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Is Your Advertising Strategy Based On Fear, Data, Or Blind Faith?

By Brian Pasch on Dec 10, 2011

The automotive industry is buzzing about TrueCar© and their business model.  Critics say that the customer sales data and transaction prices, pulled from their DMS by TrueCar.com, are being used against dealers.  Advocates claim that TrueCar arms consumers with data and pricing that will get them the best deal.

Dealers who have decided to continue using TrueCar© that I interviewed remarked "Close your eyes Brian, it's just a numbers game!".  Should I be surprised at this response when OEM goals are focused on volume and not dealership profits?  

Other current users who are selling cars through the program remarked, "I want to get off the drug (TrueCar©/ZAG©) but I'm afraid."  

I have also heard a similar comment referring to TV, Radio, and Newspaper investments that dealers have used for years. 

This fear based comment is what sparked this article.

This post is not designed to continue the heated discussion about TrueCar© on a different thread.  I wanted to challenge dealers that there are alternatives to generating leads if they decide not to participate with third party agents.  

There is a bigger problem at play that is supporting the existence of TrueCar© that needs to be addressed.

Before You Kick The Dog

A majority of dealership marketing budgets are allocated to radio, TV, and newspaper, in some combination, despite research that shows that most car buyers will visit the dealership website and 18 other Internet sites before calling submitting a lead, or coming into the showroom.  (Zero Moment of Truth)

This behavior is the real story behind the TrueCar© dilemma.  If dealers had a strong digital marketing strategy that they owned, they would be less reliant on any third party solution.  They would be generating more first party leads and not reliant on leads distributed to multiple dealers in their market.

Should I Cancel Autotrader?


No, I have not lost focus on the main story!  I want to connect a predictable behavior at 20 Group meetings across the US with this story.  It is inevitable when I give a workshop of digital marketing strategy that I am asked:

"If I do the things you are recommending, can I cancel  Autotrader and Cars.com?"

After years of not having a great answer to this question, I believe I now have an educated response.  Autotrader and Cars.com are not the big problem in car dealer budgets.  In fact, they are probably the LAST thing a typical dealer should consider eliminating.

For thousands of dealers AutoTrader and Cars.com represent the majority of the digital marketing strategy.  If you include a few dollars for Google Adwords spending, many dealers think they have maximized their online strategy.  This is the crux of the problem.  This is not a winning strategy.

Dealers love to hate Autotrader and Cars.com but fail to see that their own addiction to drugs (traditional media) is the bigger problem.   They say that Autotrader.com does not generate enough leads, making it expensive.  After looking at hundreds of budgets during our Automotive ZMOT Study that was started in September, dealers should be more mad at their own investments in Radio, TV, and Print.

Before dealers kick their third party digital vendors, they should take a hard look at the actions, or lack of action,  that have created their dependency.   This is why this applies to TrueCar© regardless if you don't like their business model.  

Traditional Advertising Costs To Generate a Visitor

 

Take a minute to follow me on a calculation to approximate marketing costs and website traffic.

Let's first start with one building block:  Most of your customers who purchase a car will visit your website BEFORE they purchase a car.

Not all, I said most.

If you can agree on this point, we can look at Google Analytics and your call tracking logs as a proxy for marketing investments.

The second point of agreement we need to have is how to approximate the impact of traditional advertising.  Let's look at one example below.

I recently visited a dealer that invested heavily in radio and TV to comunicate their unique brand message and also to promote their website address.  They did not advertise price or payments.  Their unique selling proposition always included their website address and of course their dealership name.

If we were very generous in regards to their $50,000 a month traditional Radio and TV investment, we could take all the visitor traffic on Google Analytics that included a search on the Dealership Name as well as Direct Traffic.  

Direct traffic is when the consumer typed in the website address directly.  We could also count how many calls were generated by a tracking number assigned to traditional media.

The dealership was running a Google Adwords campaign at $2,500 a month which easily gives a cost per visitor.   The dealership also was investing in Search Engine Optimization (SEO), DealerRater.com, Cars.com, Autotrader.com, and 3rd Party Leads. 

