Accounting for Advertising Cost
November 2009, Auto Dealer Today - WebXclusive
Dealers are still in cost-cutting mode, and advertising and marketing budgets have taken the brunt of cuts over the last several months. Across the board, the amount of advertising and marketing dollars spent by dealers is down by 24 percent, which is equivalent to a $10,000 to $15,000 decrease in spending per month. Current benchmarks and averages of amounts spent by dealers are below for comparison.
What the benchmarks provided by NCM Associates don’t show is what type of media that money is being spent on. Dealers are now scrutinizing not just dollars spent, but the amount spent on each and every type of advertising and the direct results generated. While most dealers have pulled back on TV, radio and print, according to Kevin Cunningham, director of business development for NCM Associates, dealers in some markets are using the pull-back by other dealers as an opportunity snatch up some big deals. For example, if nearly everyone in a market has pulled back from print, TV or radio, an aggressive dealer can almost write his own terms for advertising right now.
Another area not seeing much activity was a popular trend from just a few years ago, off-site event sales. Fewer dealers are reporting using event sales this year. According to dealers we communicated with, various reasons exist as to why these sales are no longer as popular as they once were, including associated costs and the heat left over from deals gone wrong. Dealers simply can’t afford to take the risk at this time.
Where the majority of dealers are focused is on trying to shift more of their advertising budget online; some dealers are now reporting that online marketing is the only marketing money they spend. However, they are much more frugal with their ad spends. For example, many are opting to continue classified site spending with AutoTrader.com because of the results, but are not opting for the most expensive packages due to the cost. Dealers are even searching out as many free sites as possible and trying to use social media as a way to minimize costs.
Even with all of this focus, one area that dealers are still struggling with is properly accounting for all advertising dollars spent in the correct financial statement line items. Often, NCM will find dealers with classified site fees in outside services instead of advertising expense accounts. Dealers need to make sure they have accurate information regarding their advertising and marketing dollars spent. This means that all costs associated with the company Web site(s), classifieds and all leads are accounted for in the proper general ledger accounts. Then, you can calculate cost per delivery by media type, not cost per lead, when evaluating your return on investment.
Vol. 6, Issue 10