Dealership Managers Were Set Up to Fail
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Dealership Managers Were Set Up to Fail

Dealers have been increasing digital marketing investments for years but more recently the online marketing machine is running out of gas. Dealers are spending more on marketing and selling fewer vehicles. Net profit margins are down as healthcare, insurance and financing costs increase.

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As I prepare my keynote address for an upcoming conference it has become clear to me that unless I simplify my slides, I may lose the audience.

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The answers I will present are somewhat complex and involve a change in mindset. I pray that I will be able to reframe the problem (a broken marketing strategy) in such a way that attendees can walk away from my presentation with a clear plan of action to improve their Return on Ad Spend (ROAS).

Dealers have been increasing digital marketing investments for years but more recently the online marketing machine is running out of gas. Dealers are spending more on marketing and selling fewer vehicles. Net profit margins are down as healthcare, insurance and financing costs increase.

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One dealer shared with me this week that their YOY new/used car sales, for the first nine months of this year, were up only 1 percent while their marketing budget had increased by 21 percent. Does this sound like your dealership? This cannot continue. What will dealership managers do?

I hope it’s not a 20 percent cut in expenses across the board from their marketing budget. However, in many cases, without a clear understanding of how their marketing is working, mandated cuts occur. This type of knee-jerk reaction often makes matters worse because the investments that are generating showroom traffic are reduced too.

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Dealers Are Asking Better Questions

Dealers are asking better questions of their marketing agencies but in many cases the answers they receive are not sufficient. David Boice, CEO of Team Velocity, shared with me recurring questions that come up with dealership managers:

Can you tell me how much money we made from transactions directly related to our marketing?
Can you share their names and their journey from shopping to signing?
Can you distinguish our results between our existing customers and new customers?
How did we know the marketing impacted incremental transactions versus transactions we might not have otherwise done?
Which strategies generated transactions?

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GMs are looking for answers that can illustrate how marketing investments relate to actual sales. They do not care about impressions, clicks, time on site or VDP views. They have to sell more cars at a lower cost or they’ll be out of a job.

Boice has invested in the technology and processes that can address the real concerns of dealers.

General Managers Never Had the Data

After my presentation, I hope dealership managers will come to realize that they were set up to fail. Their frustrations with marketing results are rooted in the fact that they never had the data to inspect the effectiveness of their marketing investments.

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Once managers learn what they need to do and get the right data, they will be on a path for greater success. Equipped with a solid data strategy, managers will build the necessary confidence to lead their business to higher sales and profits.

GMs can inspect the performance of their F&I team or their fixed operations department in minutes. They know exactly where to look on their P&L statement. They have that important data. However, when it comes to their $50,000 to $100,000 a month marketing budget, they just scratch their heads and hope that it’s working. Dealership managers run their business “by the numbers,” and it is time to get the data they need to increase Return on Ad Spend.

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Dealers Don’t Have Quality Metrics and Outcome Reporting

Another realization that I hope managers grasp is that most of the metrics they look at each month focus only on quantity and not quality. Dealers get reports that show Website activity, but none of these metrics help a manager improve traffic quality.

Dealers get reports on how many “conversions” their marketing investments generated but there is no standard definition for this word. For some vendors, a conversion is a defined opportunity (lead form, call, text or chat) and for others it could be a visit to a Website page. It gets worse, like the agency call my team was on this week. The marketing vendor was glowing at the 600 percent conversion rate for an AdWords campaign.

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Now, if the dealer asks their agency to break out the “conversions” by opportunity (sales, service, parts or just a business call), they will tell the dealer that the data is not available. That is partially true. You see, dealers can track true conversions and can inspect outcomes if they have the right guidance and data strategy.

Angry with the Wrong People

Managers are often looking in the wrong place to increase ROAS because of the lack of data, metrics and transparency of their vendor partners. It is common for a GM to complain about the cost of third-party portals (i.e. Cars.com, Autotrader, CarGurus) and many believe that they could do away with these platforms. That idea is based on ignorance, not data.

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Imagine if real estate agents said they didn’t need Realtor.com,  Zillow, Trulia.com, etc. and could drive in-market house buyers to their local real estate Website better than these portals. You would laugh at them, or you should. Consumers will shop where they find transparency, validation, selection and tools to fit their needs. The ecosystem of dealer Websites and third-party Websites is the world in which we live. Managers need to get serious about obtaining the data they need to run their business more effectively.

Google Gets a Pass

The odd thing is that, after analyzing thousands of Google AdWords campaigns, there is often more easily identified waste than the full cost of an average monthly portal subscription on Cars.com or Autotrader. Why do Google investments, via an agency partner, get a pass? Do dealers understand that 70 to 90 percent of all AdWords conversions come from simply buying the dealer’s name and OEM/city-name keywords and sending the click to the home page?

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In fact, dealers have been increasing their Google spend in blind faith. Why? Because I know dealership managers don’t have the data and reporting to see which AdWords campaigns are working best to drive sales. I will continue to write and share about ways dealership managers can optimize their AdWords investments to eliminate waste.

Google advertising is a required investment for dealers, but the blind romance has to end. It doesn’t matter what “playbook” is presented to dealers. If Google doesn’t enforce conversion standardization, support traffic quality metrics and help agencies tie marketing investments to sales, the YOY increase in Google investments will start to decline.

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Dealer Groups Will Act Faster and Benefit More

Dealer groups are spending millions of dollars in marketing per year so identifying 20 percent waste ends up becoming a big number. Money often motivates change, and that is why I am urging marketing managers from dealer groups to invest in next-generation marketing training.

Brian Pasch

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