Data Shows Dealer Sales Activity Healthier When They Keep Ad Budgets Intact

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By Lauren Donalson, Senior Director of National Accounts at PureCars

Although the pandemic was still a major force in the world, the automotive industry entered 2021 having rebounded from the earliest days of the shutdowns. If anything, automotive brands and dealers found themselves having to address a lack of inventory, not a lack of demand from shoppers.

Automotive marketers all over the U.S. have continuously reevaluated strategies for 2021 ad budgets. Some retailers followed the belief that they should pull back on advertising since they weren’t worried about promoting vehicles when there is a lack of inventory.

However, this has proven to cause deeper problems toward long-term customer relationships and loyalty.

If anything, those dealers who wisely shifted their advertising message have fared better than those who pulled their advertising altogether.

What we’ve learned through the pandemic It is true, hindsight is certainly 20/20. With months of inventory shortage history now in the rearview mirror, there is a lot that can be gleaned from understanding dealer ad spend patterns, especially when industry observers look at the trends of dealers who cut off ad spending compared with those that did not.

Simply put, the data suggests dealers who continued to spend on ad strategies grew their market share, and those who cut their ad spending lost sales. This data insight also includes ad spending strategies this past summer that may have been altered as a result of the ongoing microchip shortage that saw fewer new cars and trucks hitting dealer lots. Reduced ad budgets equal larger sales drop-off Unfortunately for those dealers who pulled back on ad spending, they ended up feeling more pain in overall sales drop-off compared with dealers who modified advertising messages and strategies and increased budgets. For example, between the months of March and August earlier this year, dealers who decreased their advertising spending between 50% and 89% saw their sales volume drop by 28%. However, those dealers who actually increased their advertising spend by just 9% during the same time period saw a much lighter drop in sales at just 9%, according to PureCars dealership advertising spending data from September.

The main difference in philosophy is what limited the drop off in sales performance. Dealers who pulled back in advertising looked at their showroom traffic in relation to lower inventory levels and thought there was no need to promote deals on new cars and trucks.

However, savvy dealers looked at this past summer as an opportunity to make varying levels of budget increases in their spending. What’s more, they realized promoting vehicles that may or may not be on the lot was not the right thing for their customers. Instead, they modified their advertising messages and instead focused on promoting vehicle buy-back opportunities to increase inventory, and they also promoted service and repair options to boost revenue further.

When customers come in for service and repair it gives dealers and their staff an excellent chance to discuss buy-back options with customers who give strong consideration to increased trade value and a discussion on other inventory on the lot. n