Does Your Special Finance Department Need More Leads Now?
I have been asked the same question countless times, often not by new departments but by some of the highest-skilled dealers. “Greg, I need more ‘good’ leads. What are your best dealer clients doing to drive more special finance traffic?” Inevitably, I answer the question with a question: “How many opportunities are you currently generating each month right now?”
My definition of maximum advertising return on investment is having every salesperson busy working with customers every minute of the day with no more customers calling or coming in than the sales team can efficiently handle—all accomplished with the smallest spend possible. Utopia? Maybe, but I sure know some dealers who come close to it.
As my definition alludes, it isn’t necessarily just about more customers. I know many dealers who have more leads than they can possibly work. The average salesperson can handle an average of 75 to 80 new leads per month. I talked with a dealer recently who was trying to work an estimated 900 leads/opportunities a month with three people. That is impossible, yet they were convinced they needed more leads in order to grow. Another dealer client whose sales had plateaued was trying to do the same thing, with three people attempting to work roughly 600 leads.
What I learned was (a) neither dealer (like most) could give me an accurate lead/opportunity count?they were all guesses; (b) neither really had any idea of the efficiency of the team members working the leads, just the actual sales; and (c) while neither had a problem with a willingness to spend more money, each might as well set their money on fire, as they would have had the same end success.
There is an old adage that states, 50 percent of your advertising works well, you just don’t know which half it is. Why not?! I have preached countless times from my soapbox: take the time to track where your traffic comes from and the success your sales team has in working the leads, and it will pay you back in spades. Over the last 10 years of working with dealers all across the country, I can unequivocally tell you those who track and use the data to analyze their business are the ones excelling.
The benchmark for advertising expense as a percentage of total special finance gross profit (front and back, general ledger gross, no commission packs factored in) has risen to 12.7 percent since 2007. Basically, that means if you are grossing $3,250 per unit sold, then the benchmark advertising budget would have you spending $412.75 per unit sold. “Benchmark” is the 75th percentile, so one in four is doing better than this; some are doing much better. Set a budget and stick with it.
So how do you accomplish this? Where and how do you spend advertising dollars?
Now, if you find you do have additional capacity and have done all the simple things to incrementally increase traffic—like harvesting all the names and addresses from the required references and sending them a direct mail piece, then calling if they are not on the Do Not Call List; analyzing the available Internet leads and other lead sources for the best options and buying them; or direct-mailing the open Chapter 7 bankruptcy filers the day after they file?then what do you do?
Everyone wants that “silver bullet.” My experience is that it does not exist. I have clients and friends who collectively advertise in every significant form of media, and I have seen outstanding promotions work famously for me or someone else but fail miserably in another store or setting. Some popular schools of thought advocate spending whatever it takes on radio to achieve 400 gross rating points in one week and stacking the buys to basically begin on Tuesday or Wednesday. I have seen this work fabulously for some and not for other dealers. The same is said for television, direct or saturation mail, Internet leads, trigger leads/Market Thief, you name it.
I do believe two things. First, you must be different. You must stand out! If you are saying or advertising the same thing as everyone else in the same manner then you fade into the landscape. Whomever has the best branding and share of mind will get the business. Some of the best operators I know push a personal brand, personal message, games, contests or even comedy to break through the clutter. My heart nearly stopped when I saw one of my clients offer a $10,000 cash-drawing giveaway to someone who purchased a vehicle during a contest period. (I found out they had done their homework, and it had been blessed legally.) I will tell you one thing; it got my attention and has gotten their customers’ attention.
Second, I believe in consistency. If you are in radio this month, television next month, then buy leads a third month and do direct mail the fourth, you really don’t give any of the media a chance to work. Commit to one or more and give it a run of at least a quarter.
Additionally, you have to understand market conditions—make hay while the sun is shining, as they say in the Midwest. Specifically, I am not going to be the one to try to force the market if the Super Bowl is in town one week or try to buck a weekend home game for the Nebraska Cornhuskers or Green Bay Packers. Sure, people still buy vehicles on those occasions, but fewer people are really thinking about it, and I am not going to spend the same amount of money to try to reach a smaller body of people.
Online reviews count; they really count. Reviews, good or bad, search extremely well on the Internet. Special finance customers can, at times, be challenging with their expectations, and they can be loquacious online. You need to have a strategy and a budget to ensure your customers are being encouraged to post positive reviews and even use tools like Presto Reviews. This will help counteract that occasional negative review that hits on Google, Yelp or RipOffReport.com. You just can’t afford not to.
Finally, from the compliance side (which I will address further with next month’s article), there never has been a time when you need to pay more attention to your ad copy. With the Consumer Financial Protection Bureau and Federal Trade Commission now staffed to the gills and needing to show heads on sticks to justify their budgets, get with the program or get in trouble.
I have had very good dealer clients, those who really want to walk the straight and narrow, run afoul of the Truth In Lending Act. Consent decrees and/or fines are not what you want, nor the press releases that then blanket your market. (That stuff searches, too.) Don’t use the claims or disclaimers of your ad agency, rep or a competing dealer as a benchmark to make your claims and disclaimers. Contact your state or national auto dealer association, get the rules that you must live by and learn what they mean. As I travel, I can’t tell you how many ads I see that are in blatant violation. In the past, there were a lot fewer enforcers with a much smaller budget to chase dealers.
In summary, here are the five things to remember:
- Track your traffic and analyze your results.
- Be different and give whatever you do a chance to work.
- Don’t forget online reviews?they can make or break you.
- Comply with all the rules and regulations dealers must live by.
Simple as pie! From an execution side, that is about as good as I can do for the masses. If you have specific situations you can e-mail me at Greg@AutoDealerMonthly.com and I will try to help.
Until next month, great selling!
Vol 9, Issue 9