Most dealers understand that winning on the digital battlefield is critical to their success, consequently they have significantly increased digital marketing spending over the past few years. For most, the increased spending has not produced the promised results; in part because digital marketing vendors failed to deliver and in part because dealers failed to make the changes required to benefit the new marketing methods. At the root cause is few dealers truly understand digital marketing and most do not know how digital-driven consumer behavior changes impact their business operations.
Today, there are many beliefs surrounding digital marketing, leading to divergent practices. In fact, Automotive News is littered with best practice stories each week that contradict the best practice stories from the previous weeks. Each vendor touts the incremental sales yielded by its narrow solution, while spending rises faster than sales, as multiple vendors compete to claim the same sales. No one has provided dealers with a comprehensive framework that links digital spending allocation, web presence strategy, and sales execution to final sales and profits. Without a clear, comprehensive, data-driven framework dealers flounder, wasting precious marketing spending and spoiling significant percentage of the opportunities created by OEM marketing.
Given the importance digital plays in the overall automotive business, helping dealers better understand digital marketing and make better marketing and operating decisions would have significant impact on OEM sales.
- Digital and direct marketing now above 50% total dealer marketing spend for many dealers
- 1/3 sales originate directly from digital leads
- 1/2 the remainder are significantly influenced by their digital experience – e.g. selected dealer or brand based on on-line shopping
- 2x variances in digital close rates on similar leads and brands are not unusual in a dealer group, let alone across a dealer network
The challenge is how can an OEM create such a framework for its dealers and provide dealers with a comprehensive scorecard with recommendations to drive digital performance. We have been working on a comprehensive evaluation and change management activity which we have named “Digital Edge.
Digital Edge
Digital Edge consists of a comprehensive evaluation of each dealer’s digital activities and their impact on the dealer’s business and an action plan that helps dealers prioritize investments and activities. The package should include dealer follow-on visits and targeted training sessions based on the findings and progress. While OEMs may need to subsidize to drive dealer participation, dealers needs some “skin in the game” in terms of investments and accountability to results to promote success.
Evaluation
Based on our experience, we break the framework into the following pieces which drive overall digital effectiveness:
- Spending mix and measurement
- Web presence
- SEM alignment
- Lead handling
Spending Mix and Measurement The old adage about half the advertising working and the other not, but not knowing which is which, rings true for digital. Dealers are not clear about how to measure, let alone what represents a good job. We would recommend clarifying for dealers how each digital marketing element contributes to the overall marketing agenda and how best to measure results. For example, on-line classifieds can be best measured by $ per detailed page views, while third party lead providers should be viewed in terms of $ per sale, or better yet, % gross margin delivered.
Once measurements are established, we can gather data across the network to establish standards across elements. This would help dealers make comparisons regarding overall spend, nudging traditionalists toward more effective approaches. In addition, we would give dealers a benchmark to assess their effectiveness on individual elements, providing fact-based evidence on vendor performance to guide selection and improvement discussions. With sufficient sample, we could regress overall spending effectiveness with various spending mixtures to help identify the optimal digital marketing “cocktail”, as well as any unique best practices.
Web Presence Strategy We have recognized several major flaws in Tier 3 web presence strategies which need to be addressed through fact-based best practices. First, many dealers do not understand how to evaluate and populate websites. They are comfortable with a cluttered “Sunday newspaper ad look & feel” that undermines SEO and consumer usability. We have seen examples where dealers have significantly degraded otherwise well-performing platforms through add-ons. Secondly, the linkage between OEM and dealer sites are not seamless, forcing users to repeat search or re-enter information. Third, dealers do not properly price on-line. Operating from fear rather than fact, they either post MSRP or below market prices, when consistent, transparent pricing yields superior growth and gross. Finally, many dealers do not have a well-defined Social Media strategy that focuses on building on-line reputation.
We would recommend a comprehensive audit of dealer web strategy, combining analytics with objective evaluations. For example, we would review all sites, including linked to key OEM sites, based on cross-industry best practices, showing each dealer the results along with screen shots highlighting practices. We would correlate these results with measurable results including competitive traffic comparisons, market search share and native leads share. Through these facts, we would guide dealers to better decisions regarding platform choice and implementation.
We would evaluate dealer on-line pricing strategy because this is a key driver of traffic conversion. In pilot, we sample key products, reviewing prices on dealer websites and major listing services. At scale, we can screen scraping capabilities which could be implemented to more systematically test pricing and leave dealers a capability to optimize pricing going forward. Leveraging PIN data, we could demonstrate to dealers pricing strategies that best balance growth and gross.
At last year’s NADA, we reviewed the various Social Media and Reputation Management software and services. Based on our observation, we recommend dealers create a defined process that focuses heavily on maximizing review captures (good and bad) over those tools designed to selectively solicit good reviews. In addition, dealers need a capability to centrally manage a variety of social media focused predominantly on building reputation, not sales, by celebrating community involvement, successes and milestones of associates and customers. We would review each dealers reputation and social media efforts, correlating activity to business metrics, such as repeat purchases and referral sales.
SEM alignment While dealers have significantly increased their SEM investments in the past few years, few are aware of the opportunities to improve yield through aligning search terms, ad copy and landing page copy. Evidence suggests improving alignment and relevance can drive a two-fold improvement in lead creation. While achieving that result level would require new website technology platform, there are significant differences among existing dealer website and SEM provider platforms. Therefore, raising dealer awareness regarding the issues and opportunities should drive dealers to the most capable platforms available.
We would conduct an alignment audit by testing several key search terms where we know content alignment has greatest impact – e.g. leasing deals, lowest price, best offers, high value option package, or key model variant. We will show dealers their results compared to best practices and provide an overall results by platform to aid in vendor selection.
Lead Handling The largest drop-off and area of greatest variance is the on-line / off-line interface. We recognize that changing consumer behavior, evolving on-line tactics and growing transparency dictated constant monitoring with significant changes in handling best practices every few months. Many dealers are still executing pre-transparency tactics that limit information prior to visit or withhold pricing. It is amazing how few dealers have optimized around the most basic and accepted practices, e.g. answering all leads in under 10 minutes, let alone implement more forward-looking practices such as providing price comparisons or content rich responses.
We would recommend pulling data from the CRM so that we can construct a lead waterfall for dealers. We can then identify and quantify systemic and dealer-specific leakage points. We would conduct an Internet buyer/rejecter study to identify and prioritize key performance, such as response time, response quality, and pricing strategy. We will utilize in-store audits to gain further insights into best practices such as organization structure, tools and templates, pay plans and talent management.
Change Management
Action Plan The most critical outcome is a dealer-specific action plan tied to the evaluation. Because the evaluation elements are linked to business results, we will be able to prioritize actions to financial outcomes. The action plan should be composed with input from the key operating managers, such as the Internet Manager, in order to generate buy-in and in best cases, be presented jointly to the General Manager and Dealer Principal. Action plan elements need to be tracked and reviewed by field representatives during their store visits. This will require deploying some account management software, if one is not currently deployed, and significant effort training field representatives in discussing digital best practices.
Consulting Most dealers will need assistance on a variety of issues to drive the changes throughout the organization. Driving sustainable change will require several in-store interactions whose focus will depend on each dealer’s issues. It could involve helping dealers select more robust partners, review pricing strategy or install a new lead handling process, so the content needs to remain fluid based on each dealer’s need. These interactions should continue until each dealer achieved its goal.