Reorganizing Advertising Budgets Based on What is Important to Customers

"What should I be doing with my advertising?" "How much should I be spending on digital marketing?" "How can I increase traffic on trucks?" These were some of the questions I fielded when I met with a group of Midwest dealers last month during an advertising strategy forum. Here are some of the ideas we discussed, and thoughts for maximizing marketing success in these times.

"Should I cut back my advertising budget, and if so, by how much?" Through the end of the 3rd quarter of 2008, overall, car dealers have cut back ad expenditures by about 10% versus the same period in 2007. However, if you look at the top 20% of dealers, the numbers are fairly flat, with last year or even slightly ahead. Rather than cut advertising, these dealers have re-organized or re-focused ad dollars to achieve specific goals. Every situation is different. Inventory and manufacturers represented may be a prime consideration, and of course, liquidity. A number of dealers have shifted more ad dollars into used vehicles, parts and service. Does it make sense during these times to spend ‘more per car´ or a higher percentage of gross profit in order to preserve share-of-mind? Some of the most successful dealers I´ve spoken with argue it does make sense…to a degree. Over the past 40 years a number of research studies have demonstrated that companies who maintained advertising budgets during recessionary periods emerged with a stronger market share and increased profitability as their markets strengthened.

If you must cut your budget, cut carefully. Regardless of the level of traffic you presently have, cutting your budget will probably reduce share-of-market traffic even further. Before decreasing your impressions and exposure you may want to re-think creative strategy.

"Trucks aren´t selling…no matter what I say or do!" ‘Trucks´ was one of the biggest topics of discussion at our strategy meeting. Just a few months ago gas prices shut the sales spigot off and turned the industry upside down. Not just for Ford, Chevy and Dodge…but Toyota as well. It took the manufacturers a while to understand how ‘structural´ the sales dip was…and is. It also took a while for most dealers, especially large ones with massive truck inventories, to embrace ‘the write-down´ factor. At press time of this article the situation is getting better. Used trucks are actually coming up in value. Dealer inventories of new trucks are becoming scalable and realistic. But we´re at least six months away from establishing a true rate-of-travel and days supply for trucks. Until that time, trucks are both a challenge and an opportunity. Some dealers with large truck inventories have re-focused truck-marketing efforts to a direct-channel effort, identifying ‘real´ truck buyers and appealing to their sense of value, and the unique window of opportunity. Let´s face it, once truck inventories are balanced on both a manufacturing and retail level, the massive rebates will go away and truck prices will go up. For now, it´s smart business to advertise trucks directly to a ‘known´ truck buyer/market. That is probably best done via direct mail, e-mail, phone calls and personal visits. One Texas dealer I spoke with has increased personal visits by his sales team to area businesses over the past three months with exceptional results. If you would like a copy of a letter to business-truck owners, e-mail me and I´ll be happy to pass it along.

Don´t waste your mass media advertising dollars on inventory without current mass appeal. Identify the best potential markets for these vehicles and spend a reasonable amount of advertising dollars, considering the main objective is not to make money but to blow off this inventory with the best possible deal you can get.

"What should I be advertising?" Stop thinking about what is important to you and start thinking about what is important to your customers. Of course ‘miles-per-gallon´ is a huge factor in vehicle consideration, but rarely do shoppers focus on a single issue in their decision. Vehicle price, size, style, comfort, safety, cost of maintenance, warranty, trade value, depreciation, and brand value are all part of the aggregate decision. Sell the total value equation. Don´t be afraid to shift ‘new´ mass media advertising dollars into used vehicle advertising. A lot of ‘new´ buyers have shifted to CPO and used vehicles in the past two years purely from a value perspective. Additionally, many large truck and SUV owners who have shopped for a vehicle and discovered the often dramatic depreciation of their trade, have opted to purchase an additional, more fuel efficient, used vehicle to use in conjunction with their present larger vehicle. One dealer friend of mine in the Northeast decided to make a concerted effort in building service business. He hired a service writer training firm and re-directed some of his new vehicle advertising dollars to service promotions. This dealership continues to increase its percentage of ‘service absorption´ every month.

"Where should I be advertising?" Some digital marketers will tell you that all you need is SEM/SEO advertising. Some traditional ad agencies will tell you that mass marketing, radio, broadcast television and cable are still the 900-pound gorillas. I believe you need to work every marketing channel to its highest and best use. Broadcast mediums allow you to reach out actively and persuasively to potential shoppers ‘on the edge´ of the market. Those who might have consciously backed out of active shopping but might be motivated to step back in with the right value proposition. SEO (search engine optimization) and SEM (search engine marketing) are becoming increasingly important to reach those shoppers using the Internet for research purposes. 85% of all shoppers use this Internet for research and information prior to purchase. If you´d like a free white paper on SEM/SEO, please email me.

Direct mail and e-mail (and increasingly text messaging) are also important forms of communication to market to your existing customer base, which is always your best customer.

Make sure your advertising budget includes some funds for new ideas. Recently, in a phone conversation with a west coast dealer we talked about ways to promote a new model. We talked about the fact that the vehicle was truly a ‘freeway´ vehicle, the type of vehicle that would be a favorite of commuters. We talked about the fact that the dealership had recently changed the ‘test drive´ route to include more freeway mileage. We decided it might be a good idea to produce some tasteful magnetic signs that could be affixed to the vehicle to tell the freeway followers what the vehicle was (model) and where to get it. We had a small amount of money in our ‘miscellaneous´ budget for the purpose.

One other topic we discussed at our ad strategy summit was dealerships´ physical facilities. Research shows the ‘look and feel´ of a dealership (display, signage, lighting, cleanliness, etc.) all play an important role in shopping and buying decisions of customers. Budget and personnel cuts at some dealerships have affected the physical plant in some instances. Your ‘look´ is your perception is your reality. Clean windows, updated signage, neat lots and frequently rotated inventory all speak volumes to potential customers.

One of the things I love the most about the car business is the incredible stamina, character, and perseverance of the great dealers I´ve met and worked with over the past 25 years. At the conclusion of our strategy meeting, one dealer summed up our discussions like this: "Well, I´m going back to the dealership to prepare for the coming boom. 2008 was a learning experience. 2009 will be an earning experience!" What can I say to that…except AMEN!

8/26/08 Copyright © Jim Boldebook (for October 2008 Issue of Dealer Magazine)