Article

Analyze Current Advertising Before Adding More

May 2011, Auto Dealer Today - WebXclusive

by Greg Goebel - Also by this author

My voicemail and e-mail have been filling up again with the age-old questions regarding advertising. What should I spend my advertising dollars on? Who should I buy leads from? How can I generate more traffic? Part of what has sparked this is the New Year and a renewed focus on goals, but it is also sparked by the continued improvement of outlook at the dealership level.

My conversations with these dealers almost always follow the same path. I ask them, “Why do you want to do this?” which is usually followed by their response of, “To sell more cars,” or “To drive more traffic.” This is where the real work starts, as I begin asking many more questions. “How many leads do you average per month?” I’m still amazed at how many dealers give me a range of numbers instead of their average. A range of numbers often indicates a SWAG (Scientific Wild ______ Guess) method of management. This is not an effective method of management.

I also ask what their current advertising spending level is as it relates to variable gross profit. The NCM benchmark across all dealer groups is currently 9.6 percent. If dealers are significantly off from this number I have to wonder why and start digging further. The answer is usually hidden in other numbers.

We start with actual traffic counts. You would be amazed at how many dealerships don’t track true traffic count each and every day. When you allow your team to filter out who should be counted as traffic at the top of your lead funnel, you get bad data. The adage “Garbage in, garbage out” couldn’t apply more.

From there, the question is, “Is the dealership sourcing every lead?” The more specific, the better. If a customer says they found you online, your response should be something like, “Great! Did you go directly to our site or did you find it through search or a vehicle listing site?” The more specific you can be with your sourcing, the better your analysis of conversion rates will be. You cannot allow your team to falter here.

Once you know how many leads are coming from each source and how much you are spending on each one, the story begins to write itself. As sales are recorded, conversion rates per lead source become apparent, as well as cost per lead and cost per sale. The NCM benchmark dealer is spending less than $29,238 per month or $242 per retailed unit, which gives you something to compare your numbers to.

Seldom do I work with dealers who are unable to decide at this point what advertising to trim. Eliminating poor-performing advertising sources frees cash for either increasing what is already proven (by their own data) to work in their store or to try a new promotion. If choosing new sources, I would caution against making too many advertising changes at one time. When you make a change, give that specific media type time to perform, monitor it closely and make adjustments as needed.

I also caution dealers against hitting the panic button halfway through the month. This is when sales are nowhere close to forecast, traffic is light and the urge to throw another promotion together hits. This promotion is rarely organized well, doesn’t usually create the needed benefit and, worst of all, and destroys the budget.

Set your advertising budget to match your sales goals and track everything related to your advertising budget. Evaluate it often and make the proper adjustments. As you can probably guess, I don’t actually get to answer the original questions often because by the time the dealer and I have covered everything in-between, their focus has shifted more to making sure they have the data to answer the questions, and when they do, they often find their own answers.

One final note on how to drive more traffic. Oftentimes it’s not about needing more traffic, it’s about training your people to convert more of the traffic you already have, but that’s a topic for a later date and more space.

Until next month,
Good Selling

 

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