Article

Where Have Your Advertising Dollars Gone?

October 2009, Auto Dealer Today - WebXclusive

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


Now the Cash for Clunkers promotion is over, you can breathe a little. Wrong! You’d better get going and decide what to do now that customers are not walking rapidly into your store ready to sign contracts without expending a lot of sales effort or advertising on your part.

What advertising works? Who really knows anymore? I have discussed this subject with many dealers this year and haven’t arrived at a method that consistently works for most dealers. Of course, some forms of advertising will work from time to time differently for every dealership in different parts of the country.

Do you know how much you have spent on advertising and promotion? Look at your current monthly financial statement for these expenses to see how much you have spent so far in 2009. How does it compare to 2008? Do these expenses truly describe and recap the dollars you have spent?

How many vehicles have you sold year-to-date? If you take the total you have spent in advertising and promotion and divide it by the number of sold units, you will arrive at an average amount per unit sold. Now, if you are a new-car dealer who participated in the Cash for Clunkers program and didn’t spend very much money advertising for this program, you will need to subtract the number of Clunker sales from the total sold year-to-date to get a true cost of advertising per unit sold.

Complete this same process for 2008 and 2007. What is the cost-per-unit trend? Have you spent more or less than you did in prior years? Once you have this information, do you know what media you spent your advertising dollars on? If you do not have separate expense accounts set up on your general ledger, you need to set them up now. What are you waiting for? Why not make it easier to see where your money has gone by looking at your general ledger balances monthly rather than reviewing and recapping the detail in one advertising account?

Set up separate expense accounts for billboards, radio stations, newspapers, magazines, Internet, TV, cable, invitational sales, sporting event sponsorships, service promotion coupons, etc. Post the bills to the corresponding account. We have been doing this at our store for as long as I can remember. We can look back in history and compare the different amounts spent very easily without going through the drudgery of recapping the detail in one advertising account or pulling all the vendor bills.

Do you have an advertising budget? Not the one in your head you came up with at the beginning of the month or when someone asks you. I mean a written advertising plan for the year you can track the results of. I know you will probably have to modify, delete and add to it as you go along—based on what happens to the economy, the models available for sale, used vehicle prices, etc.—but you have to start somewhere.

Using your history of advertising, make a list of all possible media sources you may use. Detail it within the media source by vendor. Then ask about the amount of people your reach with each type of media. Put this information in the column next to the vendor name. Ask your vendors what the normal sale rates are per consumer they say they reach. Put that information in the next column for the vendor.

Now, in the next column write the amount you normally spend with each vendor on a monthly basis. Does the amount budgeted divided by the coverage make sense? Are there better methods to reach more people? It seems repetitive advertising ingrains itself in people’s minds better than one-time ads. You need something that stays atop your potential customers’ minds when you are not spending much money for ads.

Once you establish repetitive ads in your customers’ minds, they will remember, for example, the jingles you use. I remember most of the ads used repetitively by the dealerships in my home area. Some have used the same theme for as long as I can remember. They have branded themselves and also have indoctrinated you in the process. Think of a common product you see on TV, such as beer or soda. The theme, packaging, etc. is consistent. You immediately recognize it everywhere without ever having to see the name on the packaging. Just the color or design is enough to trigger your mind to recognize what company it is.

It is amazingly simple if you think about it. Look at your store to see if you have branded yourself or if you are always changing your advertising without leaving a sliver of repetitiveness for your customer to recognize you among all the other advertisers you are competing against for their attention. Use consistent colors, designs, fonts, slogans, etc. to distinguish your store from all others. If you don’t have these things in your ads, then work with a graphic designer or one of your vendors to come up with them. If you already have these things, look again at your ads to see if they need to be “freshened up.” How else can you use what you already have to make a better impression in your customers’ minds? You want them to think of you whenever they think of purchasing a vehicle.

You must also track the results of your ads by asking people how they heard about you. You should ask not only the customers who buy cars but everyone who actually walks into your store, calls or e-mails you. Something brought them there. They normally don’t stop to just say hi or ask for directions. Failure to do this means you are probably wasting some or all of your money on the wrong types of media.

Don’t keep wasting your time and money. Get organized, do your homework, plan your budget, track your results and keep a history of your expenses in separate general ledger accounts. Please take the time now to plan your future sales.

Vo. 6, Issue 10

Comment

  1. 1. Carlos Cepeda [ November 03, 2009 @ 03:57PM ]

    Excellent report!!!

 

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