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The Silent Killer

August 2008, F&I and Showroom - Feature

by Bob Blackburn

The American Heart Association reports the following: “According to recent estimates, nearly one in three U.S. adults has high blood pressure, but because there are no symptoms, nearly one-third of these people don’t know they have it. In fact, many people have high blood pressure for years without knowing it. Uncontrolled high blood pressure can lead to stroke, heart attack, heart failure or kidney failure. This is why high blood pressure is often called the ‘silent killer.’”

To head off high blood pressure, you visit the doctor regularly to keep track of your weight, heart rate, cholesterol levels — basically, all the vital signs that can warn you when the silent killer is creeping up. As with your own body, you can keep your dealership healthy by paying attention to the vital signs and being proactive about it.

Performing a checkup

If it’s been awhile since your dealership’s last physical exam, let’s start with the two most basic vital signs: sales figures and return on investment (ROI):

1. Sales figures. The most obvious problem vital sign is declining numbers of sold units. Lately, this is almost epidemic in dealerships. Declining gross profits per unit accompany declining sales. Why? Dealerships look to move more units at any cost in an effort to reduce inventories. Manufacturers throw incentives and rebates on slow-moving units to help dealers feel better. Like a short-term diet, you will see no real results from this approach. (Will my blood pressure go down if I eat bran once in awhile?)

Dealers who survive and thrive in down times know how to adapt to a changing market. They proactively approach tough times. “Reactive” dealers reduce advertising expenditures investing their advertising dollars with cheaper sources. They may eliminate advertising altogether, assuming they’ll sell the same number of units whether they advertise or not. (Will my blood pressure go down if I don’t start exercising or change my diet?)

2. Return on investment. In tough times, when dollars are short, spending money haphazardly is foolish. Most of us look at each purchase we make to ensure we get the most for our money. Marketing efforts for dealerships are no different. You have to get the biggest return on investment, or ROI, for your advertising dollars.

I recently met with a dealer client who wanted to know how many leads our direct-mail campaign was producing. He suspected that not enough “bodies walked through the door” to justify the money he was spending. But when I asked how many of the customers who did respond to our mailing bought cars, and how much profit he made on those sales, he didn’t know. For some reason, he only cared about the number of leads. He wanted to calculate his ROI, but he was missing a major part of the equation. (Does knowing my blood pressure mean I control it?)

Getting healthy

As it turned out, the dealer in the example above was enjoying a tremendous response rate, one of the highest we had ever seen. Yet the return on investment was a mystery to him. A more proactive dealer would have known not only how much the campaign cost, but how much profit it produced. He would have known how many units were sold and the average gross profit generated. These are the most important statistics available, and they’re not all that hard to track.

Your dealership’s vital signs are the best indicator of the “health” of your marketing efforts and the store itself. They clearly indicate the effectiveness of your limited advertising dollars and whether the maximum profits are produced. After all, anyone can sell you cheap leads, but the old adage is true: “You get what you pay for!” The real cost is seen in the results. (Should I tell myself my blood pressure is fine without knowing the number?)

Bob Blackburn is vice president of sales at AutoLending Network in Charlotte, N.C. E-mail him at bblackburn@special-finance.com.

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