Driving Performance
AutoNation pairs analytics and digital printing to power response and retention
June 2006 By Amy Syracuse
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The number of unique combinations, not to mention the odds of marketing the ones that will resonate with individual consumers, are mind-boggling. But that didn’t stop AutoNation, America’s largest dealer of new and used vehicles, from leveraging analytics and digital print technologies to create a variable content direct marketing program that consistently delivers customized and relevant communications.
As a result of its innovations, AutoNation has doubled response rates and generated a return on investment that is “enormous,” says Scott Zientarski, director of database and direct marketing. And it’s not just the incremental sales the program has generated, he adds. “It’s the fact that we’re holding on to our customers.”
What AutoNation Traded In
After joining AutoNation in 2002, Zientarski realized the company’s direct marketing efforts needed a bit of a tune-up. The company had 17 different vendors working on service marketing for 272 dealerships in 17 states. Their output primarily consisted of service reminder letter packages with very little copy. No segmentations were being applied.
Upon tracking the number of customers who visited AutoNation dealerships for service after receiving these notices, Zientarski found a response rate of 10.43 percent. Meanwhile, in a holdout group of customers who were not being sent mailings, 9.17 percent brought their vehicles to AutoNation for service. This poor incremental performance prompted a fundamental change.
AutoNation decided to consolidate all of its direct marketing under a single agency: Daytona Beach, Fla.-based DME. The two companies then began working to make relevance the foundation of a new service marketing program, which ultimately would help AutoNation sell more vehicles. Zientarski stresses that the link between sales and service is essential to AutoNation’s business. “Keeping that customer in a service relationship … increases the likelihood fourfold that they’ll repurchase from the store,” he says.
The New Model
According to Zientarski, relevance isn’t the only thing that’s important to marketing in the automotive industry. There’s also the question of credibility. To address both of these issues, he worked with DME to create a variable content direct marketing program that would demonstrate knowledge and understanding of customers’ needs. The program was launched in May 2004.
It begins with the gathering of transactional data housed in AutoNation’s dealer management system (DMS), the software used by the individual dealerships to manage their businesses. This data is subjected to analytics that prioritize which customers to communicate to, what to communicate and how to communicate it. Using this information, unique impressions of marketing pieces tailored to customers are generated. These efforts are brought to life through cutting-edge technologies in digital print and on the Web.
The Specifications
AutoNation’s current direct mail volume is somewhere between 50 to 60 million pieces a year. The company touches its customers by direct mail approximately eight times a year, and nearly all pieces have some element of personalization or customization.
A variety of formats are used for direct mail, including postcards, letter packages and self-mailers. AutoNation’s luxury brand customers receive DocuCards in their service marketing letter packages. These cards indicate the type of service needed and provide all of the pertinent details, such as the customer’s ID number, so the customer easily can make an appointment with the dealership’s service desk.
Many marketing pieces also incorporate personal URLs, which expand the amount of content the company can include in its communications. “On personal URLs, we’re using that transactional data so we can build a personalized Web site for the cus-tomer,” says DME President Mike Walther. “It would have specific offers about cars that we believe … are in the customer’s consideration set. We can give an enormous amount of detail, allow the customer to shop online and … then set up an appointment at the dealership.”
AutoNation’s mailings are customized with a wide range of variables. Some examples include the type of service due, whether the service is a major or minor maintenance, the estimated date service is due, the estimated mileage on the customer’s vehicle and, of course, key customer details such as name and customer number.
AutoNation also uses variable copy, which is determined by a number of different factors. “It can be very specific to the store, like hours of operation,” explains Zientarski. “We also have segmentation that triggers various copy formats based on whether the customer is in warranty or out of warranty.”
In all of its marketing pieces, AutoNation gives customers the opportunity to update their profiles or to opt out if they no longer own an AutoNation vehicle.
A Well-oiled Machine
If Zientarski is the driver of AutoNation’s marketing efforts, then agency DME might best be described as the program’s engine. Before AutoNation’s new service marketing program was launched, DME assembled many of the pieces needed to make it operational; for example, libraries of variable content, including individual dealership and manufacturer information, offers and art. Among other things, DME also is responsible for converting AutoNation’s raw customer data into the usable intelligence that fuels the company’s marketing.
The basic workflow for AutoNation’s service marketing program is:
• AutoNation dealerships collect transactional data, including sales, service, finance and insurance information, and enter it into the dealer management system.
• Each night, AutoNation extracts incremental changes to that data and sends the information to DME.
• DME receives the data and subjects it to address standardization and other data hygiene procedures.
• Using an array of proprietary models, DME identifies predictive patterns that determine the who, what, where, when and how of AutoNation’s customer communications.
