This is a follow-up article to one that I wrote last week.  I go deeper into why I think there is an epidemic in Dealers Marketing Allocation.  There are 4 marketing questions to ask yourself, I show how I would allocate a marketing budget for the average sized dealer, what we do at Woodworth Dodge for effective word of mouth advertising, how much our sales volume has increased over the last 5 years, and a breakdown of our customer acquisition costs.  

Marketing allocation is costing dealers an unnecessary amount of money, and in my opinion, even has a negative effect on company morale which I explain in the article.

There's a better way:

The Epidemic of Marketing Misallocation

Let’s have a look at a hypothetical yet realistic situation:

You’re a dealer and 85% of your advertising budget is geared towards attracting new clients, and 15% towards retaining your clientele. Yet your new clients make up 30% of your business.  So you're spending 85% of your budget on the 30% and only 15% on the 70%.  To top it off, of that 85%, you allocate 75% to traditional marketing and only 25% to digital marketing.

By the way, digital marketing is extremely affordable right now and it’s where the attention of your consumers is.  It’s only going to get more expensive as time goes on.  The automotive industry is known for being slow to change and digital marketing is case in point.

I can’t honestly say that this is how the majority of dealers operate, but I can say with confidence that there are dealers who are still investing in this ineffective approach to marketing.

Here are 4 Marketing Questions that you must ask yourself;

1. How much of your advertising budget is targeted towards drawing in new clients?
2. How much of your advertising budget is targeted towards retaining clients?
3. Which client is more financially valuable to the company?
4. Would you agree that you could lower your advertising budget and maintain your sales volume by targeting repeat/referral clients?

Traditionally, we focus our advertising on the price of our vehicles which influences buyers to think price first when they contact us.  Then, our Managers and Sales Trainers tell us to stay off the price as much as possible.  Not all dealers market this way anymore, but some do, and it’s part of the reason why we have a lack of trust between consumers and dealers.  Price still has to be a part of advertising but we must incorporate our unique value proposition.  Why should they choose you?

This is how I would allocate a marketing budget for the average dealership:

• 15% Traditional
• 35% Digital
• 50% Word of Mouth

Here are some things that we do for word of mouth marketing at our dealership:

- We have random giveaways to thank our previous clients for their business.  We'll announce it on a Tuesday and give it away on Friday.  It's important to know that we do not bribe our clients by saying "If you come in and buy and/or test drive, then we'll enter you in." It's only for those who have already bought from us, a genuine thank you.  Those are the only ones who are entered.

- We send a personalized gift to our client 30 days after they've purchased with a hand-written thank you card.  We note their hobbies and specialize a gift for them based on that information, our budget is $100 per deal.

- We give our Fixed Operations a weekly "allowance" where they can give away an oil change for example at their discretion.  The catch is they have to tell the client why they are getting a free oil change that day.  If we have a client who is always respectful, kind, and courteous, we have our Service Manager tell the client that when they come up to pay their bill, and at that point let them know that we have them covered for today. 

To me, marketing plays an underrated role when it comes to the morale of the dealership.  If you're focused on repeat/referral business, your morale will increase dramatically.  This becomes more challenging when you're focused heavily on attracting new clients.

Our customer acquisition cost for 2017 (total advertising dollars spent / total retail sold, new and used) was $247.  From 2013-2016 we grew our retail sales volume 61% and have since sustained that volume. It is my hope that this will help you invest your marketing dollars more effectively.