Ninth in a series of twelve articles on the Ten Critical Components of Special Finance Success.
In last month’s column, I discussed methods to determine the number of sales opportunities needed, as well as the budget available to produce a forecasted number of Special Finance sales. We also discussed the differences in call-to-action and branding advertisements. I then left you hanging on the most cost effective ways to spend your advertising dollars. This month, the mystery is solved.
The most cost effective way to advertise is one of the easiest and most overlooked—references given by your existing SF traffic on their credit applications. Finance companies ask for a minimum of six and sometimes as many as 10 different references on credit applications. As they say in the Midwest, “The acorns don’t fall too far from the tree.” These references are great sources for potential business.
Try sending these references a simple introductory letter offering your many special financing programs for individuals with good, bad or no credit, just like you offered to Mr. Jones, who listed them as a reference. (You don’t have to have sold Mr. Jones a vehicle to use the references!) Check the names against the No-Call list, and call those that are eligible within 72 hours of mailing. You will most likely get one in 10 to come in, with a high percentage of those that come in becoming buyers. Additionally, the other benefit of working these references is that if mailed on a consistent daily basis, the traffic will come in a steady, manageable flow—allowing your team to work them more efficiently and productively.
Next on the list in order of lowest cost per sale are the Internet leads. These leads come from three separate Internet sources: 1) lead providers, 2) your own Web site and 3) direct e-mail.
Lead providers are the most used, since departments can purchase actual leads as opposed to buying advertising and hoping the ads will produce leads. If you know that you need to increase your count by 150 leads, then you can contract with lead providers that can predictably deliver the necessary count.
The downside is that not all lead providers are created equal. You generally get what you pay for, and while the cost per lead may be as much as two times higher from one provider to another, the upside is exclusivity and the ability to filter by income and beacon scores. Without a doubt, Internet leads require a distinct process that begins with quick response times. While the benchmark sales ratios with Internet leads are nearing 20 percent, those not working a sound process may see conversion ratios in the 3 percent to 5 percent range.
You will usually close a higher percentage of leads from your own Web site. Unlike the leads received through providers, which are generated through a variety of methods (the lion’s share being blind leads), individuals inquiring through your own Web site already know you or your dealership. Rapport and trust is much easier to build with these individuals. The challenge here is that you must spend your money to attract buyers to your Web site; then you must convert them into a lead.
Many dealerships are using a separate SF Web site, which is void of pricing, has a detailed credit application and focuses on the customer’s ability to obtain an auto loan. To attract traffic, they feature this separate Web address in liner ads or they incorporate them into their primary dealership advertising. Some go even further and enlist the aid of companies that specialize in search engine optimization. This will ensure that Googlers looking for a dealership’s Web site specializing in “bad credit auto loans” will find your site first.
Finally, there is direct e-mail. For years, I’ve said that this could become the cutting edge for reaching SF customers. The problem has always been being able to find reliable e-mail addresses that can be tied to the demographics of the SF customer. It has taken longer for it to emerge than I originally thought, but finally some reliable industry vendors are able to fulfill direct e-mail campaigns. As always, check any vendor’s references before signing a contract.
Dealers are also now doing a much better job of obtaining the e-mail addresses of all of their customers. Those dealerships buying leads start one step ahead in that they already have the e-mail address. Even in dealerships that are closing sales at benchmark performance levels, 80 percent of the leads received go unsold. Why not develop a solid database and continue to market to these customers with easy-to-create and inexpensive-to-deliver e-mails? I know of one dealership in a small market that raised their sales volume and, at the same time, reduced their annual ad budget by $250,000 with direct e-mail.
The third best cost-per-sale medium tends to be the weekly classified periodicals such as the American Classifieds, AutoMart, etc. They are found in grocery, drug and convenience stores and are free of charge to consumers. Buyers of used vehicles will generally pick up one of these magazines at least once prior to their next purchase, and the majority of Special Finance sales are used vehicles.
The challenge with these publications is to stand out from the pack. Rather than making your ad mirror all of the competition, consider both your placement as well as your copy. We were always in American Classifieds (known as the Thrifty Nickel at that time) in our markets, but never with the traditional 12 vehicles Ad. We chose to be on the front cover, the cover of the Motorcade section, the back cover or a brightly-colored, two-sided flyer inserted in the fold. Our message would always feature easy credit approval, our “special” sale and a handful of attractive vehicles. Rather than prices, we would feature payments and/or down payments (always with proper disclaimers), which ultimately is what your customers are most concerned about.
If referrals, Internet leads and free weekly magazines don’t fill your lead requirements, the next best cost per sale largely depends on the size of your department or dealership. For many dealerships, budget restraints and market size dictate your direction. Larger markets make it difficult to even consider broadcast media. Smaller markets and smaller sales volumes make some of the “event sales” used by larger stores nearly cost prohibitive. As a result, direct mail or newspaper inserts become an attractive choice.
The challenge with direct mail is being able stand out from the crowd without crossing the line into deceptive advertising. So many dealerships use direct mail that in some markets, an individual with a newly discharged bankruptcy is likely to receive mailers nearly once per week from a Special Finance department. Certainly the message and the mailing list will make the difference between a cost-effective campaign and extreme frustration.
Higher budgeted departments with larger inventories will opt for combinations of broadcast media, usually television, including spot buys or infomercials that are a half hour or longer. The spot buys can offer more frequency and reach, helping to brand your dealership or department. The infomercials will produce “instant” leads but lesser long-term branding. Beware that if you opt to produce your own infomercial, and place your own buys, the cost of entry can be pricey, and the time of day that your infomercial airs can produce a significant difference in the quality of the leads. In either case, television tends to produce a higher cost per sale than either working referrals or the Internet.
One thing is certain, unless you intentionally desire to keep your Special Finance department under the radar screen in your local market; you should dedicate a portion of your budget to a medium that delivers your branding message to your market. As noted last month, the drawback to simply buying leads is that outside of the individuals that you make contact with, your market is generally unaware of your presence in the Special Finance arena.
When it comes to marketing and advertising, we all know there’s no silver bullet. My wife, who was a partner in an advertising agency for a number of years, always told me that advertising was more of a black art than a science. She also insisted I remember, “If something is working, don’t change it for the sake of change, and if you have put together a good plan, give it a chance to work before you pull the plug and change directions.”
The best advice she offered me years ago was to track your advertising like crazy, learn from the results, budget your money and take advantage of seasonal fluctuations by leveraging your budget accordingly in peak seasons. Do the same and you should also meet or exceed benchmark performance.
Next month, we’ll talk about the fun topic of compliance and steering clear of the bear traps awaiting auto dealers!
Swapalease.com’s latest report show U.S. lease approval rates improved slightly to 70.9% in October following a 3.9% dip in September.