Dealers cautious about 2013 ad dollars
Digital will get larger share of the pie
Auto sales continue to rebound this year, but dealers say they are cautious about spending more on advertising next year.
Slightly more than half who responded to an unscientific online survey said they do not plan to spend more on advertising in 2013.
Of those who do plan to spend more, about half said the increase would be less than 10 percent, according to the Automotive News survey.
Strict cost controls instituted during the recession are still in place at many dealerships.
"I've seen the good, the bad, the ugly and the double ugly, as I call it," says Albert Clark, owner of Clark Chevrolet Sales Inc. in Cayuga, Ind., who has been in the business more than 50 years.
"I had to make a lot of cost cuts. Everybody -- not just small dealers, big dealers, too -- everybody got their sales volume cut in half in the last six to seven years."
Other dealers say they're spending the right amount on marketing, but the mix needs tweaking.
The $5 million annual marketing budget at Paragon Honda and Paragon Acura in New York blends traditional and online advertising such as Google paid search. About 40 percent goes to digital, says Brian Benstock, general manager of the stores.
Benstock's budget amount won't change in 2013, but he will shift about 5 percent of it into digital.
"We have a formula that's really working. It's not broken," says Benstock, whose stores sell about 11,000 new and used vehicles a year combined. "But, like an engine, we can fine-tune it. Fine-tuning it for us right now is a half-a-turn of the screwdriver."
Survey invitations were e-mailed to U.S. dealer principals and dealership general managers. One hundred sixty-six responded.
Despite the overall caution, respondents such as Benstock were enthusiastic about digital advertising. About two-thirds of all respondents said they plan to spend more on it.
Meanwhile, only a third plan to spend more next year on traditional advertising such as print, radio and TV.
Data compiled by the National Automobile Dealers Association indicate the average U.S. dealership spent $363,168 in 2011 for advertising. Expenditures per new unit sold dropped 4 percent from 2010, to $628.
Last year dealers spent their largest share, 25 percent, on Internet advertising, NADA says. TV was second at 20 percent.
Clark Chevrolet, about 150 miles south of Chicago, is in a small town near the Indiana-Illinois border. Clark sells approximately 250 new and used cars a year to customers from as far as 50 miles, Clark says.
But Clark says many of his customers are regulars. He wants new, younger customers. So he plans to boost what he spends on digital advertising from about 30 percent of his ad budget to about 50 percent in 2013.
"I've been looking at that real good the last two weeks," Clark says. "We're getting more results than I thought from digital, more sales, and sales are my results. Lookers don't count. It's those people who spend money."
Lynn Thompson, co-owner of Thompson Sales Buick-GMC-Cadillac in Springfield, Mo., says, "A minimum of a third of our budget goes to digital and about 35 to 40 percent of our cars are sold on digital leads," He sells about 2,000 new and used vehicles a year.
Easy to measure
Thompson prefers digital advertising because it's easy to measure the return on investment, he says.
"You know how many leads are coming in, how many of those leads are set up for appointments and how many we sell off those appointments," Thompson says.
Thompson monitors digital spending closely. For instance, he was spending thousands of dollars a month this past year for advertising on shopping site autotrader.com to reach shoppers in Joplin, about 60 miles away. But he says the program underperformed because many of the shoppers were too far from his dealership.
So Thompson cut his monthly spending to autotrader.com by 28 percent, he says. "We watched our number of leads coming in and it didn't pay off, so we backed off," Thompson says. But he says autotrader.com remains his top generator of online leads.
Many of the respondents said that they were planning significant increases in digital advertising. Of those who planned more digital advertising next year, half said the increase would be between 11 and 20 percent. Five percent said it would be more than 30 percent.
A.J. Hiers owns four dealerships in Florida that sell about 3,400 new and used vehicles annually. He spends 50 percent of his budget on radio, 20 percent on newspapers, 20 percent on digital and 10 percent on cable TV. He won't change that next year.
He says a big obstacle to reaching customers is pay-per-view TV programming, which has little or no advertising. "Or you've got TiVo so you can blow through the commercials. The big enemy of radio is satellite radio and iPods," says Hiers, who owns Infiniti of Melbourne, Boniface Hiers Mazda and Boniface Hiers Kia, all in Melbourne, Fla. He also owns Boniface Hiers Chrysler-Dodge-Jeep in Merritt Island, Fla.
He adds that few people under age 40 read newspapers.
Says Hiers: "You've just got to figure out what works for your market."
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