Throw away the Magic 8 balls, the much hoped for return to stable supply to meet consumer vehicle demand continues to allude us.  But that does not mean your dealership is at the mercy of the market. 

Each week, you’re flooded with headlines and reports from OEMs regarding the factors you can’t control: production lines being idled due to continued shortages of micro-chips, COVID upticks in Southeast Asia causing temporary plant shutdowns, overall supply chain backlogs for parts, labor shortages, etc.  You also know that automotive is resilient and has been for decades because dealers like you, focus on what you can control.

As you lean into the 4th quarter, consider these three things you can control while reinforcing a customer experience which delivers results today and positions you well as the industry continues to evolve.

1.     Proactively shape the perception of your customer base.  

In late spring 2020, your dealership made significant shifts to reinforce to your customers that you had their best interest in mind.  This includes putting your safety procedures on your website, offering at-home drop-off for service, and introducing tools to do more of the purchase at home. Today’s market requires this same concept, albeit some different tactics.  

Proactively let customers know that you can be their go-to partner to find and source the vehicle they want.  Hopefully, you’re already promoting your ability to order their desired new vehicle and get it in the production queue. But what about those who want something now and are shifting to the pre-owned market?

A large portion of your long-term and repeat customers likely don’t think of your dealership as a used vehicle resource.  If an existing customer cannot find what they want on your website, your customer is likely to move on.  Instead, add messaging to your website and marketing which not only lets them know they can order new vehicles from you, but you can help them find the used vehicle they want.  After all, it is more efficient and effective for you to spend your time and money sourcing vehicles for people you know and deepening customer relationships.  

2.     Prioritize customer experience by engaging with consumers as an advisor and guide.

Automotive has long been a business focused on turning a high volume of transactions. Consumers and dealers became conditioned to offering high incentives and garnering low gross to turn cars as quickly as possible.  In this market, marked by continued inventory challenges, the pendulum has literally swung in the other direction. Inventory is in short supply. Demand (although dropping off slightly in the early fall) remains strong.  As a dealer, you naturally respond to the imbalance of supply and demand by maximizing gross on every vehicle.  Consumers experience these market dynamics differently and your dealership has the power to be a hero or zero in how you engage with them now. 

How?  Let building trust and providing transparency frame how you engage with consumers.  Position your team as advisors and guides.  Although the current supply and demand deynamics feel matter of fact to your team, consumers only know what they read or hear.  And unlike your team who has been facing the reality on a daily basis for weeks or months, your team should anticipate consumers to experience sticker shock and respond accordingly.  

Train your staff to then inform consumers about what is happening in the market to command higher prices, help them locate the new or used vehicle they want, and guide them through options.  Let’s be honest, you are going to sell that vehicle anyway, likely at the higher price this market makes possible.  Small investments of time and empathy now position you for long-game dividends.   

For today’s consumer, trust and transparency are no longer a nice to have, as we addressed in previous articles.  This is an opportunity for you and your team to “wow” a consumer and position your dealership to be their partner for their next service appointment, vehicle purchase and friend or family referral.

3.     Strategically optimize, shift and/or reduce your marketing spend.   

Let’s be clear.  I am not saying to go dark and stop marketing.  If you do, your pipeline will suffer.  (Haven’t we seen how cutting off the pipeline of micro-chips has been a contributing factor to current inventory challenges, albeit more for some OEMs, than others).  What I AM saying, is look at your marketing strategies and evaluate their effectiveness in light of what today’s reality demands.

Optimize your marketing by first knowing what is and is not performing in today’s climate.  At Client Command®, we regularly review Google Analytics with or for our partners to take appropriate action.  Some of that action is messaging. As mentioned before, when engaging your customer base, you should continue to optimize your messaging to promote your used vehicles or to acquire inventory from consumers in the purchase funnel.

Shift from anonymous, vehicle-based marketing to individualized, person-based marketing.  The obvious choice is to leverage first-party data and market to those in your DMS.  For those customers unknown to you, shift your marketing to data-driven solutions which identify shoppers first and deploy marketing based on the shopper, not the vehicle. 

