Prospective buyers do not head out looking for billboards so they can gather information on where to buy a car.
The average dealership is spending more than $620 per car in advertising, according to the National Automobile Dealers Assn. Some dealers spend more than $800. Most of these dollars are untrackable and unquantifiable.
When I consult with dealers and general managers, the first thing I look at is the money. I have found many dealers spend in the wrong places because they do not know where to spend.
Dealers can achieve $200 per car or less in advertising. Castle Chevrolet and Castle Buick GMC in Chicago spend $95.
I know what you must be thinking. They sell 40 to 50 units a month, right? Wrong. They are delivering more than 250 Internet sales monthly at $95 per unit in advertising costs.
That might sound like a unicorn sighting in the car industry, but it isn’t. In fact, it is easy to achieve if you change your paradigm.
Most dealers are stuck in the quicksand of conventional advertising. On the other hand, Internet advertising is on demand. It focuses on when and where people want specific car-buying information.
Prospective buyers do not head out looking for billboards so they can gather information on where to buy a car. People do not watch television or listen to the radio waiting for a specific commercial to air so they can get vital information for deciding where and when to buy a car.
A Google study called “The Zero Moment Of Truth” says most transactions in this country are search-engine related. That ranges from $1 items to private jets.
Studies indicate about 90% of car consumers go online before entering a dealership.
They are researching prices, vehicle specifications, options, colors and packages.
They are looking at competing brands, dealerships, competing dealerships, reviews, vehicle availability, trade-in values and credit-approval information.
You can achieve a $200 cost per sale in advertising through effective Internet marketing. Here is an example: The average lead from a third-party lead aggregator costs about $20. If you purchase 100 leads and achieve a 10% closing ratio, your average advertising cost per sale is $200 a car.
Third-party leads are just part of the picture. You can combine all forms of Internet marketing. That includes pay-per-click, reputation management, mobile marketing and search-engine optimization in various forms, such as video and social media.
If you combine all of these sources and have a $20,000 budget for them, you could generate about 1,000 leads. If you closed 10% of them, you would sell 100 units at only $200 cost per sale in advertising.
Here is an equation using 1,000 fresh leads originating from a diversified online marketing strategy and five trained appointment setters:
- 5 representatives x 120 calls (placed or received) per day = 600 calls.
- 600 calls x 22 employee working days = 13,200 calls.
- 13,200 x 14% connection ratio = 1,848 connections.
- 1,848 connections x 25% appointment ratio = 462 appointments.
- 462 appointments x 50% show ratio = 231 shows.
- 231shows x 44% selling ratio = 101 sales.
The average dealership has 10 sales professionals, two sales managers, a general manager and a finance and insurance manager. It spends $620 per- car sold in advertising, delivers 96 units a month and carries a monthly advertising budget of nearly $60,000.
That’s 14 employees involved in selling 96 units. Compare that with an Internet director, five appointment-setters and a $20,000 marketing budget bringing in sales of more than 100 units a month.
Sean V. Bradley, a former dealership manager, is founder and CEO of the training firm Dealer Synergy. He is at firstname.lastname@example.org and 267-319-6776.