Jeff Schmidt Cadillac

If you have been paying attention to television commercials for Cadillacs recently and you live in Dayton you are probably aware that Jeff Schmidt just purchased Roberts Cadillac. It is now Jeff Schmidt Cadillac. As stated in the Dayton Daily News Mr. Schmidt is planning on "attracting a younger crowd" to the Cadillac market. Say What!?!

Per my father (who has a Ph.D in Marketing and follows these kinds of things) the median age of a man who purchases a Cadillac STS is 52 years old. The median age of a man who purchases a Cadillac DTS (The flagship car) is 56 years old. These are descriptors that help define what Marketers would call a Target Market. There are many reasons for this high median age you can probably name a few without any help.

• The cost of a new STS is $49,775.00 per Jeff's website. The cost of a DTS is $54,685.00 fully loaded.
• The styling, while chiseled and modern looking, is not what this younger demographic is after. (see Pontiac G6 with it's new curved lines and convertible 2-Door option.)
• 4-door large wheel base luxury sedans do not sell to families who have parents in their 40's and need practical cars (i.e. a Minivan)

I assume Mr. Schmidt is meaning someone in their 40's when he claims to reach the younger market. See above description and think of the 40 year olds you know: Do they have $50,000 to spend on a car? Will they allow their pre-teens to haul their muddy soccer gear all around town in a new STS?

Marketing 101. The answer to the questions above is "No". As we learned in our consumer behavior courses, the target market selects the product. Not the other way around. Groups of people are naturally drawn to products for specific reasons. If you try to "push" or suggest a product to a group outside of the primary target market your marketing efforts will have a very minimal effect.

From what I can tell Mr. Schmidt is doing his very best to be different. Understandably so as he bought a failing dealership. He does need to do something. Age, however, is not the place to change the game. Perhaps he should focus on service, possibly he could throw in an extra year of that fantastic OnStar service. He could maybe even buy the first "X" people who purchase a Cadillac a round of golf for 4 at a local swanky country club.

What ever he decides it needs to appeal to the same group that buys Cadillacs normally. Think 50+. What do they like to do? What is their stage of life? Where do they travel? Who is their peer group? Who are they trying to impress? What is their primary reason to purchase?

I wish Mr. Schmidt the best. But unfortunately his current model will not work in the long run. He is making a classic mistake. He is trying to change the customer base, rather than focusing on the customer.

Marketing Disaster

The category of products that I am selling currently has been around for over 25 years. However, the product I sell is brand new and has some truly innovative and groundbreaking features. It is more expensive, and works better than any product out there. It has the chance to truly dominate the marketplace. I was specifically recruited from Xerox to join this new product team and make sure that is takes off like a rocket. Coming from Xerox I realize the value of a high priced product that delivers a premium value. If you have ever sold on price, shame on you. The real money, and skill, is in the premium products that demand a premium price.

For any of you who have been in sales you realize that you control only a precious small portion of the success of any product. It is the job of the salesperson to help the customer recognize that there is a difference between their current state, and their desired state. We have to help them realize that they are dissatisfied with their current state and get them all "hot and frothy", as we said at Xerox, about the new product (desired state). Truth be told, that is only a very small part of a total strategic plan for any product. The first step is to get your potential customers aware that this new product even exists. Enter the Marketing team.

To give some background: Our sales team and Marketing team almost never work together. We had a few ceremonial meetings in the beginning and they actually had a hand in training us. Other than the first two weeks of employment we might have seen our marketing team, which consists of two people total, three times for about an hour each occurrence. Three hours in 7 months! Other than the obvious problems that are caused by the lack of time spent together there has been a relatively cordial relationship between the two teams.

About 4 months ago we received an e-mail from Marketing describing their "Marketing Plan". It consisted of sending out mass mailers to every dealer in the country by franchise. They were breaking those down by specific franchises in the order of best chance of success. The first mailer should have the most success. This is not necessarily a bad plan, but sending a mailer to everyone? What happened to target markets? I could go into a diatribe on target markets having a degree in Marketing, but I will not. So, the mailers went out and the response faxes came back. The sales team was excited about getting responses and we jumped on the chance to call these "hot and frothy" customers. Here were the response rates:

• 2281 letters mailed
• 51 Leads (2.5% response rate)
• 1 unit sold @ $XX,xxx.xx NET OT and $Xxx.xx NET Monthly
• 25 open prospects

Lets break this down.

• 2.5% response rate
• Sounds good right? 2.5% might be good for a random sample mailing however this was mailed to only our current customers. The average for a mailer of this type can be between 8% and 25% as defined by marketing standards. The 2.5% category is for things like your Sunday coupon circular.
  
• 1 Unit sold
• Out of 2281 potential customers that is a close rate of .04384%. Not even half of a percent. You might have a better chance selling vacuums door to door.
  
• 25 open prospects
• No one on the sales team even knows what this means. We have many more than 25 prospects but most of those came from our own out-bound activity. Not from the list.

The Verdict: Failure.

Here are rough estimates of the cost of the campaign only for material:

• Postage: $.21 for bulk X 2281 = $479.01
• Printing costs (I did come from Xerox after all): $.03 x $68.43
• Envelopes: $.02 x 2281 = $45.62

Grand Total Materials = $593.06

Without giving exact numbers our Return on Investment was less than 2% only on material costs. This does not include paying salaries, heat, light, time, etc... In terms of an investment. we would have been better off buying a 6 month Savings Bond.

But, have no fear. We have just been told that the next mailer is right around the corner. If we keep this up, we might just get that 1 sale out of 2281 that is just sitting there ripe for the picking.