John Wanamaker once said, “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.” And while this appears true for most dealerships, he made one mistake in what he said – MORE than half of the marketing spend is wasted, and you CAN determine which is which.
Auto retail marketing has changed dramatically over the past 25 years. Unfortunately, the one thing that has not changed is the low productivity. The shift to digital in the early 2000s promised great transparency and better results for lower spending – all of which never transpired. We have compelling reasons to address marketing spending in the current economy because we will likely see continued declines in front-end gross margins and lagging volume. The marketing expenses will absorb a greater portion of gross margin dollars, preventing the opportunities to invest in consumer experience and business transformation.
How do you figure out where to make changes that will help you increase the number of leads, stop duplicating efforts between providers, and have the transparency you need to make informed decisions? A lot of the success depends on the discipline you hold to the process and your willingness to challenge long-held beliefs, but there are a few things you can start to do to help.
- Establishing a Metric-Driven Mindset: A fundamental principle in the metrics-driven mindset is not letting great be the enemy of good. We need to understand that no measurement system is perfect and that any attribution model has flaws due to the convoluted road to the sale. That being said, we do need to define critical metrics that represent crucial stages along the road to the sale, recognizing that there are leakage and inaccuracies at each stage, but as long as there is limited bias in the measurement across market activities and time, the metrics will serve our purpose to evaluate relative performance.
- Creating a Baseline: We need to establish a baseline for marketing cost per vehicle retailed and a percent of gross profit. We believe in being as comprehensive as possible. If there is any doubt about whether to spend on “marketing,” it is better to include it so that it can be measured and managed. Also, we prefer gross margin dollars that include hard packs but exclude soft packs. In addition, the spend must be categorized by type – e.g., search engine marketing, search optimization, conquest campaigns, etc. – and vendor so that we can understand category, campaign, and vendor performance.
- Allocating Fixed vs. Variable Marketing: It is essential to make a distinction between fixed marketing – that which is required to drive brand awareness and build assets that allow the business to reduce dependence on third parties and media to generate sales over time; and variable marketing – that which is designed to drive sales in the next 90-day selling cycle. While there is no hard rule between fixed and variable spend, a 15%/85% split is a reasonable rule of thumb and should adequately support a healthy balance between long-term brand building and short-term sales goals attainable.
Digital Marketing Tools for Dealerships – Spend Less and Convert More
Watch this on-demand webinar where Withum and Serv Marketing identify ways to maximize a dealership’s digital marketing spend while cutting tools that yield lackluster results, setting them up for success.
Once you have implemented these three, you can start to track what is working and what is bringing you the most leads for the least amount of spend. Over time, you will also begin to see the gaps – do you have a problem with retention? Or is it getting more leads into the top of the funnel? What is your close rate from form fill to in person visit?
Your marketing efforts do not need to be based on fear alone. There are tools and partners out there that can help get this process rolling and provide you the transparency and control back into your marketing budgets to achieve your dealership’s goals.
Author: Courtney Evans, CEO of SERV Marketing | [email protected]
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For more information on this topic, contact Withum’s Dealership Services Team.