Reduce your marketing spend on strategies which are less relevant when you have little inventory.  Those who focus on serving specific vehicles or VDPs are an unnecessary cost in this market.  Client Command’s data shows the average time from first touch to purchase has increased 35% since April. Reconsider your spend on 3rd party classifieds and SEM while using your marketing dollars on shoppers entering the market and those who are “waiting it out.”   

Bear Bryant (the other famed University of Alabama head football coach) once said, “Winning isn’t imperative, but getting tougher in the 4th quarter is.”  Like a great coach who recognizes significant shifts in the game and responds by adding and subtracting plays from the playbook, your dealership has been doing just that over the past 24 months.  This 4th quarter of 2021 appears to be positioning our industry to get tougher.  Let’s dig in together and position our dealerships to win with customers now and over the long haul. 

Fixed Ops. The last 18 months in automotive have put this often underappreciated channel under a magnifying glass. Instead of allowing Fixed Ops to run on autopilot quietly generating revenue, you may be one of the many dealers who are now shining a spotlight on your parts and service business. 

If you have actively invested more time, strategy and resources in your fixed ops offerings, then kudos to you. If you have yet to shine a light on your dealership’s fixed ops, then I would ask that you consider doing so. This is a critical part of your business that can not only cover operating expenses for your dealership but also add to your bottom line if optimized for success. 

In either scenario, there is a chance you are still setting self-imposed limits on just how successful your fixed ops business can be. Read on for 3 ways you may be setting the bar too low.

1. Limiting yourself 
Too often we limit ourselves to what’s most easily available. When it comes to service, we tend to look at the current customers in our database due for a maintenance milestone or customers who have said “yes” to ROs beyond the warranty or recall. 

We know from the numbers that there is a wealth of opportunity out there with true customer pay work. It’s available with your recent service customers. It’s available with customers who have bought but never serviced with you. And it’s available with car owners who didn’t even buy their car from your dealership. 

There are tools available to help you widen your net and reach real service customers who are actively doing repair work in your direct vicinity. Geotargeting allows you to deliver location-based content and relevant marketing to these service customers. At Client Command® we help our service marketing partners drive more revenue through their service lane with this solution and others.

2. Failing to invest in marketing 

If you build it, they will come. But, will they really? Anyone who’s purchased a car from a new dealership likely knows there’s a service center. Hopefully, your top-notch sales people walk new buyers over to your service center and introduce them to the service manager or concierge as part of their purchase journey. But what’s being done once they drive off the lot? And what’s being done to attract net new service customers to your bays? 

Marketing your service center, pricing and amenities drives two key things: awareness & approachability. Service technicians at dealerships are seen as highly-qualified - often even more qualified than the local service center around the corner. But, there is also a perception that service work at a franchise dealership costs more and takes longer to complete.

Building awareness through marketing and breaking down those consumer perceived barriers makes your service center more approachable, and therefore, a contender the next time a service customer needs to service their vehicle. Investing in marketing also works to build and increase the lifetime value of new and repeat customers further positioning your dealership for long-term success. 

3. Increasing a goal and not resourcing against it

Okay, so now you’re shining a light on your fixed ops offerings through marketing. You’ve put dedicated media dollars behind it to drive awareness among car owners.  It’s time to focus on resourcing this side of the business.   

Imagine if your service marketing drove 100 more RO’s per month. Could sound like a stretch with your current tech and space capabilities.  But that’s only about four additional RO’s per day, which is likely manageable in most service centers. Increasing the number of ROs drives revenue and profits that often result in incremental growth.  Earmark a percentage of that growth to re-invest in your service techs and customer experience. A small investment can add hundreds of thousands more per year and make your dealership more attractive to service technicians.  Everyone wants to be part of a growing team.

From there you can do a review of your online and physical experience and make sure it is user-friendly and clean. Envision the growth you want to see and begin taking the steps possible to make that a reality, just as you have done on your sales side of the business.  

Your fixed ops department is ready to be in the spotlight. Remove your self-imposed limits, set a goal and invest in location-based marketing to relevant prospects and drive more customer-pay ROs for your service center. Your bottom line will appreciate it.

