategies generating 50% or more of their revenue: repeat and referral customers. This mistake costs dealers millions of dollars over their careers.
There are three tiers of marketing that help dealers prioritize their efforts:
Tier 1: Warm market
- Referral marketing system: A system to farm your currently scheduled installations for immediate referral business
- Sales closer system: A sales system that brings consistency to your sales process, leading customers on a logical step-by-step path from shopper to buyer
- Market to past customers: Monthly direct response newsletter, weekly e-letter
- Referral relationships: Connect with with other local business owners, including realtors, contractors, carpet cleaners, etc.
Tier 2: Targeted marketing to cold prospects
- Website (including pay-per-click advertising and search engine optimization)
- Social media
- Display ads
- Direct mail
- Home shows
Tier 3: Broadcast advertising
Implement Tier 1 strategies first. Once these are fully up and running, begin implementing the Tier 2 strategies. Once Tiers 1 and 2 are complete, implement Tier 3 using luxury marketing dollars.
Let’s take a look at the revenue potential from just two of the strategies from Tier 1.
Referral marketing system: By having a system in place to farm all of your installations for immediate referral business, closing one extra sale per week per salesperson is very conservative. Assuming an average ticket of $3,000, one extra sale per week equals $312,000 in extra revenue annually with minuscule marketing costs. If you have two salespeople, this doubles to $624,000.
Referral relationships with other businesses: Let’s also say you develop relationships with 35 businesses, and each sends you a measly four referrals per year. This equals 140 extra sales annually. A $3,000 average ticket translates to $420,000 in extra revenue with virtually zero marketing costs.
These two strategies alone can generate over $1 million annually with minuscule marketing costs. And we haven’t even figured in the remaining strategies from Tier 1, which can conservatively add another $500,000 or more every year.
Tier 1 strategies have the power to transform a failing store or take an already successful store to new revenue levels, multiple locations, etc. I challenge anyone to show me an example of a dealer who has generated these kinds of transformative results with Tiers 2 and 3 for costs comparable to Tier 1.