Navigating Tier 3 Marketing: Insights from Industry Leaders

Ed Steenman runs a full-service boutique digital advertising agency that creates highly successful digital and traditional marketing campaigns for automotive dealerships.

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.

Matthew Phillips is CEO of the Car Pros Automotive Group, and a well-respected automotive industry veteran, change management leader, franchise retail advocate, and EV evangelist.

Dustin Schuler is Marketing Manager at Bud Clary Auto Group based in Longview Washington with 14 dealerships, 4 fleet dealers, and a body shop.

Just over a year ago, I interviewed three industry thought leaders about how their dealerships and groups were transitioning out of the pandemic and what the ‘state of the car business‘, looked like from a marketing perspective.

You can read the original two-part series here.

This is a follow-up article with two of the same folks from the original interviews (Mike Conley and Matthew Phillips) and a new addition (Dustin Schuler).

Ed Steenman, Dealer Marketing Magazine:

“Gentlemen, here we are - a year later- and I know at that time Dealers were still coming out of inventory challenges from the pandemic- among other things. And really coming out of a couple of what I think turned out to be great years for the industry as a whole. So my question is how has the environment changed relative to a year ago? And is your current mindset to grow, maintain, or retract.”

Mike Conley, Sunset Auto Family:

“The industry has certainly been challenging for the past few months. This was easily predictable. After all, in my five decades in the car biz, I can tell you that following every market decline, an equal market increase will follow…usually on the same trajectory. Unfortunately, the same holds true for flourishing markets, there is almost always an equally severe decline. We had never seen a windfall like we had in late 2021, 2022, and early 2023. We are now going to have to navigate the more turbulent retail waters. And increased financing rates are certainly not helping.”

Matthew Phillips, Car Pros:

“I think everyone in automotive knows that the environment has changed, or maybe a better word is normalized. The post-pandemic time was a bit of an anomaly. And we're definitely seeing things that are more like what we've been experiencing for the last 20 years. Now, we're just trying to relearn those old habits, making sure we're providing excellent service to every customer… making sure we're doing a proper pre-product presentation, giving them a reason to buy the vehicle, and a reason to buy from us.”

“Used cars are a real focus area, and I'll admit we’d gotten a little lazy there and we're definitely having to actively manage it. Really make sure that nothing's aging, that we're bringing the cars in right again. It's what we've been doing for 20-25 years.”

“As far as growth, maintaining or retracting - you know, of course, we always want growth. We're still seeing good volume as a group. We just had the best first quarter we've ever had in total volume, new and used. So, we are still seeing the sales coming. But we're having to work a lot harder to get them.”

Dustin Schuler, Bud Clary Auto Group:

“Q1 was very strong for us. My group is pacing a 20%+ sales volume increase YTD when looking YoY. Relative to a year ago, used car acquisition is the most significant challenge that we as dealers are facing with the lack of lease returns and high costs for desirable units at auction.

Our current mindset is to continue growing as a group. We've made some key hires, and operational changes, and worked through other growth pains to put us in the ready position for acquiring more dealers as the right opportunities come our way.”

Ed Steenman, Dealer Marketing Magazine:

“How does your answer to the above question affect your ad spend for 2024? Are you stepping it up? Retracting? Maintaining? Changing the mix? What's happening there?”

Mike Conley, Sunset Auto Family:

“Like most dealerships and dealer groups, we project units sold and gross profit…then formulate our ad budgets accordingly. Even though we are projecting an at best “flat” units sold level, the gross profit average will most certainly decline…. especially with dealers once again trying to win the race to the bottom with price advertising. This would typically mean that our budgets would decline. However, due to significant changes in the competitive marketplace (especially in the area of used trucks and the closing of a number of high-volume independent dealerships), we are actually taking the opportunity to increase our ad spend and projecting a slightly higher cost per unit delivered. Risky? You bet. But we believe it is markets like this that separate dealerships. Our share of voice will certainly increase.”

Matthew Phillips, Car Pros:

“According to the latest automotive news ranking, Car Pros is now the 48th largest selling new car auto group in the nation. But we were the only one in the top 10 with less than 10 dealerships, and we're number 4 in the nation for new vehicle throughput per rooftop. And I really believe one of the secrets to our success has been consistency with our marketing.

So our ad spend really doesn't change in good times, bad times, the recession, or the pandemic. We believe that for advertising and marketing to be effective, it has to be consistent. You can't be on and off every other 60-day period. Our metric isn't per car. It's a percentage of the vehicle gross average. So we project where we expect that to be and execute annual contracts. But we generally don't dial it back if we're not hitting that gross number or increasing it, or, if we're overperforming.”

Dustin Schuler, Bud Clary Auto Group:

“We're bullish on both ad spend and allocation for 2024, but we run an agile operation and will pull back if needed given (that) it's a volatile environment and an election year. Stellantis allocation is the only OEM that gets scary with the highest days in supply compared to our other OEMs and some of the highest days in supply compared to all OEMs at the macro level. We may look to provide heavier discounts on their vehicles to move some metal throughout 2024”

Ed Steenman, Dealer Marketing Magazine:

“How are growing inventory levels and product availability affecting your pricing model and messaging, for example with EVs?”