Chip shortages and reduced vehicle inventory.  Here we are in 2021, facing a different season of industry disruption and once again recognizing the natural, reactive response of dealerships to hit pause on operations, on marketing or on both.  What's unnatural is to be proactive, keep the lights on and think about actions to take now with immediate and long-term benefits to your dealership.  And what we know is that customer relationships and the marketing which influences them are both a short-term and long-term game.

A year ago, we looked squarely at uncertainty asking if a long-term economic downturn was upon us.  We all know what actually happened.  Far from a long-term economic downturn, an extreme shift in the balance of supply and demand driving up transaction prices, gross profits and boosting bottom lines. So, why not just ride this thing out?  Historically in times of economic uncertainty, businesses who thrive do so by making balanced decisions that acknowledge their immediate circumstances and pivot quickly to re-imagine the future. 

Here are some key tips for your advertising strategy when supply is low to meet the demands of today’s market and best position your dealership to thrive when the scales of supply and demand stabilize. 

1. Prioritize getting to shoppers first and remaining present. 

In a marketplace where inventory is limited and shoppers are being advised to do even more research online to find their next vehicle, you need to make sure your dealership is part of the conversation.  That will not happen if you turn off your marketing waiting for someone to show up on your lot or if you blanket the market with ineffective tactics.  Limited inventory throws all types of wrenches into a typical buying journey.  Whether a shopper needs to replace a broken vehicle quickly, wants to order now and wait for their ideal vehicle to be in stock or is jumping in and out of the market to test the waters, your marketing strategy needs to prioritize two things:  getting to shoppers first and remaining present and relevant.

First things first, you need to be getting in front of shoppers as soon as they enter the market.  This requires powering your marketing with a data foundation incorporating behavior-based real-time algorithms, like the Active Shopper Network®.  Secondly, your marketing strategy must keep high-frequency, relevant messaging in front of a shopper regardless of which path they take to purchase.  After all, your marketing strategy builds your pipeline, and you can’t afford decisions now that swing the pendulum wildly in the other direction in a couple of months. A data-driven approach gives you an efficient and effective way to manage your pipeline as you monitor your inventory.  

2. Adjust your messaging: Promote trade-in, service specials and online ordering. 

The chip shortage is not a secret.  Consumers know it is a seller’s market.  So, use that to your advantage.  Pivoting your message to promote your dealership’s willingness to purchase their vehicle can drive inventory for your lot, even if it does not lead to an immediate sale.  I recently spoke with an independent dealer who applied this strategy in Q3 2020 and leveraged their marketing to Active Shoppers® to drive trade-ins, stabilize inventory levels and keep their sales pipeline full.  This led to three straight quarters of YoY sales gains of 23% and higher.  

And over my 18 years partnering with dealers, I have helped clients in recent years use this messaging approach which utilizes data-driven precision to strategically garner inventory.   On average, sales influenced by this approach has yielded 19% more trade-ins for our clients.  If you are not already considering this tactic, make the pivot. 

Not only can you promote your trade-in capabilities in your marketing, but also, this is an opportunity to promote other benefits of your dealership. For shoppers unwilling to “settle on just any vehicle” or those delaying their purchase, consider messages which feature service specials that can earn their business now or promote offerings that make their life easier for future purchases, such as online retailing, ease of financing or post-purchase service specials.

3. Invest in advertising which maximizes your current and future gross profit.

The longer inventory challenges last, the more likely it is that you will think limited supply is the ONLY reason your dealership is seeing higher gross profit.  Yes, it is the significant factor, but it is not the only factor.  Consumers are proving that price alone no longer sells cars - experience matters too.

How do I know?  The same reason you do.  Different types of advertising appeal to different types of shoppers.  And some shoppers, like the leads coming from 3rd party classifieds sites, tend to haggle about price no matter what.  But they are no longer the majority.  Many shoppers prioritize experience even more than price and increasingly, consumer polls show consumers will pay more to work with dealerships they trust and who offer transparency.  Perhaps this is why advertising approaches which put a consumer at the center (aka omni-channel strategies) deliver higher gross profits, even before inventory challenges lifted the tide for every dealership.  If you want to dig in to how much more, give me a shout, I’d be happy to share our numbers.

