My attempts to tell everyone how important it is to know this information (which would of course strengthen the fact of how low our ROI is on newspaper and TV) have not gone un-noticed, just without action. I’m going to have to try harder to get my dealer’s attention on this fact so that it will get enforced.

Especially now, we need to know how to squeeze the most out of every penny spent in advertising. Thanks for giving me some motivation to persist in this!

Our dealership has always looked at performance of advertising sources to decide whether to keep or shut down the vendor. We look at Closing ratios, Cost per vehicle sold, Gross vs Cost, etc.

In addition we have never really spend a lot on branding since it is hard to see what you get as for the ROI (not that it is bad)

What we have started the last several months is let all our vendors know that if we do not get help from our vendors we will have to shut them down alltogether. We send all our vendors letters asking for a decrease in price (keeping the service the same) or increase in service. This has worked extremely well with some vendors including our CRM vendor, credit pulling vendor, oil vendor, etc.

That said, when looking strictly at the Internet, I think you can really negotitate with your vendors and monitor the quality of the leads you are getting.

Regarding Consumerism:

I have noticed that although lead volume is about the same from third party and our own website, we have seen a decrease in closing percentages. Customers are telling us they are “just looking” more then before, which tells me that our customers are being more carefull because of the economic situation. The want is there, but the need has been lowered.

The internet marketing system is completely foreign to the automobile industry. The internet demands planning,review,corrective action when necessary. Dealerships have relied on taking what comes with little long range planning. Of course this is not everybody and is slowly changing. (at this point)
If you are not reporting your results to th General Manager on a Monthly basis I believe this is a big mistake. Show your return on investment. It takes out the guesswork and prevents quick uninformed decisions.

Conversion. I strive for 15% conversion on

1. Leads submitted to my web address, this includes sem,seo and pay for leads.
2. 15% on phone up leads generated solely by the Internet department. On a monthly basis

While I have not obtained this allways I have been within 1.5 percentage points the entire year.
Branding. Great topic.. This is the new frontier. I am right now exploring that option. If I can brand effectively will I need other lead sources?

Consumerism-People are the same today as before. Have you changed? Master the basics,believe in your product,believe in yourself. Yes they have more access to information. But so do you!!!Make it happen do not wait for it to happen!!

Hopefully this was some value from a internet persons point of view. Happy selling!!!

Rather than recap the obvious need to focus on ROI rather than the initial expense and the importance of a P&L engineered with journal entries accountable to specific percentage guidelines to insure profitability based on department and individual accountability it is important to recognize that those wisdoms only apply if the US dollar and the basic infra-structure of our “capatilistic” society remains intact.

A simplistic example is that many GM’s have “memorized” certain expense guidleines from the cheat sheets supplied by the OEM’s to develop an acceptable NET ROI for the dealership but few of them recognize that if the Gross Revenue from sales and fixed operations dosen’t meet certain minimums there won’t be enough cash flow or revenue to maintain them. Unfortunately, you can’t force the market! Advertising, for example, can be ball parked at 12-15% of Gross Income to maintain minimum market share and presence but that may swell to 30-40-or 50% if you only sell 4 new cars a month and 10 RO’s per day – as some domestic dealers are now faced with.

Cuts made as a “re-action” to these new levels are not actions unto themselves and therefor they will only lead to more reactions and a downward spiral unless a longer objective and “end game” is applied now – while a dealer’s minimum working capital requirements and market share responsibilities are being met. If not, the decisions may be taken out of the dealer’s hands and into the OEM’s who unfortunately have a different agenda in today’s troubled times.

The likliehood of “hyper-inflation” and depression resulting from our “floating” dollar that is no longer supported by Gold reserves or even Military options to preserve and protect our interests suggests that our economy will be impacted by forces beyond our control. The falling price of oil hides an exposure of Russia and other oil based economies to force a conflict to restrict oil production to get the prices and their economy back on track. Recent shifts of american based corporations and their assets off shore have also left industries tied to the mainland US – like retail car dealers – on their own. Now that I have scared the heck out of you – let’s answer the question posed by this article.

Expenses must be cut to preserve minimum working capital and preserve cash flow long enough to survive at least one – maybe two years – without any expectations of profit. Sorry, but you asked! Those dealers that can’t survive losses for one to two years by drawing down on in-house assets – not dependent on credit lines or encumbered assets but actual available cash – are at risk of going out of business. The consolidation efforts being forced by the OEM’s is a reaction – not an action – and the “trickle down” impact will force undercapitalized dealerships out of the business. If you are not currently positioned to survive 1-2 years with no profits, and if even after expense cuts your current debt service and minimum fixed and sem-variable expenses place you in a negative cash flow – then the best advice is to look to cash out now while the decision is still yours. If you are a domestic dealer seek the highest and best use for your real estate with the expectation that there is no “blue sky” left to your franchise and protect the assets that you have before they are gone.

Now, for the good news! If you have properly analyzed the ROI on every expense within their own limited areas of responsibility and you control expenses to minimize your expenses to preserve as much cash flow as possible and you are still able to maintain your debt service, staff and minimum working capital and you survive the forest fire that is about to take place then you can expect to benefit from the new growth that will surely follow. Those dealers that survive will increase their market share and when the market comes back – AND IT WILL – they will recoupe their losses ten fold. The trick is to be one of those dealers that survive!

I can see why dealers are so anxious when it comes to spending in general. I think you nailed it when you asked for thoughts and feefback on reporting, statistics and conversion
Imagine if every marketing company that pitched a dealer today was required to walk in with their written guarantee as to the results they would deliver?
It would be a different economy don’t you think?
I think the spiral effect of fear and lack of advertising spending has run its course and now its time to stand up and take advantage of this market.
The current Market desperately needs leadership, courage, and most of all marketing dollars in play stiring up the buyers that are definately here today.
I own along with a partner a marketing company named Team Velocity, and As crazy as this may sound, our company is growning like never before. Its growing because we are willing to guarantee our results.

To us a written guarantee is easy, especially when you actually do something that works.

I believe all dealers begining today should require a written guarantee from all their marketing partners.
This would do 2 things, it would eliminate the pretenders and make it easier on companies like Team Velocity, that are serious about growing a dealers business.
This is the best market of all time to TAKE market share away from your competition, as most of them are asleep at the wheel waiting for a sign from above that all is well.

Thanks, Budd

>> Consumerism — this is something the last few months, as the big 3 have shown their struggle more and more, has dramatically changed in our area. Consumers always have felt the buyer’s market we’re in; however, lately they’re bolder by the minute. And when we show that we feel the same way in the showroom — the down numbers, cutting deals to mini deals first bat, talking to customers about how bad business is, etc– we rub that attitude off on them and it gets worse.

It’s gotten worse. Truly, our numbers are very close to what they were this time last year (used cars is better). And even if yours aren’t, attitude makes all the difference to how our customers react when they enter the showroom. We help them feel like they can have the whole kit-n-kaboodle when they walk in because they know dealers are struggling.

Since our numbers really aren’t that bad (we’ve bought out a local Ford dealer in the process to help), I try to encourage everyone to talk like business is great as always! Let our customers know we’re not going anywhere, and top-notch service is worth something. Of all times, anyways, we need the gross now more than ever.

I think that goes along with conversion ratios.

>> We’ve constantly been measuring our results, and when something doesn’t perform we move the money into something else that will. The difference now is that we’re not putting extra money out there to try new things.

But really, we get tight this time of year every year. Except this year we don’t know if business will pick back up to where it was or not.

– William