• DME generates lists that include customer contact details and the variable content that corresponds to each customer.
• The agency uses specialized software to bring together the customer information and creative content.
• One-to-one pieces are generated and sent to the customer.
Throughout this process, the real magic happens when a customer’s behavior starts to change, says DME’s Walther. “We mine that transactional data to identify anomalies. Then, we make certain assumptions.”
“If we think you are leaving us as a customer and we’ve identified that you fit into the [profile of] a good customer for us, we’re going to give you specific and relevant reasons … why this is the dealership for your automotive service needs,” he continues.
Measurement of the program’s effectiveness is constant. At the end of 2005, the average response rate was 20.9 percent—that’s double the response generated by the previous program. Zientarski says this number has trended higher since the inception of the program, but he’s modest in discussing the success: “I think it’s a combination of having a very good program, and also being in an industry where not much has worked in the past.”
What’s Under the Hood
In addition to manpower, a number of components contribute to AutoNation’s marketing success. The first is data. “If we have 1 million customers, we might have 70 million transactions and hundreds of fields for each individual,” explains Walther.
As a supplement to the dealerships’ transactional data, AutoNation sometimes also is able to leverage anecdotal information gathered by the dealerships’ employees. For instance, a customer may have his or her car in for service and the service advisor will observe an additional problem that the customer doesn’t get fixed during that visit.
“[Employees] can record that information in the dealer management system,” says Tom Leonard, chief technology officer of DME’s Automotive Division. This is a prime example of how important it is to integrate direct marketing into the operational characteristics of a business, he adds.
Another key factor is testing, something Zientarski believes is exponentially easier—and cheaper—to do using digital print technology as opposed to traditional printing methods. “[Digital print technology] … allows us to test in ways that provide us speed to market, because we can execute highly sophisticated test matrices,” he explains. “Marketers tend to think about using these technologies as something that is expensive, but this is an ideal application for smaller test quantities.”
And, of course, there are the software applications and hardware that make this depth of personalization economically and logistically feasible. Tom Dickman, vice president of product development for DME’s Automotive Group, says the agency uses Adobe Creative Suite 2 to develop creative. The XMPie software suite then brings AutoNation’s customer information and creative together. It generates the logic needed to print four-color variable data direct mail, and creates digital versions for use in e-mail. Variable content direct mail pieces are printed on Xerox iGen3 printers.
Gearing Up for New Challenges
The success of AutoNation’s new service marketing program has prompted Zientarski to consider other possible applications for the variable content approach. Working again with DME, AutoNation now is rolling out a campaign to promote sales of new and used vehicles. The campaign currently is being tested for select manufacturers, and Zientarski expects to implement it across all of AutoNation’s brands and dealerships by late summer.
Called the “Ownership Statement Campaign,” it will benefit from data sourced from third-party data provider Edmunds. Edmunds is a prominent provider of automotive information, such as estimated values of new and used vehicles and model specifications. AutoNation is extracting information about the vehicles its customers own from Edmunds’ Web site and appending that information to customer records.
At the heart of this campaign are quarterly ownership statements sent to AutoNation customers who are projected to be in the market for new vehicles. These ownership statements are four-color variable print mailers. They show the newest model of the vehicle already owned by the customer and include comparisons between the customer’s current vehicle and some new vehicle alternatives.
The comparisons are designed to establish an economic argument for new car ownership. The issues they cover are:
Depreciation—Variable content indicates the projected trade-in value of the customer’s current vehicle based on condition. As these statements are sent quarterly, the customer is able to track his or her current vehicle’s depreciation over time.
Monthly payments—Variable content compares the customer’s current car payment to estimated payments for new purchases of the same model and alternative vehicle recommendations.
Manufacturer improvements and upgrades—Variable content shows key upgrades in the newest model of the customer’s vehicle versus the model the customer currently drives. Algorithms that predict the customer’s priorities select the upgrades featured.
Cost of maintenance—Variable content contrasts projected maintenance costs for the owner’s current vehicle versus a similar, new model over the next 24 months.
Zientarski notes that marketing of new cars traditionally has appealed to consumers’ emotions, while this campaign is extremely factual. As a complement to these statements, customers may receive specific offers that showcase current dealer incentives, sale prices on models within their consideration set or promotions in which the dealer offers to purchase the customer’s current vehicle. The latter have proven most effective during testing.
Looking ahead, Zientarski expresses great excitement about the future of this campaign. He acknowledges it would be impossible without digital print capabilities. “I’m very enthusiastic about the fact that the technology has now caught up with the marketer’s ability to think and execute,” he concludes.
Amy Syracuse is a London-based freelance writer.
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