By Joe Jolet
In its purest definition, a target market is described as the majority of people your business attracts, either by circumstance or design. As our industry evolves in terms of technology, education and specialization, many owners are also learning to "position" their businesses to draw a specific type of customer.
Target marketing is one of corporate America's most effective business strategies. The idea is to increase sales by first identifying, and then targeting smaller, yet more profitable customer groups within the total market.
Targeting Is A Verb, Not A Noun
A market segment is any identifiable group within a market universe. For example, most national advertisers break down the consumer market by at least four segments, including gender, age, income and family structure. These demographics allow them to "target" their sales messages primarily to those most apt to buy their products. If you were selling designer jeans to young adults, you may sponsor a TV show like "Friends." Those selling toys and games will dominate Saturday morning cartoons.
In the aftermarket, a segment could be as simple as your customer list and as complex as carving out a niche of classic car buffs. In either case, the goal is to take advantage of a specific sales opportunity.
As a rule, most aftermarket businesses accept the general population as their market; that is, anyone who owns a vehicle is a prospect. However, some foresighted entrepreneurs recognize the profit potential of attracting only certain types of motorists and vehicles. Still others only use target marketing as an adjunct to their normal business.
Whatever the goal, successful target marketers know the first step is to take a long, hard look at their business before seeking the perfect prospect. What services or skills does your shop have (or can develop) that will meet the needs of a special group of motorists? Perhaps you recently hired a technician with specialized training or your new frame rack is ideal for certain types of vehicles. Once you have a sense for who you are, positioning your business will come as natural as linking kids and McDonald's.
Next, understand the type of business most profitable for you. This can be defined by average repair order size, vehicle type or customer preferences. If you don't mind filling your bays with lower profit oil changes, you may want to target quick lube customers. Or, if you would rather deal with the kind of customer who cares more about quality than price, you may seek more affluent prospects.
Finally, look for new, more specialized markets to conquer. The aftermarket is actually a composite of many different groups, each with unique needs and opportunities. Once you are confident that your business can indeed meet those needs profitably, the rest is a simple matter of going after the business.
Show Me The Money!
"I'm busier than ever, but my profits are stagnant!" The only reason to target new markets is to realize a net gain of business profit. If your strategy is to attract owners of red Lamborghinis, in Worms, Neb., it may not be worth the effort.
On the other hand, the essence of creative marketing is filling viable market voids and creating new profit centers. This is the part that requires a serious look at your corner of the aftermarket. Just what segments are available to you and what will it take to gain profitable market share. To answer these questions, make a three column list with these headings: segment, why and cost.
Under the "segment" heading, list those market prospects you do not currently target. These may include fleet accounts, customers by certain income levels, vehicle types, or just about any group of vehicle owners who may require special sales or marketing attention.
Under the "why" column, list advantages of attracting more customers in each category. For example, if you identified older, more maintenance-conscious seniors, the advantage may be a more even flow of business.
The "cost" qualifier is actually the net gain you will realize if you spend more time, money and effort building this market segment. Like any investment, marketing should return more than its cost. Is the competition so entrenched with this group that your promotional costs will be non-productive? Will you have to add new, expensive equipment to meet the needs of this group and will those costs return?
Finally, be careful what you wish for. If you are not prepared to attract a new market, you may regret the endeavor. For example, you may decide to specialize in high-end vehicles. But, as we all know, a Mercedes owner can spot a 2mm fisheye from your waiting room chair.
Here are some other cautions when defining new target markets:
- Understand the big picture when defining a target market. You may decide to position your business as one that caters to upper income levels. However, you may later learn this group trades cars regularly while still under warranty.
- The market is people, not the vehicles they drive. Target your promotions to decision-makers. Here, collision repair businesses may also understand not all market segments are car owners. Some, who simply pay the invoices, also need to be targeted.
- Back your decision to target with facts. Make sure a viable market segment exists before committing to major changes or expenses.
- Don't ignore your most valuable target market, your customer list. A close study of this list will also play a critical role in defining new markets.
- Finally, consider the dangers of specializing in a very narrow market niche. If more than 50 percent of new business is generated from the majority of your present customer base, this may be a warning flag to open other new avenues of business.
Market Segments
Here are some market segments to consider:
- Gender - It's no secret that women have become not just a major segment of the aftermarket, but a primary force. If you doubt this, watch how often auto manufacturers target women in their television ads. At least one vehicle manufacturer considers women to be 50 percent of the new car market.
- Age - Why target a specific age group? Several good reasons include: the ability to pay; a specific automobile class; older drivers tend to perform more preventive maintenance; and younger drivers are more apt to install accessories and aftermarket parts.
- Family composite (marital status, family size, age of children, etc.) - Strategy-wise, larger families simply have more vehicles. Mom, dad and several teenagers each need repair and service, and many families remain loyal to one repair or service business.
- Income level - This is the most obvious target market. Motorists in the higher income brackets drive certain types of vehicles, perform more "elective" services and repairs, and as a rule, don't mind paying for quality. On the other hand, this group is much more selective and normally demands more exacting work.
Middle and lower-middle class drivers, however, are more likely to own vehicles out of warranty and need to keep the family car in road-worthy condition, longer.
- Neighborhood (geographic location) - Historically, location has been the first measure of walk-in business success. Today, however, our mobile society has evolved to the point where location is not as important as price, quality and reputation. The idea here is we no longer need to restrict our markets to within a one- or two-mile radius of the business. When the average deductible is nearing $500 and even a tune-up runs well into three digits, consumers will go the extra mile to find true value.
- Insurance adjusters and agents - Marketing professionals call this group a major influence to the buying decision. Body shop owners refer to them as the people who pay the bills. In either case, recognizing this group as a target market is an absolute must for the average shop owner who invoices more than 30 percent volume to insurance companies. More importantly, harmony between the repair facility and insurance company during the estimate goes a long way in closing the sale.
- Vehicle type, make, model, year - A shop in Texas works only on Volvos. A collision repair business in Ohio accepts only vehicles less than four years old. In Southern California, one shop specializes in Corvettes. The one guiding force in each case is the market's viability - that is, enough vehicles owners of each description were available to keep these businesses operating
profitably.
One major advantage of this kind of specializing is a totally focused market. This means once the business owner identifies the market, pleasing the customer becomes much less complicated and promotions are more cost effective.
- Other automotive businesses (source work, specialty repairs, etc.) - Twenty years ago, sending out the vehicle for frame alignment was more the norm than the exception. Today, it is very hard to make a serious profit by simply hanging sheet metal. However, some specialized tasks such as performing interior work, transmission service or mechanical repairs on collision repair orders are still in demand.
- Per the size and extent of repairs or service - Most automotive service and repair management systems will help you to recognize the jobs that lose money. For example, occupying a bay for 30 minutes while performing a $19.95 oil change can't compare to the same time spent replacing an up-front component.
But the opposite is also true. Once you have identified the most profitable repairs, vehicle types and operating range, targeting that type of business is just a matter of establishing a shop promotion plan.
| Joe Jolet is president of J.D. Jolet & Associates. With more than 25 years experience in the aftermarket, Jolet has directed corporate and automotive industry marketing communications campaigns in the United States, Europe and Asia. His firm also publishes American Motorist, an individualized consumer newsletter marketing program for automotive service and repair businesses.
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