Three Industry Thought Leaders: Key Changes in the Automotive Industry Part Two

In Part One, Steenman engaged Hollenbeck, Phillips and Conley on Key Changes in the Retail Automotive Landscape.

In Part Two, the focus shifts to understanding the state of marketing, the rapid growth of streaming and role of video, and how to better service Dealerships.

The Participants:

• Ed Steenman runs a full-service boutique digital advertising agency that’s created highly successful digital and traditional marketing campaigns for Tier 3 dealerships.
• Nathan Hollenbeck is the Vice President of Marketing for Del Grande Dealer Group. They serve customers with 17 brands and 19 dealerships in the highly competitive Northern California market.
• Matthew Phillips is the CEO of Car Pros Automotive Group which operates seven dealerships (mainly Kia and Hyundai) throughout Washington State and California including Car Pros Kia Glendale which is the number one Kia dealership in the U.S. doing 5,600 new Kia’s a month.
• Mike Conley heads the marketing team at Sunset Automotive Family. Sunset is a long-time leader in the Seattle market with Ford, Chevrolet, Kia and Mitsubishi stores. Sunset Chevrolet is Washington State’s #1 volume Chevrolet dealer month after month…year after year for the past 15 years. With over 40 years of experience in the automotive advertising business Mike has been a consistent thought leader in the area of dealership advertising, sales training, and culture development.

Steenman: Tell me about the state of marketing and dealerships at the present time. Are dealers largely going back to their previous spend levels and tactics that they used Pre Covid? Or do you feel like there’s been some fundamental shifts and changes.

Hollenbeck: I know for us in particular, seeing where the market was going, we decided in Q3 of last year to really dial back on spend due to far less co-op dollars but also because we were going to (find a) more efficient way of managing the digital dollars. It was dual fold; we knew we were going to gain a lot of efficiencies by being agnostic to media and publisher -just fixating on our first party audiences and really like dialing that in.

Phillips: I think it depends a lot on the dealership. We never stopped advertising, (although) we did shift some of our weight. We put a bit more into Used, our store in Glendale is the number one Kia CPO dealership in the country. But we’ve always believed that consistency with advertising is the key. On the other hand, I know a lot of dealerships did cut back on their advertising, and I think they’re really going to have to reevaluate their marketing commitments if they want to be competitive going forward.

Conley: (Dealers) spent less money during Covid because they had less money to spend. If they developed their ad budget based on $500 per unit delivered- and you’re delivering half the units - the spend was half as much. We didn’t prescribe to that - we kept real aggressive. But what you saw disappear was any reference to saving anybody money. Now that there’s more new cars on the lot, dealers seem to have forgotten the lesson learned for the last two and a half years - that price didn’t make any difference to the customer. If you listen to your recorded phone calls or review your text messages or email responses, it's usually the sales people that are bringing up price and creating the price objection before anybody does. They’re going back to trying to win that race to the bottom.

Hollenbeck: We’ve added additional stores over the last year, but if you were to look at just the same stores we owned in 2019 versus today - with the Co-op dollar losses over the last two years- we really had to cut back on the new car advertising side of things. I started to pair that number up with our net cost per sale after co-op as a percentage of our total PDR and started trying to keep that under 5%, and that seems to be a good metric for us. Last September, we started to really draw things back to like $325 a car before co-op. Now that we’re starting to see things ramp back up, we’ll be in a better position to ramp up that spend.

Conley: We never changed. We stayed the course. I’m not five hundred a car or anything like that – I’m a nine to one ratio. For every dollar I spend, the stores need to generate $9. It’s like 5 or 6%. Our tactics haven’t changed- our marketing approach- we’ve never, we don’t advertise cars. We promote Sunset and our value props like warranty protection for life, oil changes for life, and you just get more at Sunset -- people do like that. That’s our entire model. If you’re a dealer that’s going to try to win on a price basis – that’s your strategy to be the cheapest place to buy a car – you’re probably shifting your spend from digital or traditional electronic media and moving more towards third party lead providers that default to the price. They’re lower funnel leads, so you’d think conversion would be higher, but in my experience, third party lead provider leads are probably the lowest converting. You spend a lot of money on the lead. And congratulations if you sold a car, because you didn’t make anything on it.

Steenman: One thing that happened in the pandemic, a society-wide thing, was the rapid growth of streaming, and that’s an area that I’m focusing this particular interview on. Customers are making even more decisions prior to ever setting foot in the dealership, and video is playing a larger role than pre-pandemic. So- has that changed for you, or what are your thoughts on that?

Hollenbeck: We are heavily connected TV with digital video included as well because you’re now targeting people at the household level that you know in some way, shape, or form are in market for a vehicle. That’s allowed us to be way more efficient with spend and also expand our geographic regions, so instead of doing smaller zone buys on cable, we’re able to really cover all of Northern California because that’s the breadth of our store locations. We are better able to retarget folks from our website- we brought in our sold data, our lead data service customers, and have a really solid audience of our existing customer base.
As we get into summer and additional co-op dollars, the goal is to start bringing in-market audiences into that as well and working with some of our partners figure out how do we get that audience data to expand beyond first party. We want to make sure we’re doubling down on the first party data as CCPA and privacy stuff really continues to grab hold, but then also figure out how to increase reach and supplement in-market audiences.

