Covering The Cost Of Marketing

[Transmission Repair]

Covering The Cost Of Marketing

After quite a few years in business I learned the inverse of the rule that a business's price should cover all costs.  Early on, whenever I considered something new, or something that would make my job easier, or improve business, I would often think "I can't afford that."  
After a number of years in business, I slowly learned I could afford any of those things as long as I raised my pricing structure to cover those new costs to doing business.  I soon learned very few people were giving me price objections when closing sales at a newer, higher price.  I felt good about my prices because I knew they were rightfully justified and not some willy-nilly price increase.

This was especially true when considering any new technology for your shop.  What once was considered as a luxury item is now very essential.  Shop Management Systems, Digital Inspection, and Text Messaging soon became our industry's norm.  Soon, I proved to myself that SEM (paid Search Engine Marketing) coupled with call tracking was just as essential.  SEM is sometimes referred to as Pay-Per-Click (PPP).  Here's a little history...

Our annual sales at our transmission shop had plateaued at $700K before SEM and call tracking.  Cautiously, we dipped our toe into SEM at first.  Later, we tried call tracking with only 10 phone numbers.  Combined, we were spending about $1K/mo. and we saw an $8K/mo. increase in business.  To make a long story short, I came to learn the more I spent, the more our sales grew.

Eventually, we were spending a combined $5K/mo. on SEM and call tracking with 100 phone numbers.  I have to explain why so many phone numbers.  Ninety-two of those numbers were in a "phone pool" with a 10-day cookie attached.  Whenever somebody did a search for anything transmission-related, they would have one of those numbers attached and display on our website.  Each different search would get a different number out of the phone pool shown on our website.  It would take too long to explain the technology but let it suffice to say that the call tracking company handled it all with a couple of lines of JavaScript added to our home webpage. After 10 days, the cooking would expire and go back into the Phone Pool to be used for another search.  The rest was all done behind the scenes on their servers.

It seemed to me, the more I spent, the more sales went up.  I leveled out at $5K/mo. only because of the limited size of our Salt Lake City area market.  We appeared on every search and the very top listing on most searches, if we weren't at #2.  I learned there were only about 1,300 transmission-related searches per week.  I couldn't pay any more simply because there weren't any more clicks to be had.  In the course of a year, our sales went up from $700K/yr. to $1.2M/yr. which is a $500K increase for less than a $60K/yr. investment.  
During this year of learning and growing, I slowly raised our prices to cover the new increased cost of doing business.  In my mind, I wasn't paying for it out of my pocket, my customers were paying for it.  It worked out to cost 12% of the $500K/yr. increase in business or 5% of the $1.2M/yr. in total sales.  I ended up raising our overall parts & labor prices about 8%.  Nobody even flinched, let alone complained.

I think this sort of mindset when considering any new technology should be the norm.  I don't know of a shop that doesn't try to cover its' cost of doing business.  Just consider raising your prices to cover any new tool, equipment, or technology.

In my next post, I'll talk more about SEM and call tracking.