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October 15, 2007: How to plan your advertising and then work your plan

October 15, 2007
Filed under Columns

Have you ever heard someone say, “I’m wasting half of my money on advertising; the only problem is I don’t know which half?”
If you’ve ever felt this way, you’re not alone. Advertising can be overwhelming and difficult to quantify. There’s the Yellow Pages, Cycle Trader, Internet, print media, billboards, direct mail, customer newsletters, open houses, sponsorships (local riders, charities and sports teams), community involvement and the list goes on.
There are many aspects to a successful marketing campaign. One is to create awareness and brand your dealership’s image. Another is to generate sales leads. While any form of advertising might do both, it’s important to realize one will typically outweigh the other. For instance, sponsorships and community involvement are often times more of an image enhancer for a dealership than a lead generator. However, they might end up generating some leads.
A direct mail piece based on a promotion with a time-sensitive deadline will generally be more of a lead generator, but also can enhance the image of the dealership. It’s a good idea to think about and determine these aspects each time you advertise.
According to a recent RPM Group Composite Report, the average dollars a dealership spent on advertising was just under 1 percent of total sales. So, if a dealership’s total annual sales (for all departments) is $7 million, its advertising budget should be $70,000 annually (for all departments).
Many dealerships spend in excess of 3 percent of their total sales on advertising but generally won’t receive three times the benefit. And from a net profit perspective, using the example above, that 2 percent difference adds $140,000 in expenses that might not yield the best return for the investment.
Once you’ve determined your advertising budget, it’s time to develop a marketing calendar. Don’t make the mistake of planning your Christmas advertising in November, because by then it will be too late. Consider the strategies of big-box retailers such as Best Buy or Target, who are well-prepared for every season and holiday, and their sales reflect it. A great way to plan your marketing calendar is to invest in a Year-At-A-Glance calendar. It will list when each season changes, every major holiday and then some.
All of this can help to stimulate your creativity for monthly sales and promotions well in advance.
Now that you’ve determined your budget and planned out your marketing calendar, it’s important to quantify the results of your advertising. Have your salespeople ask each customer, “How did you hear about us?”, and write it on the traffic log. Also consider having your F&I manager keep track of it. By tracking showroom visitors on the traffic log and sold customers in the F&I office, you can determine which advertising is increasing floor traffic, and which is generating sold customers. This is powerful information! You also can quantify advertising with a “Who’s calling?” number. These special phone numbers track how many calls come in from a specific advertising campaign.
Here’s a quick recap of getting the most out of your advertising dollars:

  • Determine your advertising budget and stick to it; the benchmark is 1 percent of total sales.
  • Be conscience of your ratio of image and branding advertising vs. lead generation advertising. A good tip for generating leads is to have a promotion with a deadline.
  • Make it a point to plan out your marketing calendar well in advance. This will keep you prepared and better able to maximize your dealership’s sales and promotions.
    Quantify your advertising results, and invest in what gives you the best results.
    While there is no exact science to advertising, it is an extremely important facet of every business. History reveals story after story of businesses that are successful largely because of their advertising. Think for a moment about the Super Bowl: Millions of dollars are spent during a few hours of a football game. But that money is spent for a reason — advertising works. Just be sure to plan your work, and work your plan.
    About this column
    Series goal: Each Profit Ability column will focus on one key measurable that’s found in most dealer 20 group’s composite reports, and then offer tips on how to improve upon those measurables.
    This edition: Determining an advertising budget
    National average for closing ratio: The average amount a dealership spends on advertising was just under 1 percent of total sales, according to a recent RPM Group Composite Report.

    Tory Hornsby, general manager of Dealership University, was drawn to the powersports industry more than 10 years ago when he turned his passion for motorcycles into a career. Hornsby worked in nearly every position in a dealership before becoming a general manager. He welcomes your e-mail: thornsby@dealershipuniversity.com.

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