Auto dealers are trying to make their ad dollars work harder these days, having learned a thing or two about how to stretch a buck during tough economic times over the past few years.
Even the big guys are more mindful of how their ad budgets are spent.
“Everyone is learning how to be more resourceful and more creative in using the ad dollars they have,” says Marc Cannon, senior vice president of AutoNation, the country's largest dealership chain.
AutoNation is running fewer newspaper ads this year, advertising only on Saturdays instead of five days a week. The company still has television and radio spots, but is making a bigger push into social media as a way to reach customers.
In 2010, franchised dealers spent $654 to advertise each new unit sold, the highest amount in any year since the National Automobile Dealers Assn. started tracking that data in 1972, says Paul Taylor, the trade organization's chief economist.
But in first-quarter 2011, dealers shelled out just $604 per vehicle.
Overall, dealers have spent at least $1 billion annually for their Tier-3 advertising since 1981, NADA data shows.
Their combined total peaked in 2003 at $8.5 billion. Last year, retailers spent $5.9 billion, $55 million more than recession-ridden 2009.
Dealers started 2011 with bigger ad budgets, boosting their ad spending in the first quarter by double digits, Taylor says. The average auto retailer spent 19.4% more on advertising in the first three months than year-ago.
The average cost per rooftop rose to $83,663 in the first quarter, compared with $70,064 in like-2010.
Kantar Media reports U.S. dealers spent $858 million in measured media in the year's first quarter vs. $671 million in the prior year.
Although newspaper advertising trailed overall among all advertisers, it remained the biggest medium for dealers in the first quarter of 2011, with a total of $513 million spent, Kantar says. A year ago, dealers spent just $403.7 million in newspapers ads.
Television remained the second most-popular outlet for dealers, backed by $214.7 million, compared with $165.6 million in the year's first three months, Kantar says.
Radio again was third, with dealers shelling out $85 million in the first quarter or $20 million more than in 2010. The Internet was fourth, attracting $21 million in dealer advertising, $4.5 million more than year-ago.
Despite a resurgence in dealer advertising in the first quarter, things changed after the March earthquake in Japan, Taylor says.
The natural disaster that crippled auto manufacturing in that country caused inventory shortages in the U.S. Dealers spent less on advertising because of scant stocks.
“There's no use driving customers to your showroom if your inventory is insufficient,” Taylor says.
Multi-franchise California dealer Mike Sullivan is among those who cut back on advertising after the disaster in Japan.
“Clearly, we were going in another direction before that,” says the dealer principal of Sullivan Automotive Group, which sells Toyota, Scion, Lexus, Audi, Volkswagen and Porsche brands.
Although Sullivan slashed his ad spending in traditional media such as television and radio, he boosted his online marketing. His strategy is to send customers to his hub site, lacarguy.com.
Ninety percent of his online advertising is to build his L.A. Gar Guy brand, not to promote sale events or deals, he says.
Sullivan also is cutting back on his use of third-party lead generators, because he wants shoppers to come directly to his website.
Asked if he would return to his pre-tsunami level of advertising as Japanese auto makers return to full production, Sullivan says. “We'll come back sooner than later. Hopefully during this lapse we learned some discipline. I am more focused and frugal.”
More dealers are thinking their ads don't have to be everywhere to be effective, says Martin Collins, a former regional vice president of the Group 1 Automotive dealership chain who recently rejoined Ford as a general sales manager.
“Dealers are trying to figure out which media are driving traffic and they are giving it more scrutiny,” he says.
After a series of dealer-network curtailments by auto makers, dealership ranks now stand at 17,725, according to consultancy Urban Science. In 2000, there were 25,000 stores.
One might suspect that with much fewer competitors, dealers would advertise less.
Not so, says Tom Barenboim, dealer principal of Clark Chrysler Jeep Dodge north of Boston. “The dealers that are around are extra aggressive” in their advertising.
Texas dealer Will Churchill hasn't cut his ad budget. The owner of Frank Kent Motor kept advertising for his Honda business despite the stock shortages. He challenged his staff to sell out the inventory, resulting in a 27% increase in deliveries compared with the same time year-ago.
