Many auto dealerships drastically cut back their overall ad spending during the springtime COVID-19 lockdowns as a way to preserve as much of their bottom line as possible. After all, the annual pace of sales fell sharply to 8.47 million in April1. This was a significant drop from the 17.05 million level it was pacing just a few months earlier in January.

However, dealers were one of the earliest segments of business to embrace a message of wide-spread cleanliness and contactless business operations, and this helped its business see quick recoveries by late spring.

This quick response helped dealers gain the confidence and trust of many drivers who still needed to service their vehicles even during the height of the stay-at-home executive orders in many locations throughout the country.

This strategy has paid off considerably, especially as the focus of car sales has turned to maintaining existing vehicles, and the sale of used cars and trucks which require ongoing and regular intervals of maintenance.

Dealers pivoted their strategies in early summer to shore up their service and repair operations and began shifting digital ad spending over to Fixed Ops campaigns, as well as focus onsite offers to convert low-funnel service/parts traffic on their websites.

Beginning in May, as dealers ramped up their focus on repair order activity, there was the beginning of an increase in repair orders and service revenue. By June, the numbers continued to increase across the board and dealers focused on making the process of service even easier for customers through enhanced contactless pickup/drop-off.

Leveraging digital channels that place an emphasis on attracting service-interested drivers, PureCars reports a 16.9% increase in dealers’ ad spending on Waze during August.

Dealers are realizing the power of video

Video has been another vehicle and advertising channel many dealers have increasingly embraced as the pandemic has grown longer.

In general, consumers find videos more engaging and more popular compared with other forms of advertising content today. The use of video is important for brand storytelling, and in today’s pandemic economy it’s proving to be necessary to increase conversion, exposure, and lead to more successful transactions between dealers and their customers.

By the year 2022, online videos will make up more than 82% of all consumer internet traffic2 — 15 times higher than it was in 2017. Furthermore, it is estimated that today users view more than 1 billion hours of video3 each day on YouTube.

Beyond the level of entertainment and engagement offered by video, dealers have realized it’s a great way to communicate emotional, health-focused and heart-felt messages during the pandemic. It’s more genuine to communicate why and how a dealer cares about its customers and employees through video, more so than any other medium today.

Creating the right strategy heading into the final months of 2020

This strategy is a big reason why Fixed Ops have been a driver of revenue for auto dealers this summer, and most likely the remainder of 2020 with the continued emphasis on servicing used vehicles.

Dealers that were progressively focused on taking a proactive approach in changing their operations to cater to the new pandemic customer are seeing pre-pandemic figures in many cases today. These dealers have focused on maximizing service and repair opportunities and promotion through digital advertising channels while making it safe and easy to with. This approach creates a winning formula that helps a dealer achieve a lower cost per customer acquisition level, which is the right business strategy that will help them get through 2020.

1: https://www.autonews.com/sales/supply-crunch-still-hampering-sales-recovery

2: https://www.cisco.com/c/en/us/solutions/collateral/executive-perspectives/annual-internet-report/white-paper-c11-741490.html

3: https://www.youtube.com/about/press/

Wow, what a year it’s been so far in 2020. Entering the year, sales of new vehicles were projected to hover near the 17 million mark, consistent with the annual sales pace over the previous five-to-six years. Growth was no longer the best word used to describe the auto industry for dealers, but the projections represented a still healthy industry.

Fast-forward six months and the reality has changed drastically. 

According to the mid-year data1, auto sales declined 33% during the second quarter, illustrating in some cases the deep cuts made from waning consumer demand due to the COVID-19 pandemic. The drop in sales ranged from 25% to 50% depending on states’ differing approach to stay-at-home orders and when they began to reopen.

Are Consumers Looking at New or Used at Dealerships?

Early in the pandemic, payment deferrals and zero-percent interest incentives were plentiful on new vehicle deals, with some spectacular offers that helped to prevent deeper cuts in new sales. However, as states began to reopen in May and June, more consumers went back into the dealer showrooms and the demand for used cars increased. Zero-percent deals are still thriving, as automotive data firm Edmunds.com reported that these deals represented 19.4% of all new financed transactions in June2.

Dealership advertising spend has also rebounded as the COVID-19 pandemic continues in the summer months. In fact, the average dealership advertising spend was up 18% when comparing the week of June 21 against the week of March 29. Furthermore, dealership advertising during the first week of July was up 31% for new vehicles, 25% for used vehicles, and 11% for fixed ops and service3. 

This early summertime push further drained inventories, particularly as manufacturing plants halted production in the spring because of the pandemic. Edmunds.com also reported that new-car supplies at the beginning of June were down by a third, compared to a year earlier. What happened to the days of just worrying about what to stock and how to price? 

Top-Selling Makes & Models WoW During July 4th

Analyzing the top-selling makes and models in early July - compared to the final week of June - there was a nearly even mix of used versus new, with used taking a slight edge. It was also mostly split between trucks, crossovers, and sedans, with today’s popular models continuing to drive much of this demand.

Supplies Will Drive Near-Term Trends

All that being said, sure there will continue to be a push for new sales, but this may be volatile in the coming weeks and months. And while used car prices are up there is nearly an unlimited supply, which means dealers aren’t stuck on new offers only, and dealers can sell used fast increasing the appeal of those deals.

Looking ahead, dealers will have several industry trends that determine what is moving off the lots. On one hand, still-short supplies of new vehicles may persuade consumers to take a closer look at used inventory, especially as more leases are returned and filling out CPO options. However, as this consumer demand continues to rise, it has also caused used vehicle prices to rise, pushing some consumers back toward new options.

Price increases are already beginning to be felt throughout the country. Transaction prices in June were reportedly expected to rise by 3.9% to $34,981, the highest level ever reported for June4. 

Nobody has a crystal ball, but dealers need to focus on what’s in their control. Dominate used vehicle sales and focus significantly on fixed ops and service.

Where Do Dealers Go Heading into Fall?

Dealers should remain focused on several strategies throughout summer, beginning with their need to lead with actionable, real-time data to guide them on the right inventory and transaction decisions. They should also shorten their decision cycles down to hours, rather than days. They may also want to determine where it’s best to focus on used/CPO through dynamic search, social marketing, and retargeting advertising strategies. Additionally, they should also focus on fixed ops as a profit center, and all advertising should be optimized by channel and ROI, including social media messages (including video) for best engagement levels.

Employing these strategies will help every dealer maximize every opportunity as we head into a fall season that’s looking to be as unpredictable and unprecedented as what we’ve experienced so far in 2020.

1: https://www.autonews.com/sales/cloudy-outlook-q2-sales-fall-33?utm_source=us-sales-report&utm_medium=email&utm_campaign=20200709&utm_content=article2-headline

2: https://www.cnbc.com/2020/07/03/how-to-shop-for-car-deals-during-4th-of-july-sales.html 

3: PureCars dealership advertising data trends