Which is Right for Your BHPH Business?
The decision to spend money on advertising or promotion in the buy here pay here business is a topic that is often debated among dealers. The obvious answer is the one that gets you the best results. Before you jump to any conclusions about whether advertising or promotion is right for your BHPH business, the answer requires a deeper look and a comparison between the two.
Loosely defined, advertising is designed to establish the identity of your business and to broadcast your marketing message. “Easy Auto Credit, home of the six-month vehicle warranty” is an example of an identity and a marketing message. Advertising channels include television, radio, print, direct mail, billboards and websites, to name a few. One of the most important factors of advertising to evaluate is whether you are actually reaching your target audience. It is important to use an advertising channel that will be heard or seen by your potential customers.
The next most important factor to evaluate is tracking the effectiveness of your advertising and measuring the results so you can determine your return on investment (ROI). In BHPH, understanding your advertising cost per retail finance unit sold is an important measuring tool to determine the effectiveness of your advertising expense. Measuring ROI requires detailed work and accurate information. You must track each and every lead that is generated from the advertising. This means tracking all potential customers who call or come to your dealership.
Tracking these numbers can be problematic if you don’t have adequate tools to record the phone and lot traffic; the numbers are oftentimes not tracked accurately. This information should be tracked and recorded daily if you are going to get a true measurement of your ROI. The next step requires dividing the number of retail finance sales generated from the advertising by the total cost of the advertising to determine your advertising cost per retail finance sale. Tracking and calculating the ROI is where advertising and promotion begin to separate themselves.
Promotions are designed primarily to “reward” prospects and customers for doing business with your dealership or sending business to you. Promotions can vary widely and take on a number of shapes and forms. Cash-back coupons, gas cards, merchandise, scratch-and-win cards, and pop-a-balloon prizes are just of few examples of promotions. When you wrap a theme around the item being used, you create a promotion. Another example of a promotion is a customer appreciation day where the dealership provides free hot dogs and sodas for all customers on a certain day of the week.
Promotions are most commonly used to generate customer referrals. Many BHPH dealers reward individuals for referrals that result in new business to their store. Many dealers will also create a promotion to reward current customers for repeat business.
In the BHPH business, promotions can also help improve key aspects of your business like payments and delinquency. Some of the best promotions are designed to reward customers for making their payments on time, and as a result, your business benefits from better cash flow and reduced delinquency. Another form of promotion would be to reward customers for on-time payments when competition for their paycheck is highest, like at Christmas and back-to-school season.
These promotions are win-win scenarios for both the customers and the dealership. The size and type of reward can vary from the items listed earlier to anything your imagination can come up with. A dealership can easily calculate the ROI by dividing the number of referrals, sales or on-time payments that were produced from that specific promotion.
The important thing to consider when evaluating whether advertising or promotion is right for your BHPH business is whether you can accurately track the results and measure the return on your investment. Both advertising and promotion have their places in operating a successful business; however, a favorite expression of mine is “You can’t manage what you don’t measure.” The differences between advertising and promotion should help you to decide which one will deliver the most bang for the buck!
Vol. 7, Issue 12