Churchill, who also has a Cadillac franchise, is doing more targeted advertising this year, as opposed to what he calls the “spray-and-pray” method.
He's trying to reach owners of rival brands by beefing up his events schedule and teaming with more Fort Worth charities and community groups to get his cars in front of people who typically wouldn't see them.
“We're finding that works pretty well,” Churchill says.
He only advertises on TV during news programs, figuring viewers are more likely to watch those shows live, not record them and skip through commercials. He has pulled out of radio, labeling it as too fragmented.
Part of Churchill's online ad budget goes to third-party lead providers, with 45% of his Honda sales in April coming from customer e-mails.
On social media, he uses Facebook and Twitter only for community outreach discussions, not advertising. Churchill is putting more effort into social media for the third straight years.
He notes how his social-media pages got more action after a posting about donating a vehicle to area firefighters to battle recent wildfires.
While not cutting his ad budget, Churchill expects his advertising spending will be flat this year.
AutoNation also expects to spend about the same amount this year as in 2010, when it spent $150 million, Cannon says. Unlike Churchill's limited use of social media, AutoNation uses it for special offers to customers, such as discounts on oil changes.
The chain uses a multi-prong approach in social media, with Twitter and Facebook pages for CEO Mike Jackson, AutoNation and each individual regional brand, as well as every dealership.
“We ask people what they think of a certain vehicle, and then we communicate that to people who have indicated an interest in that model,” Cannon says.
In some ways, social media replaces direct mail, he says, contending the latter goes largely unread by recipients. So AutoNation drastically reduced use of direct mail, while increasing direct e-mails to customers.
Colorado dealer Don Hicks lowered his ad budgets only a bit throughout the recession. “I think that kept us at the top of people's minds” and helped get more product allocations now, says the president of Shortline Automotive.
Hicks is spending more in 2011 on advertising for his Hyundai, Kia, Subaru, Suzuki and Porsche stores, although he declines to provide specifics.
He has kept his TV advertising, because he competes in a market with AutoNation and wants to stay in the public eye. “We do a bit of radio, a little newspaper advertising and we've always done advertising online as part of the mix,” Hicks says. “The stew is working for us.”
The goal of all his advertising is to drive traffic to his website, shortlineonline.com, as a portal for the five brands he sells. He no longer puts showroom phone numbers in his ads, figuring “customers are in your virtual showroom before your bricks-and-mortar showroom.”
Subaru requires dealers to have a separate website. Hicks suspects it won't be long before other auto makers mandate the same.
In metro Detroit, Jeffrey Automotive Group hasn't changed its ad spending this year, except for adding a new, monthly tabloid-size direct mailer, “Save on Cars & Trucks,” featuring special deals.
“The response has been pretty good, and we're getting new customers,” says Roger Lau, vice president and general manager of the Acura, Honda, Kia and Nissan business in Roseville, MI.
Jeffrey's main focus is keeping existing customers, because that is cheaper than acquiring new ones, he says.
The dealership group sends one or two e-mails monthly to customers telling them about special deals on service and vehicles. The company only does television advertising when the factory provides funding, Lau says.
It is not advertising as usual for many dealers these days.
Barenboim, the Massachusetts dealer, has made a lot of changes this year. He hired a new ad agency and bolstered his marketing muscle by adding a social-media marketing shop.
His dealership is making its first major push into social media, including Facebook, Twitter and YouTube. That's where customers are, he says.
Barenboim points to research showing his newspaper ads weren't driving customers to his showrooms and younger people getting their news online, not from newspapers.
So he slashed newspaper advertising this year from 75% of his ad budget to about 20%.
He bailed out of broadcast television advertising, except for sports, and moved to cable programming to better reach prospective car buyers.
“Now, we're much more targeted and much more efficient,” Barenboim says. “I compare it to using a high-powered gun with night vision.”
Because an estimated 80% of car shoppers start online, he has bought more search terms to help drive customers to his dealership website.
Dealers are getting smarter about how they spend their ad dollars, Barenboim says. “The full-court press is very different today. We're much more sophisticated.”