Advertising budget questions

[flosho]

Looking for some insight on this topic. I work at an independent dealer that has roughly 32-37 cars on the lot ready for sale at any one time. We sell roughly 25-30 cars a month with this inventory level.

We spend what I perceive to be a fair amount on advertising, but until 6 months ago, we've done zero traditional advertising. We have zero billboards, zero tv commercials, zero print ads, zero direct mailings, zero local sponsorships or community involvement. In the last 6 months we've spent about $2k on radio ads with one of the local agencies that control 6 stations.

Our money is spent on 3rd party classifieds, craigslist, google and facebook. Our budget is around $10-11k including our ad spends for PPC and FB and a 3rd party that runs Meta and most of our Google ads. We've historically spent a fair amount on CL but have cut that down in have to about $2k.

Our business model up until 2.5 years ago was almost entirely online based. Meaning 85-90% of our customers were coming from some distance away or are local but found our vehicles online. Now we've transitioned to a new(larger) location and are more "retail" sales oriented. We're always wanting to find additional avenues to advertise our business. But our budget is not unlimited and so the decision to cut some services to add other unproven services is a difficult one. Especially on advertising sources that have almost zero provable ROI (Billboards, radio, pumps, banners/sponsorships). Some of that will just be top of mind and name recognition but I'm not into spending an additional 3-5k a month to plaster the radio just to say we advertise on the radio.

Any thoughts on the budget we have compared to our inventory and sales? Some of our local bigger dealers must spend tens of thousands between all the radio, tv, gas pump videos, sponsorships, etc.

Ultimately our goal is to get into the 40-45+ sales on 55-60 inventory units.

 

[Dan Sayer]

All of my experience with used is within the franchise model and we have no luxury lines New and see very little used luxury so take this with a grain of salt. I think your per vehicle spend is currently too high at north of $400 per unit sold and your turn is too low at about 9 to 10 times a year. Average age is 45 to 60? Before you change anything, I'd look at making sure your sales process and lead response is solid to see if you can gain sales from process which would lower your per unit ad spend as well as increase turn. If that is buttoned up, then may look at your pricing strategy for speed and turn. Lowering gross per to increase total gross is one strategy and you increase your turn thereby lowing your lot carrying costs. The goal you laid out is actually lowering your turn to 8 to 9 times a year. I think your goal should be to sell 40 units from 40 on the lot and I assume you have a plan for acquisition to match the pace. Your photos are legit by the way. Some of the best photo work I've seen. Jealous. How are you measuring the success of your 3rd parties? I'd boot Edmunds and include a major like Cars or AutoTrader. What type of return are you getting from the agency running your dig ad?

 

[flosho]

All of my experience with used is within the franchise model and we have no luxury lines New and see very little used luxury so take this with a grain of salt. I think your per vehicle spend is currently too high at north of $400 per unit sold and your turn is too low at about 9 to 10 times a year.

I appreciate the feedback Dan! We've never tracked our marketing spend per unit so that is a good nugget. It's also a bit humbling as I've been feeling like our turn is solid given our niche and the general structure of our dealership. We don't have fancy softwares to easily track recon times and turn ratio so it has to be done manually.

Average age is 45 to 60?

So our marketing time for last year was around 37 days on average from website to sold. But our purchase >> sold timeline is closer to 90 days on average for all the vehicles we sold. Our average time to get a vehicle through mechanical recon is around 25+ days. There are some glacial changes being made to improve that timeline though.

Before you change anything, I'd look at making sure your sales process and lead response is solid to see if you can gain sales from process which would lower your per unit ad spend as well as increase turn.

Well this is a constant battle. Our response times tend to be pretty good. Our follow up sales process can be lacking. We only have 2 full-time sales guys and 1 store manager that also does sales and then both of us in marketing are licensed as well but rarely handle sales.

Typically a good percentage of our monthly sales are from the low hanging fruit. Literally folks beating the door down to buy stuff. So once a lead goes cool after 5-7 days the follow up pattern is not what it should be.

If that is buttoned up, then may look at your pricing strategy for speed and turn. Lowering gross per to increase total gross is one strategy and you increase your turn thereby lowing your lot carrying costs.
The goal you laid out is actually lowering your turn to 8 to 9 times a year. I think your goal should be to sell 40 units from 40 on the lot and I assume you have a plan for acquisition to match the pace.

I'll have to discuss this with the GM. Our pricing strategy is more for increased gross than turn. Part of that is as you can probably imagine our ability to process vehicles is not as fast as other dealers. With Euro/Imports and being independent we often have to wait a few days for parts from our suppliers. If I start pricing vehicles to sell fast, we'll end up with the accordion effect of selling a pile of vehicles and then dead period when our inventory drops and service has to catch up.

We simply do not have the capacity in service to get 40 units inspected and recon in a month. We would need at least another high level technician.

Your photos are legit by the way. Some of the best photo work I've seen. Jealous.

Much appreciated. We've got a guy on staff that takes a lot of pride in the photos (and I photo some too). Our marketing of our vehicles has always been done to the nth degree. Photos, descriptions, accuracy, etc. Our goal is that the buyer has already fallen in love and purchased the vehicle in their heart before they get here.

How are you measuring the success of your 3rd parties? I'd boot Edmunds and include a major like Cars or AutoTrader. What type of return are you getting from the agency running your dig ad?

We don't use edmunds. We've got Cars and ATC along with Gurus, carfax and carsoup. Measuring the success between all the sources is a constant battle. I monitor GA4 and our sales guys do an OK job of asking for the sources. We just implemented a customer survey that gets completed after paperwork is signed and has some attribution questions. Unfortunately about 50% contradict either what the source in our CRM says from internet leads. And they have only a 50% rate of obtaining these "required" surveys. The agency is seems to be netting us around 3-4 fb sales per month and sends us tons of traffic to our website. I'm not sure it's worth it. They are very responsive and are constantly tweaking things to make improvements. Still not sure its worth the money though.

