Selling Trucks to Existing Customers

Isuzu makes midsized commercial trucks that sell for about $33,000 each. Recently, the truck marketplace was moving very slowly. Furthermore, at that time, Isuzu had no new truck models to offer with which it could beat the competition. As a result, Isuzu had to rely on better marketing and improved ability to target prospects and customers.

At the time, Isuzu’s marketing budget had been cut back. On the bright side, however, American Isuzu Commercial Vehicles had just completed two major database projects using an updated customer database created by msdbm in Los Angeles. The first project was to profile customers, and the second was to model customer purchase behavior. Based on these models, a numerical scoring methodology was developed to indicate purchase behavior. Scores were then grouped into three ranges indicating a high, medium, or low likelihood of purchase. If the methodology was accurate, then customers who received a high score would be more likely to purchase in the near term than customers who received a low score. It was also felt that the company was more likely to be successful at selling a new vehicle to a current customer than at trying to convert a prospect.

Msdbm developed a scoring methodology to predict the behavior of Isuzu Commercial Truck owners. The model predicted the propensity to purchase based on four variables:

1. Number of people employed by the business

2. Vocation—e.g., landscaping, electrical contractor, towing, etc.

3. Time since last purchase

4. Total number of trucks owned

Using the model scores, the customers were divided into three groups based on the likelihood of their purchasing a new truck:

1. High probability

2. Medium probability

3. Low probability

Isuzu decided to use the models to create a mailing designed to drive selected customers to Isuzu dealers. The goal of the mailing was to

• Test the model to determine whether the scoring methodology could correctly separate the customers into the three segments.

• Use the same creative material for all segments—low, medium, and high scores—in order to get a valid test.

• Provide a mechanism for collecting and updating data and offer a purchase incentive.

• Sell 150 trucks.

The data in the legacy system had many flaws. They were over a year old. Much of the contact management history had not been recorded. The majority of the customers were small vocational companies, such as Joe & Jim’s Landscape Company in Keokuk, Iowa. The vocation of many other companies was difficult to identify. The data used for the model were put together from multiple sources of data: R. L. Polk, InfoUSA, and in-house transaction files.

There was an additional problem of determining who the real driver of the truck was. In a typical situation, the sale of a truck might have been financed by GE Capital, then the truck was delivered to Ryder Truck, leased with a new truck body to Joe & Jim’s Landscape, then driven by Mac McKenzie. Who is the decision maker for the purchase of a new truck?

What Was Sent to the Customers

Msdbm created a direct-mail package that included a cover letter, a fax-back form asking specific purchasing questions, a four-color product information sheet highlighting the features and benefits of the most popular truck model (N Series), and a purchase certificate for an additional gift if a truck were purchased. The completion of the fax-back purchase information form guaranteed all respondents a gift of a briefcase, while the purchase of a new or used vehicle guaranteed the buyer a set of seat covers and floor mats for use in the vehicle. Respondents were given only 60 days to take advantage of the offer. The total quantity mailed was 6000. In addition, 520 companies were set aside as a control group to monitor the success of the promotion. These 520 companies did not get the promotions.

This test mailing proved that the scoring methodology that had been developed was highly accurate; the results are shown in Table 7-5. As a result, Isuzu used the same methodology to score the entire customer file for a follow-up mailing. This gave Isuzu the ability to target key customers and ensure the sale of a vehicle at very little cost, compared to normal prospect acquisition costs.

Table 7-5 : Trucks Sold

	Group totals	Companies buying	Buying rate	Trucks sold
High score	1899	97	5.10%	107
Medium score	1855	32	1.70%	34
Low score	1890	15	0.80%	16
Control group	520	3	0.60%	3
Total	6164	144	2.30%	160

The marketing and sales departments were initially dubious about the mailing. Based on their previous experience, they had expected to sell only 85 trucks to 6000 prospects. After they saw the results, they could see that their future success was going to be tied to database marketing. Being able to accurately predict which companies were likely to buy, so that they could direct their marketing and sales efforts at those companies, proved to be a powerful advantage.

As a result of the test campaign, the company sold 160 trucks, for a total of more than $5,600,000, with an investment, including the model, printing, mailing, and generation of creative material, of $80,000 (see Table 7-6). The industry estimates that, in general, it costs a manufacturer about $1000 in marketing and sales effort to sell one midsized truck. Using the database, Isuzu was able to sell the trucks for half that amount.

Table 7-6 : Overall Truck Promotion Results

Description	Results/response
Total number of trucks sold in 60 days	160
Overall customer sales conversion	2.1%
Overall sales conversion on total trucks purchased	2.8%
Overall forecasted sales conversion	1.5%
High-score sales conversion on trucks purchased	5.1%
Medium-score sales conversion on trucks purchased	1.7%
Low-score sales conversion on trucks purchased	0.8%
Cost of program	$80,000
Program cost per vehicle sold	$500
Control group (520)—3 sales	0.5%
Total delivered mail quantity	5,644