"Expenditures rise to meet income.”~ C. Northcote Parkinson
What a profound statement! Don’t we find when operating any type of business, the more we make, the more we spend? Years ago, I worked with a General Manager who named him boat, “Just One More Deal” and this was because when a vendor came in to solicit a program or a service, after an enthusiastic presentation, he would sign up with the justification “Just one more deal will cover the cost”. Well, when we entered a recession in the 80’s and the unit sales fell off, we found ourselves bound in all these contractual agreements and could not get out of the terms.
I am going to open up this discussion on expense control with inviting Doug Austin, President of Performance Management Group to discuss this in a little more detail. I also invite all the members of Dealer Elite to contribute with a suggestion or a best practice as to how they cut expenses.
I will start with my first question regarding expense control…Who in your business is responsible for opening the mail??? It really should be the President, Operator, Comptroller, or someone with authority who will question each invoice, each piece of correspondence and ask the questions: What are we purchasing here? Do we really need it? Can we get the same value cheaper from another vendor? Have we negotiated the price with this vendor lately? Does it have a purchase order? Was it authorized? Are we in a contract with this vendor? When does the contract come up for renewal and do we have to write a letter of intention to terminate ahead of time? And so on…..
Okay…I started it…Let’s keep it rolling!!!!!
After buttoning up the mail process... Controlling your inventories, employee compensation, and your advertising are the next biggest expenses that your dealership will have.
You bring up some great points in selecting your advertising partner - make sure you AND them understand the niche you are trying to go after.
1. Establish who your target audience is and where you should be to reach them -- If you are trying to attract college grads - look at the medians to reach them (example Pandora Radio, Hip/Hop Stations, Entry-level job advertising sites, college sporting events)
2. Make sure your message is tied to the market
3. EVALUATE, EVALUATE, EVALUATE - set controls to measure your ROI - this can be done through post-sale interviews, the use of keywords to obtain special programs ('tell them Mike in the Morning sent you'), or simply by having your sales people ask "how did you hear about us". Be careful with your expectations - one target market may have a different purchasing process/length than another (fresh college grad with school loans may have to be careful and thoughtful to their first major purchase VERSUS marketing luxury cars to executives who may seek service and ease of purchase - if you get them in the door and treat them right - they will purchase as this purchase is not near the investment to them).
Remember - the smaller your operation is - the more critical advertising can be -- customers who don't see your brand will often assume you might have been another 'victim of the recession' and look for your larger competitors.
Thats my two cents - and I don't sell/design advertising - I am just a bit of a marketing dork!
Best wishes to all of you!
Adverising is the biggest "hole" in any store that I've walked into. Normally, two things are happening. First- The store is not spending any money to speak of. Second- the store will have a decent ad budget, and spend it everywhere. $20k budget...spending on TV,RADIO,NEWSPAPER,MAGAZINES,DIRECT MAIL,3RD PARTY LEAD SOURCES and so on... Both examples are "INSANE!" If both of these two example are "same size stores"..demographics, roof top counts, like brands, similar inventory size, etc..Then the store NOT spending any money is a VERY easy fix and control the budget. Why? Store #1 has already identified what the floor is on units sold NOT spending. Any increase in volume will be identified as a direct result of dollars spent.
Store # 2 is a mess..They have NO idea what is driving traffic because they are not picking a medium and dominating it. I have found that we can't rely on our salespeople and management staff to give accurate info about "what broughtca in today?" Most stores are still using a "desk log"..have your managers list by each customer the answer to that question. Most will be "drive by". There are ways to get these answers, but that's another topic.
So how do we answer the question of what's the best way to control the budget, and spend the $'s correctly?
Know what you would sell with no money spent. Track the daily increase when you are running a campaign, and cross reference the unit "increase" with the data that you have that shows what you sold with no extra campaign. Keep a monthly calender that shows how many new/used sold on each day. List the conditions(rain/snow etc) as well as the amount of staff on shift that day.
I watch people spend 12k on dierect mail or something for just a week. When it all flushes out, they may sell 10 additional units..How much did they REALLY make?? Just my .02c
Dealer/Agency relationships are not always easy Nancy. Look around at the stores in ANY area that are consistantly doing well. Those stores have the same "tone" to the message. The content will change, but the "tone" stays the same. These stores have had the same agencies for years and they TRUST them. The customer is conditioned to know the "jingle" or "talent/person" and associates that with the dealership. Look at Gieco..they don't change the color or voice of the gieco every month do they? Gieco also stays true with the message. Point being, advertising is a familiarity campaign, and most dealerships just don't get that. Dealerships need to focus on what they are good at..Running a business, and tracking results. Help the agency by providing solid feedback. When a good agency has "real" data( up counts, units sold daily, ) we are able to hone in on how to do our job more effectively. Advertising agencys are responsable for driving traffic..NOT SELLING CARS! I have had conversations with dealers that are very upset because they had a bad weekend. My first question is, how many customers did you have through the door? In almost every case the amount of customers is NEVER the issue...It's the selling process. If an agency drives 200 people through the door over a three day weekend, and the dealership only sells 10 vehicles, who has the problem?(we all do)
My best clients, and long term friends, are smart enough to look "inside" the process. A dealership that changes ad agencys every quarter, really need to identify the "real issues". The BEST relationships are established upfront. If your ad agency isn't visiting your store, asking for new and used car run sheets...Then you have the wrong agency. I expect "real" up counts daily, and what sold(new/used). We can not do our job without this data. I guess the answer to your question Nancy, Is the dealership and Agency HAS to be a TEAM! www.topgunautomarketing.com
Thanks again Agustin,
Let's take them into consideration one at a time.... Let's talk about advertising first....What works? What is our actual return on investment? Are we looked into agreements with advertising agencies? Are we in contract with the right advertising agency that fits our needs. Are they in touch with the dynamics of our particular store, location, demographics, community, sales trends, niche markets, etc..? There is a lot here to talk about! Thanks Agustin! Have a great day!
Agustin Vasquez Jr said:After buttoning up the mail process... Controlling your inventories, employee compensation, and your advertising are the next biggest expenses that your dealership will have.