Participants:

Mark Rush: Owner, Ron Rush Lincoln Mercury, Columbus, OH

Dillon McDonald, Vice President-Dealer Sales Division, Jumpstart Digital Marketing

Reuben Muinos Internet Director, Galpin Automotive Group, North Hills, CA

Matthew Belk, e-Business Director, Hendrick Automotive Group, Charlotte, NC

Manuel Souza: e-Business Director, Anderson Group, Palo Alto, CA

Ward's Dealer Business hosted a conference call with dealers and Internet managers to discuss the latest trends in advertising and how the Internet is changing how dealers spend their advertising dollars. Joining us was online marketing expert Dillon McDonald.

Ward's: Where do you spend your advertising?

Rush: I spend 25% in classified, 25% in newsprint, 35% in radio and 15% online.

Muinos: About 60% of our ad budget goes to newspaper advertising, 20% to radio, 7% to TV and 10% goes to direct mail. Three percent of the total budget goes toward interactive. And out of that 3%, about 60% of it goes to new-car leads and 30% goes to online classifieds and 10% just in banner advertising.

Belk: The majority of our online advertising goes to banner and page sponsorships in local portals. We do 60% in print and the rest is divided up between radio and TV.

Souza: We do about 60% radio because that's what we're known by. We're branded by (dealer principal) John Anderson's voice in the Bay Area. We spend 40% in print for the dealership itself and about 15% for the e-commerce side. What we find is our e-commerce customers don't go to the newspapers to buy a car. They go right online to look at online specials.

Ward's: Dillon, you talk to dealers all the time Are these numbers indicative of what dealers are spending for Internet advertising?

McDonald: Yes, these numbers — 10%-15% online — are close. But it's tricky just because we're making a lot of assumptions on geography and franchises as far as what's more effective in each market.

Ward's: What are you trying to accomplish with your advertising? Is it building the brand or is it more focused on getting people into the store?

McDonald: We work with both the OEMs and dealers. Manufacturers have a different focus in that they're trying to get someone to choose their brand over the competitions', whereas dealers are saying, not so much choose the brand, but buy from me instead of from the competition.

Souza: We show what's different about us and why they should buy cars from us more than just the brand. We're Honda — it has No.1 owner loyalty — so the brand is already there. Because we have nine Honda dealers within a ten-mile radius of us, we have to tell the people the reason they should come to us.

And that's what we push in all of our ads, be it newspaper, radio or online. It's always about why you should do business with us. Because everybody has the same product. Everybody offers the same prices. It's the dealer that differentiates all of them.

Ward's:: Mark, is that the same for you? Do you have as much competition from Lincoln Mercury dealers in your area?

Rush: I do. But I'm nowhere near these other guys' sizes. The mantra I've always heard is to be big somewhere. And that's my goal in advertising. If I run a newspaper ad that's smaller than my competitors every Saturday, then eventually I'm going build the perception that I'm not as big as my competitor.

I would much rather run an ad that's bigger than my competitor's with less frequency, but that's very expensive in some of the traditional media. However a small dealer can make some pretty good Internet buys and appear with the same presence as a mega-dealer.

Muinos: We definitely are trying to get the consumer to shop here as opposed to another dealer, but Galpin's been in business for 57 years, so we have a brand of our own in Southern California. As far as branding the dealership, we'll do stuff — we're very much in the customizing of vehicles, we go to a lot of car events, we sponsor a lot of local community sports events.

But when we go into the newspaper, which of course is the bulk of our ad budget, most of that goes into hand raisers (buyers).

Belk: Our advertising is more of the hand-raiser type of stuff. We rarely do the branding stuff. We work online with that because we spend a lot on new facilities, probably $100 million in the last two years. We try to show the facilities and how you're going to be treated different. But most of the advertising is toward the hand raiser.

But we do some branding with Hendrick's Motor Sports. It's great to have Motor Sports out there and Jeff Gordon, Jimmie Johnson or Terry Labonte doing something each week outside all of our stores with the Hendrick name on them.

Ward's:: Do you do direct mail advertising?

Muinos: No. We've just found that it has lost its bang in my market. I think there was a point 2-3 years ago everybody was working it pretty steady and we just felt lost. It became less productive over time for us.

Souza: We found the same thing with Anderson. We decided to go with e-mail marketing. It's super-duper cheap, basically free to us and we have so much more opportunity to get our message across, colorfully and visually. So direct mail really doesn't pay, especially to our own customers.

Muinos: It's definitely the best way to get to your own people at this point. Not to mention you can customize. With a direct mail piece, there's a limit to the customization you can do for each customer. But if you just have a decent database, you can have almost a unique view for each customer when they get the e-mail.

Repeat and referral business is the only thing most dealerships have going for them. It's a very inexpensive way to keep a relationship going with a customer.

Belk: More than ever right now, with how the expectation of customers are changing, they know that we have their information, and if we don't advertise to them, we'll lose them. The 35 year olds really are used to the Internet and being followed up on by everybody. Why shouldn't we market within our own customer base?

Ward's: What's most important when choosing advertising?

Rush: In local media newsprint, I don't have a choice. Even though Columbus is a (market) with over a million people, we only have one daily newspaper. So the newspaper is not the least bit shy about price increases. So I'm always looking at where I see value compared to the traditional medium in Columbus, and I think I found a lot of that on the Internet from some of the buys we make.

Souza: We use Who's Calling to track our campaigns. Not only do we read the reports, we immediately change our way of doing advertising. If we see a huge amount of hits on the radio, then we look and see which radio station we were on and exactly which ad we were running so we know which ones are the most effective for us.

What we're commonly finding is that newspapers aren't performing like they used to two or three years ago.

Muinos: In our market, there are two major newspapers. And we advertise in both of them. I think a little bit out of fear than anything else. In the very near future, I think we'll start to digress from newspaper advertising.

Ward's: How do you determine your online partners?

Muinos: We've built some good lasting relationships with a couple of the bigger names. We have a very good relationship with Kelly Blue Book, so we wanted a partnership with them as far as being able to advertise on there.

Belk: We developed an application for lead generators that all the dealerships use to report their Internet sold units. From that we determine what the cost per sold unit is. If we see a lead provider get up in the $500-$600 per sold unit range and stay there, then we'd rather our competitor sell them the car, to tell you the truth, because it's costing them more.

All advertising and the cost of websites are in the $90 per sold unit range whereas lead generators are at the $250 per sold unit which, for our group, is lower than what our retail is.

McDonald: Whatever lead provider you're dealing with should be considerably less than someone that just walked in.

Belk: All advertising and the cost of web sites are in the $90 per sold unit range where lead generators are at the $250 per sold unit.

Souza: We watch our lead providers like hawks. We're constantly evaluating our lead providers to see if it's worthwhile for us because there's a fine line between buying leads and spending the money and brand ourselves out there.

Our cost of sale ranges anywhere per lead from about $175 to about $300 on the high-end. If we see one that is more than $350-$400, then we consider whether to continue with that lead provider because it's actually cheaper for us to go with the radio ads instead.

McDonald: Most of the folks that we deal with will track, to some degree of accuracy, the dollars that they spent online, whether that's leads, listing or banner ads.

But when you turn that same kind of gauge on the traditional ad dollars, most of the dealers we talked to will say that they're doing a lot of the prints and television stuff out of fear.

Muinos: Exactly, because their daddies, who owned the dealerships before them, have told them, “You have to be in the newspaper, son.”