Over the years I am always posed with many questions about Special Finance, but one of those that comes up as often as any other is “Where should I be advertising for SF Customers?” One of my degrees was for marketing, and I spent millions in marketing my dealerships, but this is not an easy question to answer. Nonetheless, I am not afraid to offer my opinion on a subject where there are probably as many as there are dealers and vendors combined.
First, a few ground rules and disclaimers: Before making any changes whatsoever, it is paramount to know what the specific results of your existing marketing efforts are. You need to know how many leads (whether web site, third party, loan-by-phone or phone calls) you currently are receiving and working. Additionally, you need to know the total opportunities you are receiving (leads PLUS the total of walk-ins, repeat/referrals and be-backs). Once you are able to measure what you are currently creating for your advertising dollar, you are able to then determine its ROI, as well as the impact of a change or increase in spending. If you are like many, and pull the trigger on something new before you measure your existing business, you may never know what the real value of the change might be.
Second, don’t change everything at once! There is a long-used (and likely overused) adage in advertising: “Half of your advertising works, you just never know which half it is.” Even if you are already measuring your results, making mass changes in advertising all at once leads to something working really well, something else having horrendous results, and in the end, the overall results washing out about the same. What if you had only spent money to do what worked – and maybe more of it?
Third is a reminder that advertising is more of a black art than it is a science. Just because it may work grandly in one store or area doesn’t necessarily mean that the results will duplicate themselves in another.
Fourth comes the budget. Oh yeah, money. Based on my gross profit expectations per car, and ad expense as a percent of gross profit, that would equate to $385 per car, or 11% of gross profit. Remember, this is MY money that I am talking about spending. You can spend more.
Finally, I am going to tell what I would do if it were my store and I was spending my money. That would also mean that I would already have all the critical components in place, a store staffed and trained properly to handle the traffic, and a BDC ready to handle the increase in leads. Anything short of that would be a classic example of “Fire, Ready, Aim,” and would result in burning through a bunch of excess advertising money to get the same results.
References From Credit Applications
The apple doesn’t fall far from the tree. We used to collect 10 references on each application. Those references had addresses and phone numbers. All you have to do is dump them in a data base, internally create a letter that you send out that introduces you and your dealership and invites them in to show them the same programs that you recently had an opportunity to show their friend/relative. Run them through the Do Not Call list and call those that are not listed with 48 hours of them receiving the letter. It is tough to find a more cost effective way to generate traffic. Oh, by the way, you don’t have to have sold their friend/relative, you just have to have treated them well and have had them leave with a positive experience.
Third Party Leads
OK, with those ground rules and disclaimers, the first thing I would want are more leads. “Quality leads,” as I always hear. Why that first? It’s simple. If you have a machine that can turn opportunities into sales, then all you need are more opportunities. You can buy third party leads and start receiving the traffic within 24 hours. Like most dealers, I am not one to like to wait around.
To get them, I would go to lead providers that I know and trust to provide real-time and legitimate leads. Yes, there are a bunch of schlochs out there and you have to sort through them, but there are three companies that I (and my clients) have used very successfully. The average cost per lead is higher but so is the quality. I would rather have my BDC work fewer but better leads than having them calling a bunch of junk leads that equate to dialing a telephone book. I would expect a 12% – 13% delivery rate on what I buy.
Next I would have two “Special Finance Only” sites. The first would be branded. If my stores were Greg Goebel Chevrolet, or Greg Goebel Ford, it would be GregGoebelAutoCredit.com. I would take advantage of my name that would already be well-respected and recognized in my market and add “auto credit” or “credit center.”
The site would have to be “sticky.” Even with friendly and inviting copy, people get cold feet. It would certainly include incentives such as a game or gift card to increase the unique visitors to conversion ratio to a minimum of 5% from the industry average of 2%.
Additionally, it would NOT have a “talking head.” I know that websites with a female guiding you through the application process seem more friendly and engaging, but remember, the majority of your subprime customers are applying from work. As soon as the “instant on” voice starts talking the applicant is likely going to click-out just to keep from drawing attention.
This URL would be included in absolutely every other type of advertising I did. Whether traditional broadcast or print, the URL would be there, along with perhaps a simple tag line, “Financing for Everyone,” or if I were a CAC dealer, “Guaranteed Credit Approval.”
