Despite Reduced Inventory, Continuing To Advertise Paid Off For Auto Dealers.
Auto dealers that continued to advertise despite fewer vehicles on their lots grew their market share while those who cut their ad budgets lost sales. That is the conclusion of Lauren Donalso, Senior Director of National Accounts for PureCars, an auto dealer advertising and attribution technology provider, writing for auto trade publication WardsAuto.
With vehicle supplies constrained by the ongoing chip shortage, both automakers and local dealerships faced an uphill climb in 2021. As the semiconductor shortage took hold this past spring and summer, the Seasonally Adjusted Annualized Rate (SAAR), a crucial industry metric, plummeted to 12.2 million in September 2021 after recovering to 18.3 million in April 2020.
The combination of high demand and low inventory forced auto marketers in the U.S. to reevaluate their ad strategies. Some dealers pulled back, seeing no need to promote vehicles when new car inventories were low and cars and trucks were selling for sky high prices. “However, this has proven to cause deeper problems with long-term customer relationships and loyalty,” Donalso writes in an Industry Voices piece entitled “Keeping Ad Budgets Intact Bolsters Dealer Sales.” “If anything, those dealers who wisely shifted their advertising message have fared better than those who pulled their advertising altogether.”
Crunching the numbers from PureCars showed that between March and August 2021, dealers who reduced their ad spending between 50% and 89% saw their sales volume drop 28%.
But savvy dealers saw an opportunity to increase their ad spend. Those that upped their allocation by just 9% during the same period saw a much milder drop in sales at just 9%.
These dealers did more than dial up their ad presence. They also changed their message from promoting cars (that may or may not be in stock) to instead promote vehicle buy-back programs to increase their inventory. They also plugged other revenue streams like service departments. “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 of other inventory on the lot,” Donalso says.
With the auto industry approaching the end of the fourth quarter, when ad budgets are typically higher to capture end-of-year sales, the issue of whether to increase or decrease advertising will become an even bigger issue. “Major brands in particular continue to plan marketing campaigns as a way to strengthen brand appeal, lock in future sales and deliver feel-good messages that impact long-term customer loyalty despite the inventory challenges,” Donalso continues.
One of the world’s largest automakers apparently agrees. Toyota plans to go ahead with its annual Toyotathon promotion. Lisa Materazzo, Group VP of Toyota Division Marketing, told Automotive News the seasonal promotion “is still a good opportunity for the brand, with or without inventory, to keep Toyota top of mind.” This traditional opportunity to engage with the consumer isn’t one Toyota is prepared to surrender, just because there are fewer cars on the lot. “If we don’t have the inventory, and they’re willing to wait, we can ultimately meet the customer’s needs within a short period of time – we can take the order, lock in the specs, get the process going,” Materazzo said.
To maintain long-term relationships with their customers, auto dealers and dealer trade associations can reap the rewards of these national campaigns in their local ad strategies. “Even if new-vehicle inventories remain lower than average, it’s important to promote other avenues to build revenue so that customers remain loyal when inventories eventually return to more normal levels,” Donalso surmises.