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Derrick Woolfson

Derrick Woolfson Business Development

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How Much Are You Paying In Vendor Fees for Ad Spend?

Now more than ever, your dealer needs a clear, defined marketing strategy. One that lends itself to maximizing your dealers budget. It is times like this that push us to think and approach ideas differently. Keeping in mind that the very decisions and actions made today can and have a lasting impact. Instead of approaching the situation with band-aids - with the hopes of things picking back-up naturally - you have to get ahead of the situation. There are many ways to approach your marketing strategy, but it starts by reviewing your actual marketing budget. That is removing all of the white-noise out of the budget - i.e., CRM Costs, Website Hosting Costs, and Software/App costs are not marketing expenses! That and stop solely worrying about what the same OEM down the road is doing, and focusing on your dealership and its surrounding area.  

Advertising Budget. Make the Right Moves. 

Advertising budgets tend to be more complicated than they need to be on the dealer level. The idea that the budget, itself, includes far more than actual advertising. By that, I mean, they tend to include everything from CRM costs, dealership expenses, and website & software expenses, to name a few. In most cases, it is best to have a separate line item for 'operational' expenses, which is your software, CRM, and websites (not advertising, but the actual cost to host your website). When you break down the budget and solely look at your real advertising spend, it becomes easier to identify areas you can cut, vendors to remove, and possibly vendors that you will need to add to maximize your dealerships efforts. 

More importantly, one of the go-to band-aids for "spend reductions" in our industry is to simply "pause," or "cut" ad spend. At first, this seems like the logical thing to do. Make no mistake, though; in many cases, this can wind up doing more damage than good! You have to remember that simply "flipping" the switch on/off does not solve any problems other than an "immediate" drop in costs. But keep in mind that an "immediate" drop-in spend could be costing you more in the long-term. We tend to think short-term (like today) versus thinking about future ramifications. Not to mention, what we tend to ignore (and overlook) is that by the time you decide to flip the switch back "on" your ad spend tends not to go as far as it did previously. 

Instead of slapping on a band-aid and saying, "well, we just need to cut expenses. The more money we make, the more I can spend with advertising." Focus on the ads you are currently running! When is the last time you actually read the vendor reports? When is the last time you reviewed the actual campaigns (Google PPC Ads) the vendors were running? Your dealership needs change, and so should your ad campaigns! 

For example, several dealers often neglect marketing for fixed-ops other than the occasional - expensive - OEM mailer. Or the ground-breaking (repeated, expected) organic social media post for a coupon (FYI, collecting likes does not increase your absorption rate) that does not get much traction. 

As for the PPC Campaigns, when is the last time you reviewed your OEM's detractor report (the report that outlines the OEM you are losing the most sales to?) and worked with your vendor to devise and strategize new ad campaigns? Cleaning up and re-working your ads can make your spending go further. And selling an extra two to three vehicles a month can make all the difference. 

One of the other things you need to review is what percentage of your ad spend the vendor is taking from the top! If your vendor is taking 30% of the ad spend for "fees," you need to negotiate a better cost! 30% of your $15k budget is $4,500 in fees! For example, if you have five stores in your group, which is $22,500 a month, you're not spending to run ads. 

Bottom Line: You do not know what you do not take the time to ask and review. And to keep your dealership on the right track - a sustainable track - you have to have a clear picture of your *actual* advertising spend for the dealership! Once you have a clear outline of your total spend, it is best to devise a refined strategy with your vendor making sure you are getting the most out of your ad spend. 

When is the last time you checked your dealer fees on ad spend? Have you found more success after taking the time to restructure ad campaigns? 


John Finucane

30-39% fees are common...and crazy! 

Chris K Leslie

GM really bogged us down with who we can use for ads and the fee structure. I dont like it one bit. 

Morgan Hardy

@Chris- why?

Dean Love

I've seen management fees starting to run as high as 30+% and I agree that is CRAZY, and often unwarranted.  However, if you happen to be paying a pre-negotiated 'flat' amount (regardless of the total spend), I think you need to ensure the vendor is held accountable as well, since the incentive to drive performance can be affected.  

Morgan Hardy

@Dean- I think it is beneficial for the dealer to do as much as possible in house. 

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