How Effective Is Your Advertising?

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Advertising costs are one of the most substantial expenses incurred by any dealership. And often, one of the less audited. Whether this investment is in social media, print, mailers, electronic media, radio or whatever method seems to be of interest, make sure it provides a significant return….and that return needs to be a lot of qualified ups with a high closing ratio.

After each campaign, it is a good idea to review the results to ensure that your expectations were met, or even better, exceeded. It is also a good exercise to determine that the amounts expended got the coverage you expected. If you are using social media and website follows, make sure to get the analytics reports to number of hits and vehicles of interest. Find out how many times your dealership dominates the first page of Google Searches. A very important metric. If using a lead generation service, make sure to receive “Accurate” data on where the ups originated and from what source. In addition to “sourcing the leads, marketing guru Jim Ziegler recommends that you should schedule how well leads close by source as well. This gives you accurate data as to the quality of leads generated. This is to make sure that you pay only for those ups that were directly from the lead generation service and not from a roundabout way that the service is taking credit for. Also, use customer surveys when they call or enter the dealership to see what about your advertisement caught their attention.

For electronic media such as radio and television, the rates paid are based on volume and time of day. The peak times command higher prices obviously, and you are paying for number of listeners or viewers at the time purchased. In electronic media, “poundage” is more important than “placement”. It is more important to reach 10,000 people 10 times than reaching 100,000 people. So keep track of the number of times people are reached. These figures are supported by Arbitron and TV rating services such as Neilson. It is a good idea to audit these ratings to the times your advertisements appeared. If the ratings did not meet expectations and the rating level you paid for, you may be due for refunds, credits or additional time depending on your contract. Again, keep asking your customers as they walk in the store, what about your ad that attracted them? We have a client that effectively uses “loss leaders” in their advertising, they are not a “bait and switch” dealer but the loss leaders tend to show their lowest pricing model to potential customers and that is the lure that brings them in.

Of course, the dollar return to dollar spent ratio is important to determine as well. This does not take into account dealer brand and community service type promotions. Although we do recommend that if you are considering volunteer and community service promotions, that you get something in print and even better, have a vehicle display present at community service events. This helps in tax deductions! But it is important to note the return on sales to dollars spent on a campaign, and good or bad, take the time to analyze how the campaign went, how it could have been better or more effective, was the reach what was expected and what did the customers think? It is never a bad idea to get your customer’s opinion on your advertising and promotion investment.

And don’t forget the back end! The parts and service departments need effective advertising just as much as vehicle sales. We have seen a big resurgence in coupons, mailers and appointment setting techniques and follow up on declined service to maintain customer loyalty and to keep them coming back. It is easy to place buttons on electronic and social media ads to generate service coupons, oil changes and the like at minimal cost.

If you have in house advertising or a very creative firm, consider a pay plan for them on gross profit or actual qualified ups rather than media buying. It is counter intuitive to pay an advertising firm for media purchases. Much better to pay them on performance…qualified ups and closed sales! So keep the pressure on reviewing this significant investment. It is well worth the time and effort.

Ken is the managing partner of Rosenfield and Company PLLC a CPA firm with one of the Largest Automotive Retail Practices in the Country. His firm is made up of “car guys” who happen to be able to offer effective tax planning and efficient attest and consulting services. Contact Ken at ken@rosenfieldandco.com…the author would like to thank his good friend, Jim Ziegler for his input into this article.