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Rethinking Marketing ROI

Industry insider explains why so many consumer marketing campaigns remain highly inefficient.

May 2016, F&I and Showroom - Feature

by Jared Kalfus

It seems like everywhere you turn, there is an immense amount of conversation and pressure to drop your current dealer marketing strategy and throw all your eggs into a new basket, such as direct marketing, social, or mobile.

These “wave-of-the-future” strategies have promise, and there is even some decent ROI associated with each. But what about finding a better way to do what you’re currently doing in terms of customer marketing?

Some habits are hard to break in the automotive industry. And to be honest, some don’t have to be broken, especially if you can simply find a better way. This is exactly what’s happening with dealers and the way in which they market to their customers. The marketing works, but the method is failing us.

The problem isn’t necessarily at the tactical level. Direct mail still works. Equity marketing remains highly effective. DMS information is ripe with accuracy. The biggest problem is the way in which all these components come together. The process is disjointed. It’s frustrating and inefficient. Worst of all, it could be costing you millions of wasted dollars.

It’s important for dealers and their marketing partners to reevaluate the way in which customer marketing campaigns are developed and managed, and many of the reasons are financial. Dealer profits are shrinking, mainly due to shrinking margins on the sale of new and used vehicles. According to Henderson, Hutcherson and McCullough (HHM)’s recent auto dealer economic outlook, the gross profit margin for dealers fell from 13.5% down to 13.3%. The report also stated that the average new vehicle gross profit fell from $1,204 to $1,193. Gross margins also declined from 3.81% to 3.68%.

Furthermore, according to research firm Statista, the average-size dealership (selling between 150 and 399 cars annually) spends approximately $616 on advertising per each new car sold. This number goes up as dealer size shrinks. The firm points out that dealerships selling fewer than 150 cars a year are faced with a per-vehicle advertising spend of $862. This figure can be lowered simply by consolidating the different touchpoints involved in the development of campaigns.

Currently, if you and your marketing agency wanted to pull together a new customer marketing campaign, you would have to consider the needs of six different vendors, each of whom have a distinct role in that process:

1. Your DMS vendor runs the central hub of vehicle and customer data that often serves as the backbone of each campaign.

2. Your consumer auto data supplier holds intimate demographic data on would-be car buyers.

3. Your incentives vendor manages vehicle sales data that can help set incentives and other offers for the benefit of the car shoppers.

4. The vendor who produces photos of each vehicle helps ensure each customer is enticed into learning more.

5. Your vehicle values vendor provides all the necessary data for accurate valuation.

6. Your printer takes the essence of the campaign from the marketing agency, builds the direct mail piece and manages shipping logistics.

When the dealer and marketing agency want to build and execute on a campaign, all the correspondence and planning between these six different vendors takes time, as well as individual markups that can drive up the campaign cost and eat away at your profits.

So where do we go from here? Well, the industry needs to collectively find a better way to streamline the process for developing and executing customer marketing campaigns. By doing so, dealers will begin to drive more costs out of the equation, which will help offset the pain they’re feeling on the balance sheet.

Jared Kalfus is senior vice president of sales for Black Book, a provider of timely, independent and accurate vehicle pricing information. Email him at [email protected]

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