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Brian Pasch

Brian Pasch CEO

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Do You Spend Over 50% Of Your Budget on Digital Advertising?

Digital Marketing Mix

As I conduct training seminars and webinars for the automotive industry, I often ask dealers what is their current mix between traditional automotive advertising and digital automotive advertising.

What is your mix?  Are you at 10%, 20%, 30%, or over 75%.  Take a minute to share your mix here on DrivingSales.com in the comments area below.

To come up with a good approximation of your "mix", in the traditional advertising category I would place radio, TV, print publications, newspaper, printed yellow pages, billboards, and direct mail costs.

In the digital advertising category I would place your website costs, Google Adwords or similar Pay-Per-Click models, digital display advertising, re-marketing, social media, online videos, third party leads, OEM leads, Search Engine Optimization (SEO) services, and inventory advertising platforms like Autotrader.com and the Automotive Advertising Network (AAN).

Why Is The Range So Large?

The responses I get from car dealers range from 10% digital to 95% digital. This large swing reflects the tsunami of change that has engulfed the automotive industry in the last 10 years.

These massive changes are not limited to the automotive sector. All business owners are being faced with the challenge of being open to reconsider if the yellow pages, radio, TV, and newspaper are connecting their brand with the majority of in market buyers.

Dealers Need Digital Marketing Confidence

 

Recently I spoke with a dealer who had just purchased an existing franchise store that need a complete renovation. He shared all the costs associated with the refit of the building and his upcoming opening. He wanted to turn around this store and make it profitable location.

The conversation we had was focused on how he could make the biggest impact on the market with this new point. Intermixed with the conversation was frequent reminders of how much he was investing in the store, how much this place needed a capital investment, and how much he wanted to make this work.

When I asked him on what portion of his budget was allocated to digital marketing, the answer surprising. Aside from his costs to setup his new website, he had not budgeted for any other digital marketing of the dealership.

His advertising plans were solely radio, TV, and print, and I won't share what he planned to spend. When I suggested an initial investment of $3,000 a month in digital marketing strategies, he said that he didn't have that much to spend.

Welcome to 2011 and the wide gap in knowledge and confidence that digital marketing is a core strategy for automotive retailing.

Working Toward a Reasonable Change

 

It is easy to say that a car dealer that is only spending 10% in digital marketing is spending too little on new media since over 90% of car buyers use the Internet to research a car. It may also be safe to say that a dealer who eliminates all radio, TV, newspaper, and direct mail are missing a segment of their local market that is influenced by these channels.

Ignoring the extremes, I would like to suggest that to bigger opportunity is to move the majority of car dealers that under utilize digital marketing to the middle. From a survey conducting by PCG Digital Marketing with dealers across the country, the current average "allocation" for digital investments is 20-25% of a dealers total advertising budget.

I would like to see the average dealer investment in digital marketing move to 50% in the next year.

Those that say 50% is still too little, I'll be working on another industry move in 2012! We can't parallel park the Titanic in Manhattan without some patience. Moving digital spending to 50% would be considered a massive change but one that this industry needs to embrace.

This reallocation of traditional marketing investments will not happen without a massive effort to reeducated the dealer community. Proper education on the strategies and opportunities that digital marketing can provide will help make those steps to 50% + with confidence.

Today, dealers are not moving because of fear or they just don't know better. Neither position is attractive to an entrepreneur.

Automotive Advertising Education

 

We can assume that dealers will make this move on their own but there will be a tremendous opportunity cost for those that take the slow path to 50%; an that still is not the end game. Since first responders are rewarded in search, the sooner dealers make this move, the more they will be rewarded.

This move will need a coordinated effort by industry leaders, vendors, and educational agencies to educate dealers on all of the new media opportunities and marketing strategies for automotive advertising.

The DrivingSales University is one such program that will help dealers achieve greater confidence in digital marketing and innovative dealership operations. Dealer principals need to be able to clearly differentiate and measure the benefits of SEO, SEM, social media, display advertising, and inventory syndication.

Every time I conduct a seminar at a 20 Group meeting or at an automotive conference, light bulbs go off in the audience. Dealers are truly thankful to be shown, in plain English, why their lack of digital marketing investments is hurting their brand. We need to coordinate more "light bulb" experiences at 20 Groups, conferences, and regional teaching events.

Automotive Marketing Conference

 

One of those opportunities for education is the 2011 Automotive Marketing Boot Camp in Orlando, April 16th-18th organized by my company PCG Digital Marketing. The Boot Camp will be held at the beautiful Hilton Orlando hotel and has attracted a wonderful team of industry leaders and dealership employees to teach.

Dealers spending less than 50% of your total advertising budget on digital marketing and new media, need to attend and find out what is working for dealers that have made that have crossed that line.

