What do car dealerships and start-up companies have in common?

Usually, not much. By nature, they are very different business models:

Dealerships are generally well-established, as they require a great deal of capital to acquire or start.

Start-up companies are generally quite the opposite. They typically start with nothing, or very little.

I had an interesting conversation with a dealer principal and owner of an auto group a few weeks ago.

We discussed the marketing strategy of his stores, it went something like this:

Kevin: “What percentage of your marketing budget is spent on traditional advertising, and what percentage is spent on digital?”

Dealer: “About 70 percent traditional and 30 percent digital.”

Kevin: “How did you and your team decide on that split? Do you feel that you receive a better ROI on traditional?

Dealer: “Well, I know that digital marketing is more effective; we just haven’t switched our budget yet.”

Kevin: “Interesting, so what are you waiting for?”

Dealer: “We just don’t know how to make the switch, where to put the money, etc. We know print and newspaper, we know nothing about digital.”

This type of rationale isn’t uncommon when it comes to dealers, and the prospect of shifting to digital; it’s something I’ve heard many times before.

The main reason why dealers aren’t spending the lion’s share of their marketing dollars on digital isn’t because they believe that traditional is superior, it’s because they don’t know how to make the switch. It was the fear of the unknown that was holding this dealer principal back, the fear of doing something different from what had brought him success for so many years in the past.

Large and well-established companies in our space focus on protecting their golden goose by making small changes rolled out over long periods of time. I understand this logic (to some degree), as key decision makers are often accountable to shareholders or individuals who have already made their fortune, and tend to be more averse to risk at this stage of their life.

While many dealerships and their ownership/management start out with a somewhat entrepreneurial mindset, it’s common for that to fade over time as success comes (and routine sets in). This provides an inherent advantage to businesses being run by driven individuals who are still working to carve out their legacy, and are willing to take some calculated risks along the way.

Eighteen months ago I switched from working inside of a large auto group, to working within a start-up that supports dealerships across North America. During this time I’ve had a unique opportunity to observe and analyze the contrast between the two worlds. The ‘sit back and wait for business to come to you model’ does not work in the world of start-ups as it does for some dealerships.

If you are one of the managers or owners that are willing to take chances and challenge the status quo, here are few good places to start:

Reject normal: Many dealers make decisions on how they are going to run and market their dealership based on what their competition is doing. This is a great formula, if you want to be just like them — average.

Grow talent, don’t buy it: It’s easy to go out and ‘buy’ a top dollar employee to help grow your business. A start-up company doesn’t have this luxury. Instead, look at bringing in someone who has less experience but lots of talent. This way requires more effort and takes more time, but the long-term results will more than make up for it.

Figure out what you do best, and leverage it: Most dealerships struggle with identity; they can’t differentiate themselves from their same-make competitor down the road. In an increasingly competitive market, it’s imperative that every employee on your payroll can articulate why your store is the clear cut answer when a customer is looking to purchase or service your brand of vehicle.

Make every dollar count: Over time, dealers have become comfortable in spending copious amounts of money on advertising media which is notoriously difficult to track. Stick to advertising in ways that you can at least establish some form of ROI with.

Why start-ups do the four things on this list: This one is simple and obvious. Start-ups can’t blow money on unproven advertising mediums because they don’t have excess capital to do so. Start-ups don’t have the competitive advantages that their well-established competitors do; they have to find innovative ways to run a better operation and supply a better product/service if they want to be successful in carving out a piece of the pie.

If you feel like your store is stuck in a rut and just isn’t moving forward at the speed you want it to, consider the definition of insanity:

“Doing the same thing over and over again, and expecting different results."

The automotive industry is ripe with opportunity, perhaps more so now than ever before. With the last few years bringing so much change (and the years to come showing promise of even more), those who embrace the change and start running their business more like a start-up will surely rise to the top.

Want to learn more about Convertus, a fast-growing digital marketing start-up serving the automotive industry? Contact Kevin Gordon at kgordon@convertus.com or 888.354.6441