By Jim Boldebook, Founder, CBC Automotive Marketing

When I surveyed dealers at the end of 2019, these were the two comments I heard frequently: 1) “We’ve got to get our marketing/advertising costs in line!” 2) “Advertising expenditures are eating us alive!” Virtually every dealer and GM I spoke with had a shared sentiment that marketing spend has spiraled out of control during the past several years, eating dramatically into EBITDA. Not only in terms of actual spend but as an increasing percentage of gross due to increased industry pressure on grosses as well as labor costs.

In 2007, many dealers I interviewed reported overall marketing costs between 15 and 20% of total front and back gross. Those same dealers say it’s now well over 25%.

Here are some thoughts on the ‘battle of the bucks’ with one of the biggest line-items:

• Make a budget and stick with it! There must be a hundred salespeople at your door, on the phone or in your email, vying for a piece of your profit pie with a promise of guaranteed attribution. No matter which accounts you expense it to, these costs come out of the advertising/promotion category. No advertising or sales gambit is so critically important that it can’t wait a month or two or even a year. Don’t make hasty changes adding dollars to the budget that will do nothing more than drag down profitability. Get a solid game plan, and stick with it for at least a full quarter. 

• Have a conversation with all of your team members on ad spend. Ask the salespeople, the service drive and office personnel for feedback. Don’t just rely on ‘metrics’ pitches from folks trying to sell you something. Remember, every marketplace is different. Your ADI (area of dominant influence) may vary differ dramatically from national, even regional key influencers, especially if you are on the outskirts of a major metro.

• Do your research. Your dealership should be conducting at least a one-page media habits survey or interview at the time of purchase. The highest quality accuracy return on this research is within hours of actual delivery. With every passing hour, accuracy and response diminish. We can no longer count on, “What brought you in today?” We have to get buyers sharing actual media habits to best determine the hierarchy of influence.

• Balance your ‘deal’ messaging with brand messaging. Branding builds familiarity and trust (think Carvana). When was the last time you saw this company hawking a price or a payment on TV? Carvana is using broadcast effectively, promoting volume, convenience, guarantee, trade appraisals, and delivery. What is your unique marketing message? What do you better than anyone else in your marketplace? Why aren’t you spending time talking to potential buyers with that message? 

• Send more emails, but do it the right way! Emails are powerful tools, especially when your company is a trusted name (branding). And when your message is timely, personal, and relative, email effectiveness increases. Twilio SendGrid just announced a benchmark study that outlines what elements impact a recipient’s choice to open and click, as well as what frustrates recipients, and makes them memorable.

• Buy broadcast… radio & TV! Several dealers have told me they abandoned broadcast in favor of all digital and are now returning to a balance. If you are truly interested in increasing your profitability, keep in mind that the lowest grosses are produced by the highest digitally inclined shopper. Customers that have spent half their lifetime researching pricing, incentives, and availability are often willing to drive 100 miles to negotiate a deal down to a tissue. If you’re only interested in selling the absolute highest number of vehicles at the lowest possible gross, spend 100% of your money on the internet. A customer that is within 15 miles of your dealership, who has previously purchased from you, who is likely to tether to your service department, and is comfortable with your brand reputation, is most likely the customer that will let you earn enough money to pay the floor plan, a sales commission, and maybe a few dollars of profit. Two dealers that I spoke with in my survey, both high volume, highly profitable dealers, have stopped soliciting out-of-state business in their advertising.

• Hire better. Train better. Profitability (gross) increases when the right salespeople get the best training for customer-centric relationships. If you don’t have the right people and the best training, shift some of your advertising dollars to training until you do. Reams of research demonstrate that a customer will knowingly spend ‘a little more’ if they are treated right, feel that you really want their business, get the information they are seeking, and are happy with the overall sales process.

• Hire the best used car manager money can buy. A good used manager raises both new and used grosses by knowing what a vehicle is truly worth in your particular market. Too often, a dealership will put too much into a trade because the computer metrics say its right. There are a lot of overpriced sleds out there that will ultimately end up at the auction as a loss because of ‘computerized metrics.’

• Advertise used vehicle specials on Facebook Marketplace. Many dealers are getting great results with the medium, especially with unique vehicles. It’s quick, it’s cheap, and those ads get seen by the folks in your backyard zip codes.

• Spit shine your website. Ensure your website is user-friendly, up-to-date, and easily navigable so that users can find advertised specials, directions, and contact information. Chat windows are losing ground because they are too impersonal, so display your telephone number, address, and email prominently on the homepage. And optimize for mobile too. A map finder/direction button is a great tool to have so that one-click leads them right to your door.