  • - The cost per visitor for their Adwords was: $1.50
  • - The cost per visitor from their Traditional Media was: $18.65

Despite these numbers, the dealership budget was 63% Traditional Advertising.  The Dealer was also spending 25% of their budget on Third Party Classifieds and Leads.  88% of their budget was managed by generic advertising partners with little control on making their dealership unique in the Zero Moment of Truth. 

  • - Looking at these numbers, wouldn't you think that the dealership would increase their Google Adwords spending to generate more first party leads at a lower cost?
  • - Would you think the dealer would have invested in an IRM or Video Marketing Strategy?
  • - Would you think that the dealer would look at their Cost per VDP view on Autotrader.com and Cars.com and compare how these investments merchandise their inventory compared to radio, TV, and print?

The Dealership Digital Strategy


This dealer really didn't have a digital strategy that differentiate themselves from other local dealers.  What they had was a traditional marketing strategy with a sprinkle of EASY digital expenses that they were "uncomfortable" with generating a good ROI.  

No one took the time to look at the cost to get interested shoppers to their website.  

It's too easy to avoid arguing with the dealer principal who may be addicted to traditional media drugs, right?

So, if this is the rule rather than the exception, it's easy to see why dealers use third party lead generations websites, including TrueCar© to hit their sales goals.   They don't feel that they have an alternative.  Selling cars now is all that matters to dealers on the 30 day gerbil wheel. 

I go back to the one dealer comment "It's all about volume!".

If dealerships took more leadership in their online strategy, the third party partners remaining would be people who added value and not out of fear or obligation.  Dealers would be empowered to cut anyone who did not support their brand or delivered ROI.

That's the story behind the TrueCar© story.  If dealers had the balls to change their marketing investments to connect with where consumers shop, they would have more first party leads and be more in control of their business.  They would be able to opt-out of TrueCar if they felt the company was a competitor because they had strong alternative digital strategies.

Dealers who hate the TrueCar© model and stay with the program may do so because they feel that they have no alternatives.  The truth is that they have alternatives. 

It takes courage to get off drugs (traditional media over spending)  and focus on the investments that have the best ROI today.  

 

For this dealer, Cars.com and Autotrader.com had a better ROI than the radio and TV investments this dealer was making.  Is that a surprise?  Stop kicking the wrong dog.

 

Do You Need A Digital Strategy?

 

If this story reminds you of your dealership, isn't it time to roll-up your sleeves and create a First party lead strategy?  Isn't it time to have a stronger presence during the Zero Moment of Truth?

One place to start is to attend the 2012 Digital Marketing Strategies Conference (DMSC) on February 1-3rd just prior to NADA.

You can register online before tickets are sold out by visiting http://www.digitalmarketingstrategies.org.

Brian 

Brian Pasch CEO of PCG

 

Brian Pasch, CEO
PCG Digital Marketing
Text PCGedu to 75674 get information on our upcoming conferences

* ZAG© and TrueCar© copyright True Car Inc.

Comments

Debating whether to use all your ad and marketing money online or offline is not only the wrong question to ask, it is a dangerous question. Stop perpetuating the myth that one or the other is the only way or that one or the other is bad. It's just not true. One is a very bad number in business and using one strategy is unwise. You should use ALL media forms and be intentionally congruent with all of them. The better question would be, "What is my marketplace, message to match that marketplace and what types of media can I use to reach that market? Don't fall in love with one area or hate one area. This may really get you going but there is NO bad media. Only bad message to match your marketplace. Think in terms of using all available media and dominating in certain areas. There is no such thing as old school or new school media. Traditional or not is not the question or the answer. Who cares as long as it makes you ROI and money.

Dec 10, 2011

Mark

I am not saying that dealers should stop traditional marketing media nor advising that they should spend all their money online. I am encouraging dealers to engage and measure the results of all their marketing investments. Spray and pray marketing has to stop.

