Advertising - Wasted Distribution

Why it may be a sign of insanity.  

Side Note: We have had many dealers call and thank us for this article.
We have even had dealers use computer programs to test this article against their data and customer base statistics.
They were shocked when they realized just how much money they had been wasting. 

In this article we will address the issue of wasted distribution; paying for advertising market share and exposure you don’t need. Spending years on both sides of the line (buying and selling advertising) we figured we would try and help retailers and auto dealers see why and how they often waste their dollars.  

The concept is rather easy to understand but the fix is a harder problem. You are not alone in this struggle. 80% of retailers waste advertising dollars through wasted distribution and struggle to grasp the concept that will fix the problem.  

First, let’s understand wasted distribution.  Every retail store owner and every auto dealer has a commerce circle. As an example…Would you expect a customer to drive 450 miles to purchase a vehicle or product from your retail location?

Obviously the answer is no. This person is not in your commerce circle therefore if you spend advertising dollars on them, it is wasted distribution.

Now a harder question, where exactly does that radius stop? That is what EVERY retail operator and needs to figure out. What is my commerce circle?  A retailer’s commerce circle is the circle in miles around their location where 85% of their business comes from, or can reasonably come from. This includes both single location and multiple location owners.   

We’re not talking about the 5-10% of customers that travel a great distance to do business. We want you to figure out where 85% of your business comes from. In heavier populated areas that number is often around 3 – 10 miles. Any farther than that and they will be passing by 10 other stores just like yours that are closer to their home and more convenient. In more rural areas that number may extend out 20 – 40 miles. Traveling miles through open farm land is nothing to them and a daily ritual.

Paying for huge numbers and huge exposure sounds great, but more than likely will have little effect on your day to day sales and traffic.    

Take a look at mass media coverage area. Your radio, TV and newspapers justify prices by showing you their wide coverage area and all the viewership / readership numbers.  If they cover a 65 mile circle, you are essentially paying for 70% of consumer exposure that will never even consider becoming your customer.

(Wasted distribution.)  Their reach can be wide and strong, but is that what your business really needs.  If your target area / commerce circle is 10 miles out from your location, this is where you should put 85% of your advertising budget.  

Keep pounding and pounding that circle until every home, business, and person within it knows your name very well.

Retail owners need to understand this VERY QUICKLY or they will spend themselves out of business. Don’t be swayed by pretty magazines, huge circulation newspaper numbers or TV / radio viewership exposure.  The real question that you need to answer is, “How do I get 85% of my advertising dollars to fall into my commerce circle?”  

The answer…
Don’t spend another dime on large market media advertising. Buy only targeted advertising that is focused on you commerce circle. (Not an easy task.)

Here is a great exercise for all retail stores and auto dealers. This can be done for all mass media such as TV, Radio and Newspapers.

Go to your newspaper’s website and look at their published rate card. 

You will find on it the general circulation numbers for the paper. Now, look at a specific breakdown by area and city. (If they don’t publish it on the web, ask for a copy.)  Look at the specific paid distribution to residential / homes in your commerce circle.

The low numbers will probably shock you.

Here is a specific example.

We will call this newspaper “XPaper”, even though it is a real paper not far from us.

Their circulation is stated as approximately 30,000.  However, when you look at the actual town the paper is from, and you look at residential paid delivery, that number drops to 9400.

Yes you heard us right. The number of home owners and residents in their own town that actually pay to have the paper show up at their door is only 9400. Out of this number not all of these consumers may be in your commerce circle.  While a full-page ad sounds like a great price to get your message to 30,000 readers, when you breakdown the actually cost per home in YOUR commerce circle, it can often exceed more than $1.25 per day / per home.   

So how do you fix the problem?

1-    Truly identify your 85% commerce circle. Remember, it is 85% not 100%.  Find out where most of your business comes from.

2-    Use only advertising that can guarantee 85% of their coverage in that area.

What are the top choices for capturing that exact market?

There are three.

Cable television:
Cable TV allows you to effectively buy a selective market on a much narrower scale. Instead of buying the local station news for a 100 mile circle, you can pin point a very small portion of that area in many cases.
Buying the entire city for $600 a spot on the local news doesn’t make sense, when you can buy Larry King in your target area for $35. Meet with your cable retailer and get exact area specs. Also, don’t buy into “packages” that cover a wider market. While the discounts may seem tempting, this is the habit we are trying to get you to break.   

One source all retailers and dealers can now look at is a new website called www.SpotRunner.com . This new site is truly amazing and offers creative, production, demographics and placement services in every area throughout the US. Not a welcome sight (site) to TV sales reps.

Local Community Newspapers:

Local newspapers have done quite well over the past few years. They often are published once a week and have a loyal following. They are also much more targeted with their distribution and often a GREAT deal when it comes to cost.   

Many of these papers understand that while the “glory” sought by big paper writers and editors is focused on writing the “big breaking story”, local people buy their paper to read what is on the school lunch menu or read about local board and zoning meetings.  It may not be glamorous, but it is what keeps their local base returning. This is also news that the consumer can’t find on the internet or the evening news.

