By Amy Hughes, Senior Director of Dealer Intelligence, Experian
No one could have predicted the challenges COVID-19 would bring; it’s impacted all facets of the economy, including the automotive industry. In fact, many dealers have had to rethink how to manage business and move forward in the months ahead. Some explored cutting back on ad spend to keep dealerships afloat, particularly amid inventory shortages and depressed vehicle sales during the early months of the pandemic. And it’s a move some are considering continuing in the months ahead, particularly with pent-up demand building. But will pulling back on ad spend have an impact down the road?
The short answer is yes. Pent-up demand will subside, and inventory will recover. You may not notice an immediate impact to your bottom line as a result of smaller ad spend, but it could put you behind the competition in the long run. We understand budgets are tight; money and resources can’t be wasted. So, how can dealers both maximize ad spend and be more efficient with their budgets? The first step is to identify where the wasted ad spend is coming from.
It may seem obvious, but let’s look at current advertising techniques. Some dealers rely on blanket advertising strategies, oftentimes reaching consumers who aren’t in-market for a vehicle, resulting in thousands of dollars building awareness with consumers who aren’t ready to buy. Instead, campaigns should focus on those in-market buyers. To accomplish this, you need to dig into the data, understand your local market and be more strategic with the people we want to reach.
Don’t miss opportunity in your database
According to Experian’s Q2 2020 Market Trends Review, nearly 30% of vehicles on the road have changed registration within the past 12 months. This means there are likely customers in your database who no longer own the vehicles you think they do.
Identifying wasted ad spend begins with your own CRM database. Outdated information can lead to inaccuracies in campaigns, such as unknowingly sending owner-specific communications to people who no longer own the vehicle, resulting in high opt out rates and wasted time and money. You need to ask yourself:
- Does my customer file accurately reflect current ownership, addresses and e-mails?
- What is the source data, and how current is it?
- Who should be removed from the database and marketing lists?
An accurate CRM database leads to lower mailing costs, streamlined loyalty programs and more accurate customer segmentation and outreach.
Drill down to in-market shoppers
Connecting with the right people goes beyond your CRM database. Unlike the “spray and pray” approach of years past, customer acquisition strategies need to focus on the vehicle shoppers most likely to buy. Examine the sales performance of your core makes and models and analyze the local markets these vehicles perform best. Extend that same research to your competitors and you might identify conquest opportunities.
Find opportunities to optimize
Once you’ve built your audience segments, it’s equally important to measure your campaign effectiveness—it helps you identify what worked and what didn’t, so you can adjust campaigns moving forward. For instance, are your audiences translating into what we like to call high-value users? These are individuals who demonstrate traits with higher propensity toward a vehicle purchase, such as spending a certain amount of time on a website or visiting the website multiple times. Based on Experian dealership research, high-value users are 34% more likely to buy than average website visitors. If your campaigns don’t translate into these in-market vehicle shoppers, explore opportunities to optimize future campaigns.
Dealers are exercising caution when it comes to their budgets, but cutting back on ad spend could have repercussions that put you behind your competitors. Rather than pulling back on ad spend, consider revisiting your advertising strategies. Leveraging data and analytics to identify those shoppers most likely to buy a vehicle will better position you to take competitive market share in your local area.
About the Author
Drawing upon her years of experience in advertising research for national magazine publisher Time Inc. and Sinclair Broadcast Group, Amy has a passion for advancing the skill set of automotive marketers by helping them apply the latest enhancements in technology to their dealerships’ monthly advertising spend. Currently at Experian, Amy collaborates with dealers to transform their marketing operations through data. Previously, Amy was responsible for driving dealer sales and business development relationships for String Automotive and has been consulting with dealers on media and advertising for over 15 years.