COMMENT: Data shows dealer sales activities are healthier when they keep advertising budgets intact

Although the pandemic is still a major force in the world, the auto industry has entered 2021 after rebounding from the first days of the shutdowns. On the contrary, brands and auto dealers found themselves faced with a lack of inventory, not a lack of demand from buyers.

Across the United States, auto marketers have continually re-evaluated their strategies for 2021 advertising budgets. Some retailers have believed they should opt out of advertising because they don’t care about promoting vehicles in the event of a loss. lack of inventory.

However, this has proven to cause deeper problems for long-term customer relationships and retention. On the contrary, dealers who wisely changed their advertising message fared better than those who completely removed their advertising.

What we learned during the pandemic

That’s right, the hindsight is certainly 20/20. With months of inventory shortage history now in the rearview mirror, there is a lot to be learned from understanding dealer ad spend patterns, especially when industry watchers examine trends in dealerships that have slashed their sales. ad spending versus those who didn’t.

Simply put, the data suggests that dealers who continued to spend on advertising strategies increased their market share, and those who cut ad spend lost sales. This data snapshot also includes ad spend strategies last summer that may have been shifted due to the continued microchip shortage that has seen fewer new cars and trucks arrive at dealerships.

Reduced advertising budgets equate to greater drop in sales

Unfortunately for the dealers who cut their ad spend, they ended up feeling more pain in the overall decline in sales compared to the dealers who changed advertising messages and strategies and increased budgets. For example, between March and August earlier this year, dealers who cut their ad spend between 50% and 89% saw their sales volume drop by 28%. However, dealers who increased their ad spend by just 9% over the same period saw their sales drop much more slightly, to just 9%, according to PureCars dealer ad spend data from September.

The main difference in philosophy is what limited the decline in business performance. Dealers who withdrew from advertising looked at their showroom traffic against lower inventory levels and felt there was no need to promote deals on new cars and trucks .

However, savvy dealers saw last summer as an opportunity to increase their spending to various levels. Additionally, they realized that promoting vehicles that might or might not be in the field was not the right thing for their customers. Instead, they changed their advertising messages and instead focused on promoting vehicle buyback opportunities to increase inventory, and they also promoted service and repair options to further increase revenue.

When customers come in for service and repair, it gives dealers and their staff a great opportunity to discuss buyback options with customers who place great importance on increasing business value and discussing the issues. other stocks on the lot.

Lauren Donalson is Senior Director of National Accounts at PureCars

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