You misrepresent my messages to dealers and the hundreds of articles I have written coaching the automotive community on how to develop an educated, comprehensive marketing strategy.

You say "Who cares as long as it makes you ROI and money" is assuming that dealers have looked at the ROI of their marketing investments. It assumes that they know how to measure that ROI. Most do not and ask for help every time I speak.

I have worked with many dealers in dozens of 20 Groups this year and all are seeking honest input on how to create, measure, and monetize their marketing investments. They are NOT confident that they have it right. I love helping them find answers through debate, dialog, and data.

Dealers are realizing that just using all media outlets, because they can, is not a wise choice. Dealers are realizing that they have stop justifying marketing decisions because they think "its cheap".

2012 will be a great year for dealers who dig into their marketing investments with a new set of eyes.

Never have I told dealers to end all traditional media or put their eggs in one basket. You must have some other agenda in your commentary to imply that I do.

Dealers have made comments like "that xxx was expensive so I stopped it" but when I asked what were they comparing it to and how was it measured, their reasoning was emotional not factual. This is the point of this article, to encourage decisions based on data and strategy.

This article is designed to encourage a deeper look at the ROI of all marketing investments and what their goals are for that money. Dealers with 70-85% of their budget in traditional media are just not able to leverage all the newer channels that are working to connect with consumers online.

It's all about finding that right balance in their market with the best ROI. Now it's up to dealers to decide if they want to dig in and look at the numbers.

Dec 10, 2011

After spending most of my career conducting and analyzing traditional media/market research, it has become ever so clear that there is a strong similarity between the growth of that industry with what is going on in the auto industry today. When companies started to measure media they had no way to analyze the data. That void gave growth to software companies to develop programs that would create reports to justify media expenses by advertisers.
The auto industry also needed third parties to capture prospects to their respective inventories to generate sales. Then every newspaper, TV and Radio station had a web site to capture customers for dealers. Cars.com, Autotrader and others developed software to engage dealers and customers in the persuit of that perfect used or new car. So what we have seen is the constant reinvention of products and services whose goal is to capture our customers for us.
Well here is the flash, we are and can do a very good job of capturing our customers in our own virtual environments. We have wonderful metrics to analyze their behavior also.
Once when I was addressing a national group of newspaper executives, I suggested that if I were thinking about looking for a car I wouldn't turn on my TV in hopes that a car commercial would appear. But, I would (this was 12 years ago) look in the newspaper. What we often mistake advertising used to generate sales and advertising used to brand us in our market. So then the difference between branding and selling is that; one is long term and the other is looking for a reasonably fast result. One reason why dealers use direct mail is so they can measure its success almost immediately. We review and tweak our ad mix constantly. It is all about finding the right mix. It's always been about that. However, in the current environment it is not business as usual. Getting back to the basics has a whole new meaning. We have the tools to capture our own customers. But not without a little help from our friends.

Dec 10, 2011

I think you misunderstood my intent. I don't have an agenda, just an opinion. It was not directed at you specifically but at posts I read continually from vendors with an agenda. I certainly have nothing against you at all and agree with the points in your reply.

Dec 10, 2011

Gary, good points about advertising objectives, traffic-now and branding. The first step in budgeting is determining your advertising objective. My view is that these two objectives should be budgeted for separately. Thoughts?

Dec 12, 2011

Brian I came across this article over the weekend while researching and I really appreciate your message. TrueCar is more of a symptom or product of remaining attached to conventional methods. I believe that effective blogging is one way dealers can dig out of this hole, which is what I wrote about this morning in response to your article if you would like to read it:

http://blogproautomotive.com/internet-marketing/auto-dealers-use-blogging-to-counter-truecar/

Dec 12, 2011

I agree Dennis. There has to be a distinction made during the budget process. Hardly anyone sees a car billboard and gets the urge to get off at exit 33 and buy that car, but the consistent placement of that billboard gets the dealership's primary message across; branding.

Dec 12, 2011

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