Article

Are Performance-Based Sales Events For You?

November 2007, Auto Dealer Today - WebXclusive

by Tim Bailey - Also by this author

<>When creating your next ad campaign, consider the average consumer’s intelligence – better yet, consider the dumbest consumer’s intelligence to avoid the wrath of the Federal Trade Commission’s (FTC) advertising regulations. According to the FTC, an ad should be
In case you haven’t heard, and it is hard to believe that you haven’t, more and more dealers each week are turning to the most secure sales promotion that the country has to offer. Performance-based events during their relatively short existence have made serious headway within the industry, and due to the shared-risk element they sport, could replace the traditional scheme of automotive advertising forever.

But for now, let’s pretend that you have no idea of what I’m talking about. “What is a performance-based event?” you ask. “And how can a sales event change the face of automotive advertising as we know it?” you cynically add. Well, buckle your seatbelt Mary, because when revolutions take place, some people can get thrown by the wayside. Now, we wouldn’t want that, so I’ll help you keep up.

Until now, advertising seemed to be a simple recipe:

1 cup of client investment
2 cups of advertiser’s “best” approach
Add sprinkle of faith
Mix thoroughly and pray to God it works

Prayer is powerful and faith is strong, but wouldn’t it be nice if they had a safety net?

Enter the performance-based event! The dealer’s investment is still required, but it is secured and linked with a guarantee to produce a predetermined amount of gross profit. Then a team consisting typically of a Sales Desk Manager, F&I Director, Closer, along with extra sales personnel, comes to the dealership to ensure success. What’s more, your staff receives in-store training designed to help enhance even your everyday sales technique. Many dealers are unaware of the impact of this element until they experience it first-hand. (Note: This in no way reflects on the abilities of your personnel. In fact, these events have an entirely different feel than day-to-day business, and unless you have an “event mentality,” there is a strong probability that a significant amount of business would be missed). At the close of the event if the guaranteed amount is not reached, the entire sum invested in advertising will be refunded.

Unfortunately, this is not a philanthropic deed done by the advertisers for the client. They charge a fee, (feel free to wince) and it is directly related to the amount of gross profit produced (wince again. . . it sounds like commission). Relax, you’d never believe how cost effective this formula can be. The buying atmosphere created at these events coupled with the proper handling of the ups will increase the front and back grosses significantly, sometimes over 100 percent. As a result, after paying the percentage owed to the company, you are still left with more gross profit per unit than you would normally average on a daily basis. And in many cases you sell as many units in four days as you would in an entire month—you do the math!

So, let’s take a look at the revised recipe: the investment becomes a refundable deposit. The advertiser not only uses their “best” approach, but they double the effort, because now, not only is their residual account money on the line, but the initial amount earned off the first event is also in jeopardy. (It is a fact; they will try harder). The faith is replaced by confidence and the prayer to God is less fervent. It’s a different twist on the familiar ingredients.

Now that you understand, be warned. Due to the concept’s success, many advertising companies are jumping on the bandwagon and attempting to create a shortcut around the key elements that make these events so effective. This will not work, and the following are some key points to be aware of and ask about to determine whether or not you are getting the most for your guaranteed dollar. Yes, yes. . . it is a fact that either way, your gross profit is guaranteed, so why do you care? Well, the difference in the end can easily amount to tens of thousands of dollars—in one event! Like anything else, do your homework!

Don’t fall for the loss leader. Like no two dealers conduct business in the same manner, the same holds true for performance-based companies. Make sure that you are not enticed into an event with the promise of guaranteed results, only to find out that the guarantee only applies to the first event conducted at your dealership. If that happens, every event after the first is pretty much back to the original advertising recipe, and you still pay a commission, win, lose or draw. Much of the world feels that car dealers perfected and harnessed the idea of using a loss leader to attract business. Don’t be victimized a similar technique.

"And-a one for you, and-a two for me.” OK, without smearing names in the mud, let me just say this—any company that does not apply all of the advertising investment to the promotion is not serious about milking the event for all that it is worth. That being said, no portion should go toward "processing costs" or "research fees." If you encounter this, know that it is the same as a pack or holdback. The company should cover these factors with the dollars earned after the event. And again, every red cent of your investment should be utilized solely for the success of the promotion. 'Nuff said.

Some folks will actually reach into their own pocket and put up additional money to create an even bigger return. Are they nuts? Hopelessly addicted to gambling? Nope, they just understand the beauty of the concept. It's a partnership—the more you win, the more they win.

"Same ol’ song and dance." There seems to be this dominant belief in the almighty power of inserts. And the main proselytes of this belief are performance-based companies. Don't get me wrong; inserts can be an effective tool. It has even become the crutch for some companies. This creates a one-sided viewpoint that really is not open to your specific market’s needs. So, when looking for a company, be sure to inquire about their other forms of media such as television ads, radio spots, traditional direct mail and even alternative mailings that may consist of videos. In short, the company should have a brain, not a routine.

"We don’t need no stinkin’ test drive!" Know this: if a performance-based company agrees to do a sale without a careful review of your inventory, they are careless or they are desperate. Either way, it is not something with which you want to be involved. The good ones will make sure that they have a realistic shot at grossing well over, and I do mean well over the guaranteed amount. So, when they ask you to fax your inventory and your hard cost on each vehicle, don’t be shocked. It is the same as a test drive—they just want to know what this baby is capable of!

"I know this guy who knows this guy..." If the company does not have a list of dealerships and contacts that have experienced recent success with their program, burn their business card. With the way the program works, dealers should feel comfortable doing these more often and therefore every company (except upstarts) will boast dealers that have conducted a good number of these and continue to reap the rewards. The references should also set your mind at ease concerning a team of strangers "invading" your store for a few days. Be sure to ask about the level of professionalism and the teams' ability to get along with the staff in a non-confrontational manner.

In conclusion, I return to the statement I made earlier that performance-based events could replace the traditional scheme of automotive advertising forever. Why would a dealer accept all of the risk in advertising if there are companies that are willing to share the load? And in sharing the load, the success is no longer gauged by the turnout, but more importantly by the financial results. Just make sure that you have done your due diligence before you take the leap!

The bottom line is everyone has to advertise, everyone in business. The scary thing about advertising is that it is more of an art than a science. At last, however, even though it remains an art, at least the money you will spend can be guaranteed.

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