Training » 5 Critical Success Factors » Effective Marketing

5 Critical Success Factors:

5. Effective Marketing

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Q: I've spent a ton of money advertising in lots of different media, but I’m not sure what is working and what is not. Can you tell me plainly and simply how to advertise so it will work?

A: I applaud your honesty. The simple truth is, many dealerships feel like you do, but their pride won't let them admit it. While I don't have a "success pill" for you to swallow, I can provide you with some helpful information and mention a tool set that can take you out of the “hope” game.

Recently, we introduced five fundamental factors for success in sub prime auto sales. Those fundamentals provide the foundation from which a successful sub prime effort is built. Perfecting the fundamentals, like perfecting blocking and tackling in football, will insure success. They include having:

    1. Dedicated sub prime department / personnel
    2. Proper lender relationships
    3. Appropriate inventory
    4. Efficient business systems
    5. Marketing

This month we are going to look at the last of these fundamentals: Marketing – a system to consistently generate and capture a high quality of lead and measure results Marketing includes a number of activities which allow you to meet the needs of your customers and get value in return. These activities include market research to find out, for example, how many potential customers exist, what their needs are, which of those needs you can meet, how you should meet them, etc. Marketing also includes properly positioning your dealership and promoting it through continued advertising, promotions and sales. You want a system that allows you to consistently generate and capture a high quality of lead and measure results.

Protect your “brand image” - Brand image is the perception of your dealership by the consumer. While I believe you want to enjoy the profit generated by sub prime sales, protecting your reputation or image is critical. Like me, you are probably aware of dealerships that have failed to protect their brand image and as a result have become know as a “sub prime” dealership. In the early 90’s, a dealership in my area grew their sub prime sales to more than 100 special finance units per month. Though they became a sub prime “success”, it was at the expense of their retail or prime sales which still suffer today. It has been a long road turning their brand image around.

If a dealership becomes too strongly identified with sub prime, consumers reach a point where they begin to question whether they want that dealership’s nameplate on the back of their vehicle. They question whether they want their neighbors guessing whether they are one of that dealership’s “good credit” or “bad credit” customers. Advertise and promote your dealership’s name enough to let people know you do help people with credit circumstances but let the majority of your sub prime advertising be “Blind”. Blind advertising keeps your dealership’s name anonymous which protects your reputation and brand image. Additionally, you will engage your prospects only in a credit (vs. product) decision and expand your market share across franchise lines.

Direct Response vs. Image advertising – Advertising can be defined as “bringing a product, or service, to the attention of potential and current customers”. It is typically done with print ads, television and radio commercials, direct mail, brochures, e-mail messages, personal contact, etc. In your sub prime advertising, I suggest you use Direct Response vs. Image advertising. Direct Response advertising “demands a response” by requesting consumers reply directly to your advertisement, by telephone, e-mail, mail or some other means of communication. Direct Response advertising generates a sales lead you can follow up on.

Prime sales more easily benefit from Image Advertising which promotes the image, or general perception, of your dealership but does not demand a response or directly generate a sales lead. Image advertising will create lot traffic. In an earlier article, I suggested your sub prime advertising should not create additional lot traffic but should target sub prime prospects and drive them directly to your sub prime staff. Directing the customer in this way allows the appropriate staff to control the sales process and achieves a greater success rate than “front end flips”.

“John Q Public” - Television, Print, Radio, Inserts, Billboards, Internet, –advertising reaches the whole market and follows the 100/50/25/10 rule.

What is the “whole market”? Within a 30 mile radius of most dealerships, an analysis of credit scores shows that approximately 50% of the individuals have credit scores of 640 or less. The “whole market” would be that segment of population around your dealership that might respond to sub prime advertising. The 100/50/25/10 Rule suggest that for every 100 workable leads, you should be presenting ~ 50% of them to your lenders. Of the 50% presented to lenders, you should see an approval rate of ~ 50%. Of the net 25% approved, you should deliver between 40-60% resulting in a net 10-15% delivery ratio.

