It seems like everywhere you turn, there is an immense amount of conversation and pressure to drop your current dealer marketing strategy and throw all your eggs into a new basket, such as direct marketing, social or mobile.
These “wave of the future” strategies have promise, and there’s even some decent ROI associated with each. But what about finding a better way to do what you’re currently doing in terms of customer marketing?
Some habits are hard to break in the automotive industry. And to be honest, some don’t have to be broken, especially if you can simply find a better way. This is exactly what’s happening with dealers and the way in which they market to their customers.
Marketing works, but the method is failing
The problem isn’t necessarily at the tactical level. Direct mail still works. Equity marketing remains highly effective. DMS information is ripe with accuracy.
In reality, the biggest problem is the way in which all these components come together. The process is disjointed. It’s frustrating and inefficient. And, worst of all, it’s costing many of you millions of wasted dollars.
Jared Kalfus, Black Book
Dealer profits already being squeezed
It’s important for dealers and their marketing partners to re-evaluate the way in which customer marketing campaigns are developed and managed, and many of the reasons are financial. Dealer profits are shrinking, mainly due to shrinking margins on the sale of new and used vehicles. According to Henderson, Hutcherson and McCullough’s (HHM) recent auto dealer economic outlook, the gross profit margin for dealers fell from 13.5 percent down to 13.3 percent.
The report also stated that the average new vehicle gross profit fell from $1,204 down to $1,193. Gross margins also declined from 3.81 percent down to 3.68 percent.
Furthermore, according to research firm, Statista, the average-size dealership (selling between 150-399 cars annually) spends approximately $616 on advertising per each new car sold. This number goes up as dealer size shrinks. The firm points out that dealerships selling between one and 149 cars annually are faced with a per-car advertising spend of $862. This spend can be lowered simply by consolidating the different touch points involved in the development of campaigns.
Six different calls for one outcome
Currently, if a dealer and his/her marketing agency want to pull together a new customer marketing campaign, there are six different vendors who must participate in that process.
- DMS: The vendor who runs the central hub of vehicle and customer data that often serves as the backbone of each campaign.
- Consumer auto data: Vendor who holds intimate demographic data on would-be car shoppers.
- Incentives: Vendor who holds vehicle sales data that can help set incentives and other offers for the benefit of the car shoppers.
- Vehicle pictures: Vendor who helps with the visual marketing of each vehicle, so that each customer is enticed into learning more.
- Vehicle values: Vendor who provides all necessary data on the vehicles accurate valuation.
- Printer: Vendor who takes the essence of the campaign from the marketing agency and builds the direct mail piece, plus shipping logistics.
When the dealer and marketing agency want to build and execute on a campaign, all the correspondence and planning between these six different vendors takes time, as well as individual markups that can drive up the campaign cost (and erode dealer profits).
Where do we go from here?
This should serve as a wake-up call for dealers and their marketing agency partners. The industry needs to collectively find a better way to streamline the process for developing and executing customer marketing campaigns. By doing so, dealers will begin to drive more costs out of the equation, which will help offset the pain they’re feeling on the balance sheet.
Editor’s note: Jared Kalfus is senior vice president of sales for Black Book. For more information, visit www.BlackBookAuto.com.