CNW: Traditional Media Translates into More Buyers than Online Advertising

By Jennifer Reed, SubPrime Auto Finance Editor
October 17, 2007

Email this story Printer Friendly Version

BANDON, Ore. — In his latest analysis of the market, Art Spinella, of CNW Research, found that used-car dealers are spending more money on the Internet than ever before. However, overall, most of the marketing funds are still going into traditional media, such as newspapers, spot TV and local radio.

And it appears the dealers have it right, according to Spinella. Advertising in traditional media is paying off as that is where the most buyers are coming from.

"During a two-month analysis of dealer spending patterns and resulting sales, the typical dealer put slightly more than 61 percent of his advertising budget into traditional media and generated an average of 204 shoppers," Spinella indicated.

"The second largest expenditure (13.4 percent) went toward community promotions such as local sports team sponsorships, golf contents, issue-awareness events, etc," he continued, saying the data was broken down to sales per 100 buyers.

While traditional media tends to cost more than online advertising, the share of buyers-to-shoppers ratio favors the old-fashioned methods, CNW highlighted.

In fact, more than 44 percent of people who entered a dealership and purchased a car or truck indicated traditional advertising methods were what drove them to a store.

"The conversion rate for Internet advertising was a dismal 4.5 percent even though it generated far more phone calls and e-mails about advertised vehicles," Spinella said. "But 95 percent either went elsewhere or were merely window shopping with little or no intent to buy."

Although ratios can vary via market, CNW said its survey reviewed medium and large dealerships in a cross section of large, medium and small markets, with results weighted to sales and DMA populations.

"The second most effective buyers-to-shoppers ratio came from involvement in local community events and services. This includes such activities as sports team sponsorships (high school baseball or soccer for example), golf tournaments, ads in little theater programs and the like," Spinella reported.

"While generating few shoppers, better than a quarter actually purchased a vehicle," he pointed out.

Used Sales Results

Looking at the first half of October's sales data, CNW discovered that used-car sales will likely be down 5.6 percent for the month.

However, used-car departments at franchised dealers are actually showing significant improvements and could end the month up about 7 percent, compared to a year ago.

Basically, franchised dealers are closing deals with a higher proportion of their asking price, Spinella explained.
"While asking about 1 percent less ($10,405 versus $10,511 a year ago) the actual transaction prices are essentially flat, off less than 0.15 percent," he noted.

"Including aftermarket products such as extended warranties, as well as interest rates, total value of the used-car market in September was $38.3 billion, up 5.3 percent versus September last year," Spinella continued.

Overall, franchised dealers increased bottom lines by almost 17 percent while independents declined 1.2 percent and private party values decreased by 2 percent, he concluded.

For more information on CNW, visit www.cnwmr.com.