Phillips: Yeah, we’ve always been real believers in video. When we started as a new car dealer in the late nineties, it was all about cable, getting out there, getting high impressions, getting people to see the car and see us. And those basics haven’t changed - but the way it’s delivered has been shifting since before the pandemic, and every year we’ve seen our weight of streaming increase and the weight we’re doing on a broadcast or cable go down. We’re still doing a lot of video. But it is, like you say, looking different. And with streaming, you have such an opportunity to be more strategic about your messaging and your audience, who’s seeing the message, and what message they’re seeing.

Conley: We made a complete shift to video a dozen years ago, especially geo-targeted video. Our spending on cable was many, many times higher (than our competitors) early on with pre-roll, mid role, YouTube. Our digital stuff was much higher than most. There are far more cable cutters than stackers, so we’ve shifted dollars. Our OTT spend today is probably higher by percentage than most dealers. We spent a lot of money on video. I mean, we are a video junkie society. Take a look at Tik Tok and YouTube and streaming. Americans love video, and the people that are capitalizing on that innate desire (are the ones that win).

Phillips: It is so much more complicated than it used to be. Years ago, I used to do the media buys. You sat down once a month, made the phone calls, and played let’s make a deal. Now we have a team of 4 full time people in our marketing staff plus the digital agency we work with. So you really have to be knowledgeable about it and have the right people to do it because it’s very expensive, it’s easy to spend a lot of money, and you really have to be intentional and wise about how you deploy your money and what you’re getting for it.

Conley: I think where dealers fall down is that they produce television commercials or videos that appeal to them. You see cars, pictures of the dealership, and the lick up copy to talk about how great they are. They lose sight that customers, by and large, consume video for one of two reasons; they either want to be entertained, they want to be informed, or both. But a lot of dealerships don’t have ad guys like you that recognize that. They’re still thinking the people want to see a $199 car thing, and they got lost in the first 5 seconds of the spot.

Steenman: What is the best opportunity available for marketing and advertising folks to better serve you or dealerships? Where do you need the most help right now? Or do you need any?

Hollenbeck: If I take DGDG out of it and just think about the dealer community and the dealer world, I think, in general, we really need greater integrations and more access to API’s and the ability… like CRM systems really should be able to connect with whatever chat tool, whatever phone system or call tracking system you work with, any texting tool, whatever is going to make it most easy and convenient for your team to communicate with your guests. I think that’s probably the place where we need the most help. We embarked on our own journey about two years ago building our own CRM system on Salesforce because we just didn’t see those capabilities available in the automotive space - and I think that’s one of the things where dealers really need the help. Just having open APIs allowing you to add whatever you want to their systems can be very profitable while being super flexible to use whatever tools make them the most successful.

Phillips: We’ve always tried to be on the leading edge of technology, and we launched digital retailing before the pandemic. After the pandemic, there was a mass run to it because everyone’s trying to do remote sales. But it’s really important that we meet the customers where they are, and marketing has to be part of a holistic strategy. It’s not just about ‘get the customer in the door and we’ll sell them something.’ How do we want to engage with the customer? First with awareness; then when we’re in the dealership; then even after; sales and post sales follow up sales and service. What does that all look like? I think, as an industry, we really need help with that complexity more so than ever before. I think it’s a point that’s continuing to evolve, and it’s very easy to get away from you- even if you’re good at it today, we might be bad at it by tomorrow. If we’re going to engage with the customer, maybe they’re searching and then see a streaming video, or they’re served some sort of banner ad, and it has one offer, then they go to our website and open a chat; does the person in the chat know about the offer? And then they come into our dealership. Does someone know what the chat was- or do they all exist in little silos, and the customer has to start all over?

Conley: I did a talk at NADA in 22. The name of it was “The problem with your advertising is that your advertising is not your problem.” And what it really focused on was that advertising fails regardless of your media selection, no matter what industry - whether retail service, car, business, furniture, or restaurants- if your customers are not finding the environment they expected from the ads. If you’ve got a value proposition- and your sales people and your website doesn’t convey your messaging - you’ve already lost the consumer because they don’t trust us.

Hollenbeck: You know there are so many great marketing tactics and strategies, but if we don’t have them fully integrated into our sales processes, that’s where so much of the waste comes from. It kills me that we strive for a 10% closing ratio; that means we literally threw away 90% of what our marketing produced for us! From a sales opportunity standpoint, I think there’s just so much more that we can do with what we have if we had better integration on communication systems.

Conley: If your culture improves the dealership, your word tracks are consistent with your ad copy, and they’re conveyed at every customer touch point, whether it’s an email response, a text response, or a phone call - then there’s a consistency between what we’re broadcasting and what the consumer finds when they come to me. So really, it’s educating and training your own people to be able to deliver that experience along the entire path. Training is something you do, not something you did. It’s never completed.

Thank you to Nathan Hollenbeck, Matthew Phillips, and Mike Conley for their contributions and time.