CBC Automotive Marketing

BLOG

Research Increases ROI on Auto Advertising

There was a time when ‘throwing your advertising budget dollars against the wall’ might yield a reasonable return on investment. Newspaper was a powerful information format for potential shoppers. Electronic media was reasonably priced. Postal rates and paper were fairly cheap so that targeted direct-mail programs would often generate a high percentage of shoppers at an attractive cost per thousand. Even with 20% to 30% of ad budgets spent ineffectively, it was still common to hear of dealers spending less than $100 per vehicle on advertising…often less than 8% of gross. Research was rarely discussed.

Welcome to the 21st century and the reign of ‘communication confusion’. Today, dealers face lower grosses, both on the front and back end, as well as a proliferation of media opportunities and challenges, and must therefore distribute advertising dollars in a cost efficient, effective manner. Twenty years ago I told dealer clients that research could dramatically improve both advertising effectiveness and profitability. Today I would tell any dealer that unless they are doing a reasonable amount of customer research on media habits, they are doomed to extinction. No one can afford to ‘throw ad dollars against the wall’ in hopes that enough will stick to do the job. With the hundreds of marketing channels available, only a thoughtful, well-designed research effort will yield the kind of valuable information necessary to carry out the best possible strategy for maximum return-on-investment.

I spoke with Faith Logan, Research Director for Research Partners (RP) since 1999 (www.ResearchPartners.com) regarding her views on automotive dealership research. Research Partners conducts proprietary media habits research and analysis for some of the top retail automobile dealers in the world. Ms. Logan is a 1989 graduate of the University of Miami School of Business in Coral Gables, Florida, with a degree in International Finance and Marketing. She has also held positions as media buyer and supervisor for an automotive advertising agency.


JIM: Why is it so important for a dealer to conduct some kind of research locally when considering media allocation dollars?


Faith:

It is imperative that dealers have the necessary information to make educated, strategic business decisions. Research studies based on data that is compiled nationally (from various markets around the country) may or may not reflect the dynamics of your individual market. Local market research allows you to probe the minds of your own customers, ask them about their local media habits; what they watch, read, listen to, and are influenced by, …and when.


JIM: In general, what trends have you seen developing in your media habits analysis research regarding consumer influence of various media?


Faith:

Radio and cable are still the biggest players. On average, about 78% of our respondents listen to broadcast radio regularly. Approximately 70% subscribe to local cable services. However, only about 28% said they referred to automotive ads in a newspaper. 15 years ago, the numbers were dramatically different. Newspaper responses are declining, it seems, by the day! On another interesting note, many folks thought that satellite radio would be making a bigger impact than it is by now. In fact, we have not seen any real drop in traditional local radio listenership.


JIM: If a dealer does want to do research, what are the things most important things to consider in choosing a program?


Faith:

When conducting any type of research study, you are trying to gain a deeper understanding of something. Whatever that something is depends on your goals and reasons behind conducting the research project. Cost is also a major driving factor. Basically, there are two types of research – qualitative and quantitative. Qualitative research methods are much more subjective. They focus on the questions, “Why?” or “How?” The researcher may only know roughly in advance what he is looking for. In fact, the design will emerge as the study unfolds. This method uses mostly discussion, participant observation, in-depth interviews, focus groups, etc. to obtain insight about the respondent’s feelings and opinions. With quantitative research projects, the study is clearly laid out in advance. Each respondent is asked to respond to the same set of questions, like on a questionnaire, and end-data is in the form of numbers and statistics. This method is much more objective, efficient, and easier to quantify. A simple, well-designed one page questionnaire will help you glean a great deal of significant, useful information.


JIM: Do you see greater differences in media influence by age, gender and socio-economic groups than in the past?


Faith:

Not as much as one might imagine. There are some obvious things. For example, Internet usage and percentages of customers visiting the dealer’s web site before purchase are always higher with more affluent customers under the age of 54. The same goes for those that say they actually bought their vehicle off the Internet. Those customers are primarily male, between the ages of 25-54 with above average incomes in their marketplace.


JIM: Is it possible to transpose the current ‘impressions’ and subsequent ‘return on investment’ model from traditional media to E-media such as the Internet, E-mail, digital signage, etc?


Faith:

I don’t believe so. At the beginning of the Internet craze, many dealers tried to use the Internet as an advertising medium. Most of them realized quickly that it really didn’t work — that the Internet was more of a communication tool than a direct marketing vehicle. There is a great deal of aimless Internet activity and web site “hits” from people who are not qualified customers, but rather serial surfers who have no interest in buying your product. Calling a “hit” an actual “impression” just isn’t accurate. The dealers who seem to be the most pleased with their investment return in E-activities are those who have mastered internal tracking and conversion to bona-fide sales as a direct result of their ‘E’ expenditures. These dealers can not only tell you the cost of an E sale, they can also qualitatively compare profitability of sales generated from electronic channels vs. traditional channels.


JIM: Can research really answer that age-old advertising inquiry, “How did you hear about us?”


Faith:

Here is a funny story. Years ago, a client insisted (against our advice) that we put this question on his questionnaire. When the results came back, the respondents overwhelmingly specified “TV ads”…the only problem was that the client had never advertised on T.V.! The fact remains that consumers are inundated on a daily basis with thousands of media impressions, many conscious, some subconscious. The fact is, there were likely many impressions and various influences that led to their decision.


JIM: Any final thoughts for dealers interested in doing research?


Faith:

Dealers need to consider a broad range of factors when deciding on a research program. Set specific goals. Make sure you know what information you are trying to obtain and what you will do with it when you get it. Avoid asking questions whose answers will make no difference in the way you run your business! End-data has to be useful, actionable, and must answer a specific question or address a real need within your business. Make sure that you choose an experienced, objective researcher who listens well to your goals and needs and helps guide you to the desired outcome. You also need to be sure that the end results (data reports, analyses, and recommendations) are precise, clear and understandable, and easy to implement, given the goals you set at the beginning of the project. It’s all about planning and execution, as well as continuous and effective communication between you and your researcher.

Email Faith Logan with your thoughts and experiences with dealership research for future articles. Or Jim.

4/23/09 Copyright © Jim Boldebook (for June 2009 Issue of Dealer Magazine)

Share

Stay up to date with CBC Sign Up