Dealers must not equate these broad customer groups with common market segments that they can effectively target.
BY DENNIS GALBRAITH
I hear or read many dealers, their marketers and consultants discuss women or millennial car buyers as though they were unified market segments to whom the same marketing strategy will produce similar results. This is a gross overgeneralization. Segmentation can be a valuable marketing tool, but broadly defined groups of people are not actionable market segments.
For example, Volkswagen has sold well to women buyers, but they don’t all want the same thing or buy for the same reasons, and Volkswagen would go out of business if it marketed only to women. A very high proportion of millennials find negotiating a car price or spending hours in a dealership to be distasteful; this does not mean all millennials desire the same shopping experience. Market segments must be more narrowly defined to be actionable for the seller.
Really, the only thing millennials have in common is being born in the same broad time period, which ranges from 1982 all the way to 2004, depending on which expert you ask. As far as I can tell, the only common trait among all women car buyers is their gender.
What Segmentation is All About
Modern digital marketing lets dealers send separate messages to distinct groups of shoppers, thus utilizing their marketing dollars wisely. For example, say there was a nationwide 40-day supply of Jeep Wrangler but a 94-day supply of Jeep Renegades. A Jeep dealer could spend more than usual on costs-per-click to attract shoppers interested in Renegades to its website, while cutting back or postponing spending on marketing Wranglers. Regardless of their age or gender, Wrangler intenders and Renegade intenders are low-funnel shopper segments that are meaningful and actionable to dealers.
Moving up the proverbial purchase funnel, dealers might want to target people who purchased or leased a similar vehicle during the timeframe most common for replacement. They might target existing customers going through one of the life experiences frequently associated with change in the family fleet (e.g., marriage, purchase of a first home, a first child, a vehicle accident).
Most dealerships don’t need to market to everyone in town or even large segments of the community. At any given time, only 4 percent of people in a local market are interested in buying a vehicle. Even with manufacturers that compete in a wide array of price categories (e.g., Toyota, Ford and Chevrolet), fewer than half of that 4 percent will be considering a late-model vehicle of the type the dealer represents.
Dealership marketers are capable of identifying finely tuned segments and advertising to them directly. A Chevrolet store’s message may very different to Cruze shoppers than to Camaro shoppers, but neither prospect likely will ever see the message designed for the other.
Avoid the Worst Mischaracterizations
Fans of extremely broad segmentation are often vendors offering a training program on how to treat “millennial buyers,” “woman buyers” or some other broad group. Undoubtedly, some stores and dealers would benefit from sensitivity training when it comes to their female and younger buyers. However, that challenge amounts to simply correcting a training deficiency; it should not be confused with market segmentation.
Also, some of the statistics tossed around with broadly defined groups are misleading. Take the claim: “Millennials have the greatest life-cycle value of any market segment.” A dealer may worry he is doomed unless he unlocks the magic strategy to meet the needs of these shoppers. In truth, the youngest group of buyers always has had, and probably always will have, the highest life-cycle value for car dealerships. On average, they are simply going to live and buy longer.
Millennials are credited with blazing the trail for mobile and social media. Again, advancing shopping trends is generally characteristic of young shoppers across generations. For example, in the mid-1990s, younger buyers led the move toward online car shopping, well before any millennial was old enough to buy a vehicle and before many were even born. Dealers have always needed to keep their eye on trends with younger buyers; this did not begin with, and will not end with, millennials.
Refine Your Target Profiles
The purpose of advertising is to sell products faster and/or at a higher price than would otherwise have been the case. Target your ad dollars on the people most likely to advance or begin consideration of the vehicles your dealership most needs to sell, and you’ll sell more cars at a higher total profit. That’s what market segmentation is about.
A proper market segment might be women with children who work fulltime in a job in which her vehicle is very visible as she visits or entertains client. These women share the common need to obtain a vehicle that is as appropriate for work as for the family. This segmentation can be narrowed further based on affordability.
For dealer marketing, part of segmentation often comes down to the shopping process. Some car shoppers want nothing to do with price negotiation and would pay a premium to avoid it. Others want a rapid process that is online as much as possible. Still others want to be pampered; the in-store experience means a great deal to them and determines their willingness to recommend or even complete the purchase. Yet another group of shoppers highly prize obtaining the best deal possible, or at least feeling like they did.
An urban dealership can align itself with the portion of the market who want to shop a particular way, and develop competitive advantages toward that segment. However, segmentation around the shopping process is rarely enough on its own. A Kia, Hyundai or Subaru dealer does not offer pick-up trucks. Millions of buyers are not in their target market by virtue of the vehicle demands created by their lifestyle or livelihood. The segmentation must reflect these facts.
Rural dealers have it particularly hard when it comes to shopping-process segmentation. The size of any one segment may simply be too small to sustain the dealership if its processes alienate the other segments. The rural store has a greater need to be all things to most local people. Yet the average shopping radius has never been larger, and savvy urban and suburban dealers are luring rural customers in with a more defined process and message.
All dealers, but the rural dealer in particular, must have a website that listens. The shopper needs to be able to find whatever information they are looking for on any vehicle or service with minimal effort. If the site listens well with great navigation and advanced text searching, then the shopper is more likely to feel the local alternative may meet her needs regardless of the appeals of more distant dealers.
Broad Segmentation is Outdated
In the 90s, there was little need for fine-tuning market segments. Various radio stations and television programs were designed to attract a particular market segment, but the targeting of those media rarely had anything to do with vehicle needs and even less to do with shopping preferences. That is not the marketing reality today. Digital advertising can be extremely targeted. Dealers can segment shoppers looking for the exact inventory they most need to sell.