Have you heard of hyper-inflation? For a quick primer on what causes it and how it will affect your shop, I suggest you check out a blog I wrote called “Will Hyper-Inflation Kill Your Shop?” (Click here to read it!)
For an even quicker primer, the basic idea is this: inflation happens because the government wants it. Higher inflation means things like food and fuel cost more, but income doesn’t increase to meet them.
A shop whose customer base is made up of mostly lower-end, coupon-type customers is vulnerable to failure during hyper-inflation as those customers have less extra money for auto repair. A shop that has a higher-end customer base will weather that economic condition much better.
The good news is that you can change what type of customer base you have through advertising. The issue, of course, is what kind and at what cost.
Advertising to lower-end customers is not that expensive, right? Maybe not on the surface. All you have to do is get some discount coupons into one of those little books or mail packets, do a discount card or send out a flyer with some specials and the customers and profits will come running…right?
But when you start adding up the amount of money you’re spending on the advertising, and the money you’re giving away with the advertising, and the money you’re losing while those discount-customers fill your bays with unprofitable cars while your good customers wait hours or days (you didn’t think those customers were really going to listen to any recommendations from your service writers, did you?)…well, it doesn’t really seem that inexpensive to do a cheap ad anymore, does it?
Chances are you already know this. I haven’t yet met a shop owner who didn’t fall prey to cheap ads to try and drive business. Whether you’ve added up all of the costs associated with those cheap ads, you’ve probably felt what those cheap customers do to your shop — their complaints and anger and frustration can kill any shop’s morale.
So…if doing advertising that appeals to high quality customers comes with a few more upfront costs but much better results, does that mean some shops HAVE to start out by using discount ads until cash flow improves?
In a word: NO!
Keep reading the next blog, when I discuss the problem with opting for cheap ads, and why you don’t have to go cheap to afford the high-quality ads that attract high-quality customers!
Originally published January 4, 2011 and seen on Motor Age.