As yet another year has ended and the new one has begun, it’s a good time to reflect on the past year to formulate a game plan for this year. As most companies do, it’s time to pencil budgets and sales forecasts. In the past, this has always been a disheartening practice because ad budgets skyrocket with higher sales projections; more print ads, more TV and more direct mail equals more money.
Legitimately, these types of media might help increase sales, but they will also certainly increase the cost per sale. So, the bottom line from increased sales might not end up being that much more attractive. However, I feel that in the next two to three years, dealers can actually lower advertising costs and still increase sales. Crazy Talk? Maybe, but not that crazy.
Over the last two years, car dealers have doubled online advertising spending to $1.9 billion in 2006, as reported by eMarketer.com. That number is projected to increase another 42 percent in 2007. Why the shift in spending? Simply put: More exposure for a fraction of the cost – not just more exposure, but targeted exposure because you are putting your entire inventory in front of people specifically looking to buy a vehicle during the next 90 days.
Never before could dealers display their entire inventory, every option, every color, every vehicle to the buying public 24 hours a day, seven days a week. If my GM could have found third shift salespeople, we would have kept the dealership open 24 hours a day. But even then, at what cost? The Internet keeps your showroom open all day every day for a few hundred dollars a month as opposed to thousands or tens of thousands.
Earlier, I mentioned lowering advertising costs and still increasing sales. A dealer client of ours has done exactly that. As crazy as it sounds, he has stopped all newspaper advertising.
Now, I also have friends at the newspaper and I don’t want to get flogged at the next tailgate party, so I would never say stop all newspaper ads. But in this example, my dealer friend took a bold leap and never ran a newspaper ad last year … never! Instead, he took 25 percent of what he would normally spend in the newspaper and spent it online. As a a small to mid-sized dealer, he had spent around $45,000 a month with local newspapers. He allocated a bit less than 25 percent ($10,000 a month) strictly to Internet advertising for a new state-of-the-art Web site ($1,000/mo), third party Web site advertising ($3000/mo), strategic banner ads ($2000/mo) and search engine marketing ($4000/mo). The result? He increased sales at almost half the cost-of-sale per unit. PRICELESS! In a hard sales year of 2006, this dealer made more money than he ever has. True story.
Your task as you budget is to look closely at 2007 as YOUR year for Internet advertising. It’s cheap, it’s easy; there are plenty of companies that can help and you too can enjoy rolling more units and making more money. Now who can disagree with that ’07 budget?