Hunt them down and advertise with them.

Direct mail:
How can you target every homeowner / residence / business within a 5 – 30 mile commerce circle and get your message to all of them?

Look for the common factor…

Each one of these homes / residences / businesses has one thing in common. They all have a mail box and the USPS has a list of them all.

Mail to them and mail to them often. 

We have to chuckle a bit when we first take on a new client that is struggling with advertising.  The reason we find it humorous is because they always answer the exact same way.

Q: How often do you use direct mail?
A: We do a mailer about 3 - 4 times a year.

Q: How often do you use newspaper ads?

A: Every week, all the dealers around here do.

Q: Have you ever had someone call 100 homes within 5 miles of your store and ask
     them if they subscribe to the paper?

A: No, we just assume that most get it.

Q: Have you ever had someone call back the same 100 people and ask
     them if they have a mailbox?

A: That would be stupid, they all have one.

Now we simply shut up and stare at them.

If the light bulb doesn’t go off, we make them find someone to call.

We actually make them hire someone to call 100 – 200 homes within 5 miles of their store and ask them if they subscribe to the paper.

Dealers are shocked to learn the results. Most of time the results will fall between 15 and 35% of the people within a 10 mile radius of their store subscribe to the paper. Yet they are putting 85% of their budget there.

Dealers quickly learn from this exercise that more than 65% of the people in a 10 mile radius of their store never even get a chance to see their ads.

Direct mail should be used heavily by all retailers as it is the most effective way to target an exact radius and get their message to that audience guaranteed.

Why guaranteed?

Here is a great question we ask dealers when they ask us about response rates.

Dealer: What response rate should I be getting to my direct mail?

US: A better response rate than your newspaper. What was your response rate to last week’s newspaper ad?

Dealer: We don’t figure out response rates to newspaper ads.
US: Why not?
Dealer: Because we don’t know exactly how many people actually got the paper or saw our ad.
US: Blank stare. (Waiting for light bulb to go off.)

Direct mail is the only form of advertising that is held accountable for response rates / percentages. Why? Because it is the only form of advertising that the retailer actually knows exactly how many people got his message.

The real and most important question they should be asking is…

What is my TRUE cost per household in my commerce circle?

How many times have we seen this happen….

A dealer runs a 4 day, full-page ad and spends $10,000.

He has 65 people respond to the ad and in his mind the ad worked.

The next week he spends $10,000 on a mail drop and has 158 responses.
”That was less than a ½ % response rate, I was not happy with the mail.”

Understand that response rates are important but true, commerce circle exposure is the ultimate measure.   

Saturation mail is now the king of the effective direct marketing program. It does exactly what it says. It hits EVERY person in a circle around your store. Keep in mind we are not talking about shared mail, “value packs” or as we call them “pizza wrappers”. Shared mail is not the place for a car dealer or specialty retailer. It is the place for sub shop or pizza parlor.

Saturation mail is the same mail system as first class mail except it must go to every residential address on the carrier’s route. It is delivered as any other piece of mail would be, with the exception of time. It generally takes 2 – 4 days longer to reach the consumer. However, the difference in price well justifies the slight delay.

Most saturation mail is now printed on 11” x 17” 4 color paper that tri-folds. It is a huge message board and allows the dealer to be creative.

The cost of saturation mail is by far the best ‘bang for your buck’.  You can often buy complete mail including printing, lists, postage and more in the 30 – 39 cent range.

Learning how to say “no” is one of the first things you need to learn.  You can do it in a polite way, but you must learn how to do it.

Here is a great method that is a very nice and intelligent way of saying no.

When approached by advertising sales people, simply use the ‘85% rule’ line….

“We now put 85% of our advertising dollars in our commerce circle. This means that we only buy advertising that is limited to a 15 mile radius from our store. If your coverage is broader than that, we would not consider it.”

Now remember, these are sales people. They are trained to accept a ‘no’ as the road to the sale. If they continue with pressure to buy, take them to this level.

“Here’s what we will consider. Tell us what percentage our commerce circle makes up of your total distribution. We will pay that percentage. If our circle is only 20% of your coverage, we will pay 20% of your rate. The rest is wasted distribution.”

Stick to your guns and tell them you are serious. Sooner or later they will get the point.

What about the 15%

We call these “blips”.  Every retailer has a small area or town that is outside their commerce circle but still produces a good amount of sales. Maybe they don’t have a retailer or dealer like you in their area. This is the exception and should be treated as such. Don’t broaden your total coverage just to cover your “blips”. Use the remaining 15% of your budget to buy local advertising or mail to these pockets. Not only will you still get sales from that area, but you exposure will actually increase.   

Every day we hear the cry of retailers and auto dealers across the nation. My advertising is not working. Yet they keep repeating the same mistakes over and over.

Remember what Benjamin Franklin said, “The definition of insanity is repeating the same action over and over, expecting different results.” Force yourself and your business to spend every dollar in the right place.

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