Vehicle sales are strong but dealers still find themselves in one of the most fiercely competitive selling environments in recent history.
That's why prudent dealers continue to look for ways to cut costs.
Although it's tempting to put the advertising budget under the scalpel, that could put dealers at a disadvantage. A smarter cost-cutting strategy is to review the entire media mix — what you spend, where you spend it and what options are available based on what's most effective vs. what's not.
Where to spend to attract buyers has settled into a predictable formula, with print advertising accounting for half of the average dealership's advertising budget, and local TV, radio and others slicing up the remainder of the pie in roughly equal portions. Justification for this spending pattern may have more to do with tradition than science.
Take radio, for example. Many dealers say their radio buys are determined primarily by having service department staffers make note of the stations that drivers have preset on their radios. The dealers then advertise on stations with the most presets. A clever idea, but it's hardly scientific and may not be effective.
What if the customers' kids are the ones setting the stations, or what if there are six resets and the customer only listens to one? What if the customer uses the presets to change stations when commercials come on?
There are similar flaws with how decisions are typically made in placing ads in other traditional media, but the flaws are not as important as what they reveal.
They indicate that dealership ad buyers are more concerned with generating leads than spending their money effectively.
Roughly 1%of Americans are ever in the market to buy a car at any given time. If we overlay that on the projected reach of local newspapers, television and radio, then dealers spend a lot of money to reach a few of the people whom they want to reach. In any other industry, spending nearly $400 to pull in one prospect would be grounds for firing the ad manager.
Dealers looking to reach more in-market buyers for less money should go where their buyers have gone — online. Conventional wisdom holds that the Internet is an unproven advertising medium that is only good for producing leads (which is not all that bad).
But the Internet is undeniably the first step in the car-buying process. J.D. Power and Associates says that among the 62% of new-vehicle buyers who use the Internet for researching and shopping, 88% visit automotive web sites before visiting a dealership.
It makes sense to place ads on automotive web sites wherein-market buyers are beginning to research makes, models and prices. About 30%-50% of visitors to the top automotive research sites are in-market buyers.
Newspapers have long contended that non-subscribers flock to the Saturday edition when they're actively looking for a car. But the buying process begins online whenever the customer wants it to.It could be 10 in the morning on a Tuesday, could be 10 at night on a Sunday. An Internet ad is in front of the consumer when the buying impulse strikes.
Most car buyers are doing an enormous amount of online research before they go for a test drive and before the Saturday paper hits the doorstep.
The Internet has changed the way people buy cars, and should change the way dealers buy local advertising.
Dillon McDonald is vice president of Jumpstart Digital Marketing Inc., a media sales and marketing company that works with dealers and auto makers.