Advertising Works! Don’t Stop!
Ok, I understand that some car dealers are in panic mode. Car sales are off and the competition is tough, expenses keep growing, and you have to look hard at your financial statement. I understand there are a lot of tough decisions to be made, but what I do not understand is why some dealers cut back on service marketing and advertising that obviously creates traffic and makes them money.
Expenses that do not give a good return on investment should be scrutinized or cut. Investments like service advertising, however, should be increased. When showroom traffic is off, dealers don’t cut their ad budgets— they spend more. The same should be true with service.
Sometimes dealers are short –sighted and shift their advertising to the sales department because they need more traffic upfront to sell more cars. But what about the service business? The average dealer grosses 70 percent on every labor dollar sold and about 45 percent on parts sold in the service department. You make more gross on service then car sales or any other department or product. Why would you trim the budget for the department with the best margins in your dealership?
Do the math. That average technician generates about $10,000 in labor gross profit per month and the average service advisor aka service salesperson, generates $55,000 and $75,000 in gross profit –not sales-gross profit.
Some dealers and service managers get complacent. They think they are busy so they do not need to advertise, when in fact they are missing an opportunity for growth. Add some techs add some advisors. Stay open late and all day Saturdays. Start working shifts to accommodate all of that new business. Do not be lazy and accept the status quo—step it up and push the envelope. If you have 10 techs now, plan on growing to 12, and then 14. If you have two advisors, grow to three then four, and more. You can do it if you make it your mission to grow.
The financial gurus tell you that service advertising should be two to three percent of gross profit. Think how crazy that sounds when the same gurus tell you that the average advertising spent on vehicle sales should be between $300-500 per car sold! That means that for a dealer who grosses $100,000 in service—their ad budget would about $300- that’s it!
You know that advertising works, which is why you do it for the vehicle sales department. Why not do the same for service advertising rather then cut it? Make sure it builds brands equity, is tractable, and gets you as much bang for the buck as possible. Stop cutting—start spending!
This article originally appeared in the March 2008 Dealer Marketing Magazine, author Randy Johnson.
Tags: Automotive Advertising
April 1st, 2008 at 8:09 am
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