We've learned from history that those who go dark and/or take a passive approach in times of uncertainty, take longer to recover. Take intentional steps today to more fully adopt a consumer-centric marketing approach, serve relevant messages that help consumers AND strategically add value to your dealership by building experiences which bolster your bottom line now and in the future.

With the fourth-quarter in sight, now’s the time to be planning for ways to end the year strong and insure you maximize your dollars and their effectiveness.  One way is to make sure you evaluate how you maximize OEM reimbursements and move more inventory.  Co-op funds can substantially improve a dealer’s ROI by reimbursing up to 50% of your marketing spend.   Think about it, if you have a $50,000 budget and spend it in Co-op eligible ways, you’ve increased your budget to $75,000. 

But too many dealers are missing the opportunity to maximize Co-op.  Yes, keeping up with Co-op requirements and guidelines can be time-consuming and frustrating, but the potential payback is too big to brush aside.  Big dealerships may have the manpower to work through the process alone, but most dealerships need help to capitalize on Co-op opportunities and process the paperwork for payment.

Here are the most crucial questions to ask your third-party partner or OEM-approved vendor to ensure you’re not leaving Co-op dollars on the table.

1. What are the most up to date Co-op policies and submission guidelines?  And what was the most recent change?

Let’s face it, staying on top of OEM Co-op rules and guidelines is challenging because they change often.  For example, General Motors and FCA update their Co-op requirements every month based on logo and incentive requirements. Other OEMs update annually. 

Checking in monthly is a best-practice to stay compliant and verify submission deadlines.  Steps like adhering to logo and whitespace requirements, obtaining pre-approval, and submitting frame-by-frame screenshots of artwork, vary by OEM and must be rigorously followed.

Also, your vendors should be keeping an eye on paperwork deadlines. Most OEMs require Co-op paperwork be submitted within 60 days of campaign launch. Miss the deadline and all the time and money spent to accrue Co-op dollars goes right out the window.

Test your vendors to make sure they are up to speed on the most recent changes and well-equipped to secure the full funds you are counting on. 

2. Are there any special discounts or upcoming opportunities for additional Co-op dollars?

Throughout the year, OEMs may introduce special events or programs to help move more metal. This is a great way to get more bang for your buck. This is especially relevant for Q4.  For example, in the past Honda has offered additional Co-op dollars in the fourth-quarter to help move aging inventory.

Other OEMs offer seasonal promotions when they add more Co-op contributions to your advertising.  For example, FCA offers “Special Programs” made available by region.  Take a few minutes to call and find out what is available for your dealership and start the application process.  It is extra work on your part, but that call every few months has the potential to bring additional marketing dollars for your business at timely junctures.

Ask your partners to help you be a proactive about special events and programs.

3. How much of my Co-op money is available for digital?  

At the beginning of Q3, Ford changed its program to require 75-percent ad spend on digital.   Mazda, Hyundai, and Chrysler all have digital specifications that you must know to build marketing campaigns that earn you money back (some even include email in the mix which, as a bonus, is easily tracked for ROI).

As audiences for broadcast and print media continue to decline, you can expect to see OEMs continue to skew Co-op programs toward digital media. It pays to stay on top of changing requirements. Dealers who do it successfully, could get 100 percent of marketing reimbursed.

Strategize with your partners to evaluate if the marketing solutions offered maximize your digital spend.  Your best options are partners who have omni-channel solutions that work across devices and channels including display, social media, and email.

4. What tracking do you provide and how do you measure ROI for Co-op dollars?

As the digital requirement in Co-op continues to grow, so does the necessity for 100 percent transparency in ad spend and performance for your marketing dollars. The opportunity for digital waste and fraud has been well-documented.  Don’t be a victim of waste.  This requires you be diligent in holding your partners accountable in how they are investing these digital ad dollars. 

Make sure the partners you choose can track the dollars spent, create visual graphics of campaign performance, and provide meaningful reports detailing Co-op reimbursements.

Wrapping it up

Its estimated that only about 20 percent of dealers maximize Co-op opportunities. You don’t have to fall into the 80 percent who leave money on the table.  If you haven’t evaluated Co-op recently, now’s the time to do it.  Take inventory and challenge your vendor partners do their due diligence to be experts and turnkey providers on your behalf. These steps might uncover the push you need to end the year strong.