While the pandemic is still a major force globally, the auto industry has entered 2021 after rebounding from the early 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.
Auto marketers in the United States have continually reassessed their strategies for 2021 advertising budgets. Some retailers have pulled back from advertising because they weren’t concerned with promoting vehicles when inventory was low.
However, this has been found to cause deeper problems with long-term customer relationships and loyalty. On the contrary, dealers who wisely changed their advertising message fared better than those who completely removed their advertising.
What we have learned from the pandemic
That’s right: in hindsight, it’s certainly 20/20. With months of inventory shortage history now in the rearview mirror, there is much that can be learned from understanding dealership ad spend patterns, especially when industry watchers examine trends in dealerships that have cut back their sales. ad spending versus those who didn’t.
Put simply, 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 last summer’s ad spend strategies that may have been altered due to the continuing microchip shortage that has seen fewer new cars and trucks arrive at dealerships.
Reduced advertising budgets equate to greater drop in sales
Meanwhile, dealers who cut their ad spend suffered an overall more painful drop in sales than dealers who changed their advertising messages and strategies and increased their budgets.
PureCars data shows that between March and August 2021, dealers who cut their ad spend between 50% and 89% saw their sales volume drop by 28%.
However, dealers who only increased their ad spend by 9% over the same period saw their sales drop much more slightly, to just 9%.
The main difference in philosophy is what limited the decline in business performance. Dealers who cut 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 ramp up their ad spending to varying degrees.
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 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 a high value on increasing business value and discussing the issues. other stocks on the lot.
End-of-year advertising remains critical
The philosophy of cutting ad spend or even increasing it will become a larger discussion as the auto industry nears the end of the fourth quarter, where budgets are traditionally higher to make a last ditch effort for late sales. year.
Big brands, in particular, continue to plan marketing campaigns to boost brand appeal, lock in future sales, and deliver wellness messages that impact long-term customer loyalty despite inventory issues.
In a recent Automotive News In the story, Lisa Materazzo, who oversees marketing for Toyota, said the seasonal promotion of the Toyotathon “is always a good opportunity for the brand, with or without inventory, to keep Toyota ahead.”
“It’s a chance to engage with the customer,” said Materazzo. “If we don’t have the inventory and they’re willing to wait, we can finally meet the customer’s needs within a short period of time – we can take the order, lock in the specs, start the process. “
Level 2 and 3 players benefit from these national advertising campaigns and can leverage them in local advertising strategies so that long-term relationships with customers are not compromised.
Even though new vehicle inventories remain below average, it is important to promote other ways of generating income so that customers stay loyal when inventory eventually returns to more normal levels.
Lauren Donalson (photo, top left) is Senior Director of National Accounts for PureCars, a provider of advertising and attribution technologies for car dealerships.