The second site would be non-branded. It would be a clone of the first site, only it would not include my name. It would be something like FloridaAutoCredit.com or TampaBayAutoCredit.com. Why? I go back to my days as a Hyundai dealer in the Midwest. It was primarily a truck market back then, and that meant you needed to have a GM, Ford or Dodge franchise. I didn’t then. As a result, my ads directed to WhataDealer.com rather than to a Hyundai branded URL. Truck buyers couldn’t SPELL Hyundai back in the late 90s or early 2000s, let alone come to a Hyundai store to buy a truck. The same goes if you are a Chevy dealer talking to a Toyota loyalist. These leads will be slightly harder to appoint and get into the store than a branded site (after all, they know who they are contacting with a branded site), but they still are very valuable leads.
Not all website providers are built equally. This is especially the case with when it comes to organic SEO and delivery times. Expect to pay $500 – $800 a month for each site. Can you get them done for much less? Sure you can. Just make sure that whoever says they can, is actually delivering good results for many other dealers before you sign. The expected results – a minimum 15% delivery rate for leads. At $385 per car sold, that would mean a $1500 spend would need to deliver 26 leads to provide 4 sales to cover the expense. I know dealers that are receiving 600 or more leads off their credit microsites. It is easy to understand why I like them so much!
Pay Per Click
To create unique visitors, you must rely on searching well. Even with great SEO, one of the top three positions in search is apt to come up as a competitor through Pay Per Click. PPC will greatly enhance the ability or your sites to create leads. Assuming the sites are indeed sticky, then the more traffic you can funnel through them, the more leads you will create. SF terms can be costly in PPC, but as long as your site converts, it is a matter of math. If it costs $20 to create a unique visitor then at a 6% conversion ratio from clicks to leads, and a 15% closing ratio, you would need to average about $3.50 per click to make it cost effective.
Yep, that old dinosaur still works. Are there a bunch of “pretenders” in this space as well? Yep, you better believe it, but if you can sort through those, there are some very good companies still providing some very strong results.
With direct mail you have two real types when it comes to the SF business. First you have what I call “credit mail.” It could be niche marketed mail targeting Open Chapter 7 or discharged bankruptcies that could even be generated weekly at the dealership on dealership letterhead. It could be mail sourced through some reliable credit mail houses that allow you to pick certain parameters such as credit score range, equity in vehicle, prior interest rates, etc. It could even be sourced through one of the finance companies like Capital One or CPS where the recipient is pre-approved. Bottom line, it is helping you fire a laser shot at your target as opposed to blasting away with a shotgun.
The second type is basically saturation mail. You are mailing to basically every address in a particular area/market. As opposed to a laser shot or even a shotgun, this is more like an atomic bomb. Everyone in its path is going to feel it. The best involve games/gifts, but the dealership must be adept at handling a high amount of traffic over a few number of days AND converting gift grabbers into buyers. For those that are proficient at that, and many are, the results can be staggering.
The differences are very important. Direct mail (along with some other types of advertising) can be likened to trying to drink out of a fire hose. Credit mail can be done on a controlled (dealership) or small volume basis. Saturation mail, obviously not the case. Credit mail involves people coming in because they are looking to get financed, where saturation mail creates people often looking for a gift. Both can be very effective, but is your team ready to handle a day with 400 – 500 ups? My store would be.
My budget would be somewhere in the $0.75 range, depending on the piece. I would certainly use credit mail, then bring in saturation, making sure I had enough people on staff to handle the traffic.
If I still could handle more traffic, I certainly would be using broadcast media. Remember, I was the second guy to ever use a SF infomercial. Whether television or radio, I would be there depending on the market, but also remember, I would already be there for the traditional/prime marketing. As I grow my business, I am monitoring what is and isn’t working and adjusting. If I needed more leads, and as long as they were cost effective, broadcast will certainly deliver.
So there you have it. There are obviously even more ways to market and advertise, and over the years I probably tried most of them. As I said, this list is my opinion of what I would do myself if I still had dealerships. Is this guaranteed to work for you? No, that was one of my ground rules. It is, however, guaranteed to be what I would do.
Until next month.