If dealers wants to increase their dominant market position, they should attend to learn that latest strategies for digital marketing and social media from industry leaders.

Bring More Than One Person

I would also like to suggest that at least 2 people from each dealership should attend. Why? Because the best opportunity for change occurs when the dealer principals or GM learns side by side with their eCommerce Director or Internet Sales manager.

Too many things can get lost in translation when one of these two roles are missing. The good news is that attendees and educators at the Boot Camp will be willing to share exactly what is working and how they are measuring the ROI of that investment.

Dealers can register for the Boot Camp and make the decision to invest in education and the future of their dealership today. The event website is located at: http://www.automotivemarketingbootcamp.com

DrivingSalesTV.com will also be recording the two keynote addresses live from the Boot Camp.

Automotive Boot Camp

JD Rucker
I remember a chat we were having with a 20 group when someone asked Jim Bradford how much they should be spending on Digital. He said, "At least 30% of your advertising budget" and we were nearly thrown out of the room. That was 2008. Now, some dealers we talk to have moved beyond the 50% mark and the traditional advertising dollars they spend promote their digital properties. It's no coincidence that many of these dealers are leading their markets or making tremendous strides to move from the bottom to the top. I agree with your numbers, Brian. 25% sounds accurate for now and 50%+ sounds ideal. The challenge with moving much higher than that is that digital is so inexpensive in comparison to most traditional advertising. A dealer once asked me in 2009 if they could move their entire $40k a month budget to digital (or $30k, or $50k - Joe Turner, help me remember the exact number here) and we had trouble back then coming up with valid ways to spend it. Today, dealers wouldn't have a problem finding places to spend the money. Picking out the best ways to spend it right - that's the challenge.
Dennis Galbraith
The goal of seeing 50% of overall dealer advertising spend on digital comes from the heart and is definitely aimed at the dealer's best interest. However, I'd like to offer a different framework that will help reach this goal sooner. From both a strategy and communications perspective, it is a mistake to look at a store's budge in terms of online vs. offline or digital vs. traditional. The two advertising objectives of any retail outlet are branding and traffic now. You are either trying to reach the community in mass to let them know what the name on your sign stands for -- your unique selling proposition -- or you are trying to reach the 4% who are in market for a vehicle and get them into your store right away. Although most digital marketing is for the purpose of driving immediate traffic, some online advertising should only be used for branding and not for the purpose of driving immediate traffic. Banner ads on the home page of your local newspaper or cable TV website are a good example. Most traditional advertising is for branding. You can't buy anything on TV, radio, or outdoor with an audience of 20% in-market shoppers, no less the 80-100% we get with digital. However, print classified ads are almost exclusively read by in-market shoppers. This is why over 50% of dealer advertising was spent on print classified in the 1990s. There was no other traffic-now alternative. This is also why we tried to combine sales events with TV ads and beat it into a traffic-now alternative. Of course, TV as traffic-now advertising was never very cost effective and are even less so now. Print classified can still be cost effective, in those rare instances when the price is right. Every dealer needs some level of traffic-now advertising, and taking the most cost effective options first almost always results in a traffic-now budget of over 50% digital. Sometimes its 100%. Branding is something a dealer should either do or not do. There is an old saying among ad agencies that you must buy enough reach and frequency to make it work or you shouldn't buy any at all. The branding budgets of mega dealers often surpasses their traffic-now budget many fold, and they are not wrong for doing so. I even worked with a rural dealer who was much larger than any store for miles around and dominated the air waves with an effective branding campaign that cost many times what we spent on traffic-now advertising. The crime is when dealers dabble in branding and waste nearly everything they spend. The vast majority of dealers should not have a branding campaign at all. If digital experts approach dealers with this kind of strategy discussion, then we have logic and credibility on our side. There is plenty of logic behind the 50% digital discussion, but it just doesn't come across as credible. It tends to sound more like we are digital and want 50% of the pie than the actual message of looking out for dealer's best interests. Credibility is why I still study and work with all forms of media. Not everyone has that option, but I think framing the discussion around branding and traffic-now will allow very influential people like Brian and JD to be even more effective going forward and help dealers get where they need to be sooner.
Brian Pasch
Dennis I appreciate your perspective because it is so important to look at the bigger picture as you very well stated. I agree that just stating a number (50%) might be mis-understood to want more of the pie rather than confidence that a move in that direction would benefit the dealer. It's all about balance and my article was intended to start a discussion on the "mix" and your feedback is exactly what I would hope would come. I would love to opportunity to collaborate on some dealers to document joint strategies that focus on branding and advertising. I would love to be able to leverage your data analysis and experience with my testing on digital strategies.

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