Article

Stop Wandering Around Your Advertising Expense

April 2008, Auto Dealer Today - WebXclusive

by David Keller, CPA, CFE - Also by this author

As I wander around the country visiting clients during this busy tax season, I am asked many questions by our dealers. Some are financial, some are personal, some are tax related and some questions are just about how everyone else is doing right now. I have answered these questions many times in the past 23 years.  It seems the answers to some of these questions are starting to sound the same.

Most dealers want to know if everyone else is struggling right now in this “could be better economy.” Everyone tells me they are working more hours and it just isn’t as much fun as it once was. When was it fun? Is it only fun when it is easy to make money because enough customers are walking in each month to provide the sales you need to make a profit?

The automotive business has always been known for long days, and many weekend hours to achieve the necessary sales to attempt to make a profit every month. Sometimes there are enough sales and sometimes there are not. When there aren’t enough sales, what do you do?

Do you spend more on advertising to drag in the customers? Do you hire more sales people? Do you hold more sales meetings trying to increase the excitement to sell more cars? Do nothing and write off trying it again because it doesn’t work anymore?

Let me ask you a few questions. If someone told you that 70 percent of your vehicle sales came from repeat customers, how would you advertise? Would you advertise at all? Would you need to?

When I look at the money dealers spend on advertising, and the lack of time spent by them to justify it, it sets off alarm bells off in my head. If someone asked you to write a check each month for the same amount you spend on advertising for anything else in your dealership, you would make sure (1) you really need it, (2) find out who thinks you need it, (3) make sure you get what you are paying for in either goods or services, (4) monitor the usage and make sure it is not wasted, and (5) not do it again if it was a bad experience and seemed like a waste of money.

Why then, do you keep spending all this money on advertising and then not devote time to track the results? Today, when advertising is one of the few expenses you can really control, why not spend some time and devote part of your advertising budget to tracking the results to find out if it did work? It is not that difficult to do.

One of the problems I see in many dealerships is the lack of motivation from the sales staff, both sales managers and sales people, to actively and accurately determine what brought the customers into your dealership. Why you spend all this money every month?

Are you afraid if you cut back too far that your current pitiful sales volume will totally dry up and you won’t have any sales? That’s not likely to happen unless your dealership has a bad reputation, no repeat customers in parts and service, and never follows up with previous customers.

Some dealers spend $5,000 per month and other dealers spend $25,000 per month with the same unit sale results. Not just for one month, but many months. It doesn’t make any sense at all. It is no different than stocking 50 Grand Ams and still only selling 10 per month. Sooner or later, you need to wake up and make the decision to get a grip on the expense.

First, you should determine an annual marketing budget. Start by detailing last year’s total expense by category and vendor. Separate them into promotional versus direct advertising. You may be astounded to find out how much you spend just in general promotion of your dealership, which does not directly drive customers into your store today! This type of expense is voluntary, with hardly any method to track whether it works or not. Now you have to, or probably should do, some of this advertising in your community, but don’t let it derail you from using your available budget wisely.

Second, track every person who walks or drives into your store. Why just track the people who purchase? Do this by assigning an employee specifically to actually interview them with some preset questions designed to find out what actually brought them into your store. I have seen the results of some of these surveys that were not completed properly. For example, it really bothers me to see a high percentage of traffic allocated to “drive by” customers from these surveys or “up” tracking logs. This normally tells me someone did not ask specific enough questions to find out “what” made them drive by and actually “stop” this time. Complete this survey for at least a three-month period. One month will not tell you what is working or not working as you try the different types of sales and advertising you have planned.

Third, compile the results of your interviews with the potential customers. You will probably be surprised on the results and find you have been wasting your money on various media or localities. Pay attention to the timing of the advertising and when potential customers actually appeared at the dealership. Gathering enough data over time will tell you in which direction you need to point your advertising.

Remember, if the advertising was successful, potential customers showed up at your door whether they eventually purchased a vehicle or not. Once they do show up, it is your sales department’s job to close them.

Fourth, don’t forget to continually follow up after the potential customer leaves your store without buying a vehicle. Also, remember they came to your store for a reason. Work on that annual budget today and track the results constantly so you do not waste money on inefficient advertising. Put yourself on the same restrictions you use when purchasing other goods and services.

Vol 5, Issue 3

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