 

[Dan Sayer]

Our average time to get a vehicle through mechanical recon is around 25+ days

IMO this right here is your priority issue. I think the industry average for daily holding cost (dept expense - selling expense / units sold / 30 days) is about $50 which means you're hitting the market with a car that already racked up $1,250 in DHC but doesn't have a single eyeball on it yet. You said you were making changes in this area which is great. If you could get to 14 days that would have an incredible impact on your business in both net and turn.

 

[Dan Sayer]

We don't use edmunds. We've got Cars and ATC along with Gurus, carfax and carsoup.

I could have swore I found one of your BMWs by a VIN search on Edmunds and couldn't locate it on Cars or ATC by filtering to your zip, etc. I'm going to about-face on what I said then and you need to cut one of those to reduce your expenses. I'm just taking back over marketing for the group as we've had some leadership shift. I fired both Cars.com and AutoTrader and kept Cargurus and Carfax listings. In our markets (may be different in yours), those two had the highest rate of return in leads and VDPs and best engagement on site referrals. I don't need to stack more an more leads on a single VIN with our Used inventory being as thin as it is right now. I don't see any need for Used dealers to include traditional ads if they have a solid online strategy. Used has always been about merchandising, pricing, and VDPs.

 

[flosho]

I could have swore I found one of your BMWs by a VIN search on Edmunds and couldn't locate it on Cars or ATC by filtering to your zip, etc. I'm going to about-face on what I said then and you need to cut one of those to reduce your expenses. I'm just taking back over marketing for the group as we've had some leadership shift. I fired both Cars.com and AutoTrader and kept Cargurus and Carfax listings. In our markets (may be different in yours), those two had the highest rate of return in leads and VDPs and best engagement on site referrals. I don't need to stack more an more leads on a single VIN with our Used inventory being as thin as it is right now. I don't see any need for Used dealers to include traditional ads if they have a solid online strategy. Used has always been about merchandising, pricing, and VDPs.

Our vehicles are on Edmunds, but we don't pay edmunds to list vehicles so it must be pulling the feed from one of the other sources (ATC is my guess).

We've just started with the survey and some other manual methods, tracking the 3rd party sales.

All of them have such ambiguous reporting with the way they attribute sales to their sites simply by removed inventory after some sort of action.

 

[Dan Sayer]

Our vehicles are on Edmunds, but we don't pay edmunds to list vehicles so it must be pulling the feed from one of the other sources (ATC is my guess).

We've just started with the survey and some other manual methods, tracking the 3rd party sales.

All of them have such ambiguous reporting with the way they attribute sales to their sites simply by removed inventory after some sort of action.

Well, I evaluate 3rd party classifieds by three things:

Cost per VDP - what am I paying you to get a set of eyeballs on my car. We see anywhere from $0.54 to $1.38 and in the same month with each of them having the same inventory, you can challenge them on "why are you $X higher than ______?".

Leads and Solds - knowing that we are working all the leads the same way, in 90 days which source has the highest volume and close rate. What is my cost per lead, cost per sold and compare them.

Referrals - hopefully you have GA4 Key Events set up to get an idea of whose referral traffic not only spends the most time and whose most engaged but which source is really hammering those Key events.

 

[flosho]

Thank you for all the insights Dan.

I have a tangential question related to GA4. We do have key events set up. Unfortunately, we are getting skewed data from our credit application key event. It will give me a count like 256 key events in a month, but we don't get that many credit apps each month.

Our website has a RouteOne credit application integration and it would appear that it counts a key event every time the credit app link is clicked, instead of every time there is a submission. I've been told that there may not be a great way to track these submissions (like add a "thank you for your credit app submission" page and count the key even on that page instead of the initial link click.) We are on the basic R1 plan so we don't get partial credit app captures which I think is an option.

I can track the standard lead submissions pretty easily and just not count the credit apps but that's not the best route either.

 

[Dan Sayer]

Thank you for all the insights Dan.

I have a tangential question related to GA4. We do have key events set up. Unfortunately, we are getting skewed data from our credit application key event. It will give me a count like 256 key events in a month, but we don't get that many credit apps each month.

Our website has a RouteOne credit application integration and it would appear that it counts a key event every time the credit app link is clicked, instead of every time there is a submission. I've been told that there may not be a great way to track these submissions (like add a "thank you for your credit app submission" page and count the key even on that page instead of the initial link click.) We are on the basic R1 plan so we don't get partial credit app captures which I think is an option.

I can track the standard lead submissions pretty easily and just not count the credit apps but that's not the best route either.

We don't have our RouteOne credit applications tracking as a Key Event because 99% of the submissions are directed there by the store as part of the sales process. They also don't trigger an XML new lead notification to the CRM for that same reason. How many of your credit applications are "first time hand raisers" starting with a credit application vs your credit application is being used because your sales people are sending them the link or directing them there as part of the sales process?

 

[flosho]

We don't have our RouteOne credit applications tracking as a Key Event because 99% of the submissions are directed there by the store as part of the sales process. They also don't trigger an XML new lead notification to the CRM for that same reason. How many of your credit applications are "first time hand raisers" starting with a credit application vs your credit application is being used because your sales people are sending them the link or directing them there as part of the sales process?

We do get a handful of shotgun credit applications each month from customers that haven't talked to anyone at the store.

But, this was exactly what my plan was, to just remove our website credit link from Key Events reporting because like you say. Most of the submissions are from sales guys sending the link. We probably get 3-7 a month in the shotgun method (1st point of contact with us).