Television, Print, Radio, Inserts, Billboards and the Internet reach that entire market. I often refer to these media types as “John Q. Public” advertising because they reach out to that market without discretion to credit quality. You get the “good” along with the “bad” and will work through a larger number of prospects to find the sales. These media typically provide your lowest cost per lead but may not provide your lowest cost per sale. You can improve “John Q. Public” lead quality by putting qualifiers in your ads such as “If you are currently working and have verifiable income of at least $X,XXX / month…” or “Minimum $X,XXX / month income and X years job time required”.

“Targeted” Direct Mail advertising pre-screens prospects based on actual credit filters and improves your sub prime metrics

It is possible to pre-screen the market by accessing actual credit data. Pre-screening your prospects before you advertise to them allows you to improve your metrics and more quickly reach those prospects you can deliver. When one of our dealerships looked at their Market Analysis and understood how we use filters to eliminate those customers who are not able to buy, they best described the process. “I see what you are doing. You’re going to that ‘whole market’ and just bringing to us the ‘best of the worst’”. He was correct.

Keep in mind that three things make direct mail work: 1) Design of the piece and the offer -. 2) Mailing List – Make sure you data is fresh, properly filtered and managed to maximize sales without burning out your market and 3) Follow Up – Make it easy for your prospects to respond and be sure you have in place processes for follow up and accountability.

In each of these areas, there are proven techniques that insure success. Make sure your mail company is using them.

Both work well. Lead quality and quantity are variables that need to be balanced to match your dealership’s capacity and optimize your ROI.

What advertising will work best for your dealership? I’d suggest it depends upon your dealership’s capacity. Your capacity is defined by the competency in each of the other 4 other critical components. Dealerships with well trained staff, the proper lender relationships, appropriate inventory and efficient business systems may be well suited for a high volume of “lower quality” sales leads. If your department is smaller or your business processes are not as well defined, scale down. Evaluate your strengths and weaknesses in each of these areas and don’t bite off more than you can chew.

When advertising, think of lead “quantity” and lead “quality” at two ends of a continuum. Generating a high volume of sales leads does not necessarily equate to a high volume of sales. That lead quality may be so poor that few convert to sales. Similarly, a high quality of sales lead may leave sales on the table if your staff is only picking up the “low hanging fruit” or does not have enough lead flow to keep them occupied. What is most important is to consider your return on investment.

We only manage that which we measure. To evaluate ROI, I suggest you track each of your media types to look not only at cost per lead but also cost per sale. Begin with how many leads you receive from each of your media types? Of those leads how well did your staff do setting and keeping appointments? What was your approval rate by media type? Most importantly, for each of your media types, can you answer how many leads: converted to a “Sold” unit, are still “Actively Working”, scheduled as a “Future Opportunity” or became a “No Sale”?

Tools are available that can help you know exactly where your sales are coming from. Many dealerships’ monthly advertising plan is similar to playing a “hope” game. If last month went well, they repeat their advertising plan and “hope” it works again. If sales were off, they make changes and “hope” the new plan works better. The dice rolls but it is based upon hope and not solid business intelligence. This month, one dealership using our tool set intelligently re-allocated $5,000 of their advertising budget from media that was not performing to media that was. Hard factual data helped them make an informed business decision.

Goal is to gain market share, and where and when possible, to sell across franchise lines to do so.

Would you like to know what your market opportunity is? We provide our clients a free Market Analysis of the population around their dealership, defining their opportunity, by illustrating how many prospects are prime and how many are sub prime. If you’d like to see your market, e-mail your contact information and I’ll be glad to provide a Market Analysis at no charge.

The sub prime market holds great opportunity for dealerships today. To lay hold of that opportunity, it is critical that you perfect the five critical components we have discussed these past months. With these components in place, your dealership is positioned to proactively pursue the profit available in the sub prime market. The average gross enjoyed from your sub prime sales is typically higher than those from prime sales. Additionally, because many of these prospects are “credit captive” customers, it will be easier to capture these prospects and have them respond to your advertising.

Few opportunities exist in the automobile industry like sub prime. Today, manufactures fight for market share in the prime market with low interest rates, rebates and low price offers. Gaining market share is a battle. Properly pursued, this sub prime market will allow your dealership to significantly grow profits and gain market share by selling individuals that might otherwise be your competitor’s prospects. Perfect the fundamentals we have discussed and I believe you will achieve the success that you want. Happy selling.

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Charlotte, NC 28269
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