Mike Conley, Sunset Auto Family:

“Sunset has no “Pricing Model”. We (at Sunset) do not advertise price at all. Why? Promotionally, we do not sell automobiles. We sell the Sunset brand and our value props. In this messaging, we inform customers that there is no competitive advantage in price…. that all dealerships pay the same from our respective manufacturers for the same vehicles; and that all dealers use the same tools to evaluate the value (and therefore, price) of used vehicles. Hence, there is no significant “savings” dealer to dealer as the cost basis is virtually the same. That is, it is not so much about what you pay…but what you get. Hence, our value props and Sunset extras that are included with every qualifying vehicle is our messaging.”

“Want me to prove that “Price” means nothing? Almost every dealer stopped discounting promotional/advertised prices during the pandemic, right? The result was that many set gross profit KPI records. Why didn’t price matter then? The truth is - price has never really mattered. We in the industry make it (price) a thing - not the customers. Many dealers may not be able to wrap their heads around this….and that is exactly what we are counting on.”

Matthew Phillips, Car Pros:

“A couple of different things. First of all, most of the brands we represent have MAAP guidelines, so we don't have a lot of flexibility in what offers we put out there. We started with ‘buy a new car for $6,988’ but we had to evolve. And the market changes, as our brands, mostly Hyundai and Kia, have matured. So our tactics and our marketing have had to evolve with us. With the EVs one thing we've been playing with, and had some success, is the one pay lease.”

Dustin Schuler, Bud Clary Auto Group:

“With increased new car inventory, we're back playing the game with discounting our inventory on most OEMs. Toyotas, for instance, we're still selling at or near MSRP with no issues, but we're discounting Fords to keep the momentum going.”

“For EVs, we're discounting them so they don't become a problem with aging. When combined with OEM and/or government rebates, they become rather attractive to buyers who are early adopters or on the fence, but price-conscious shoppers. During and post-pandemic we've become experts at leasing vehicles and the OEMs have come to the table consistently with low-dollar leases for EVs – Especially with import brands like Hyundai or Volkswagen”

Ed Steenman, Dealer Marketing Magazine:

“Buying media during an election year can be challenging. My last question is to ask about whether the upcoming election cycle or current environment affects your marketing plans or media mix. Are you moving off of traditional TV or how do you deal with it? Or do you just ignore it and keep going?”

Mike Conley, Sunset Auto Family:

“All industry projections say that this will be a very contentious and competitive political year with a record-setting amount of money likely to be spent on advertising on both a national and regional basis. This will certainly limit the number of local avails on traditional broadcast radio and TV stations (and the remaining avails will be more expensive by every measure). We will certainly shift our spend away from broadcast and more to digital, OTT, audio streaming, etc - as well as lead generation mediums.”

“Most dealerships are seeing a significant decline in lead generation. There are several reasons for this happening (too many to discuss in this forum). We will shift our focus to a little lower funnel shopper during political windows to try to recapture the lost lead volume from the pandemic period.”

Matthew Phillips, Car Pros:

“It's always been something we've had to contend with every election cycle. We are doing less broadcast (and) when the election heats up towards the end of the year we'll probably shift some of that (remaining) broadcast more to streaming because that's not preemptable. That's not governed by the same rules. So we do a fair amount of streaming in conjunction with our broadcast because they do have the ability to make it more targeted. [We do a little radio as well but it’s] generally pretty targeted in either Spanish or Chinese language and the other ones like personality partnerships. And so those are less likely to be preempted”

Dustin Schuler, Bud Clary Auto Group:

“Heavy political advertising affects our advertising placement decisions in multiple ways. First, we have to be conscious and granular with the placements as you don't want to go viral for the wrong reasons with our political climate being as intense as it has been - people may remember the Applebee's debacle with a commercial placement during the live coverage of the initial Ukraine invasion.” (https://www.youtube.com/watch?v=D6QUsx68DCA). Second - we also don't want to get lost in the noise of political ads. The CPMs will grow for certain channels, programs, and time blocks. It's significantly easier to pivot and control for that on OTT with the proper DSP like Jamloop or TheTradeDesk”

Ed Steenman, Dealer Marketing Magazine:

“Great. Is there anything that you want to share with me relative to how you see the year coming together? Or in the industry in general that I haven't asked you?”

Mike Conley, Sunset Auto Family:

“The success or failure of advertising campaigns will be (and always has been) what happens to respondents at the dealership level. “How are the leads being responded to (Time, content, straightforwardness, etc.)? “How are phone pops handled (are we able to convert a low funnel shopper to an appointment that shows up at the dealership)?” , “Is our closing percentage in every customer category improving (are we seeing improvement in our KPIs)?

During the 2022 NADA Show, I spoke at the “Learning Lab”. My topic was: “The Problem With your Advertising Is That Your Advertising Is NOT Your Problem!” This topic could have been addressed during the 1980 NADA Show and will probably still be relevant at the 2050 NADA Show. Dealers seemingly refuse to take a critical look at the role the culture of the store plays in the success or failure of their ad campaigns. There is no way to exaggerate the importance of this reality.”

Matthew Phillips, Car Pros:

“You know this industry just keeps getting more and more dynamic, and maybe by dynamic, I mean stressful. I'm old enough to remember sort of when the Internet really became a thing, and it was going to end all brick and mortar, and it hasn't. And then we saw certain lead providers like TrueCar that were going to collapse the industry. At the end of the day the dealers still have to do the transaction and at the end of the day it's still a complex transaction, but dealers are adaptable, and that's one of the strengths of the franchise dealer system.

I'm not really sure how this year is going to wrap up. My wish is that we do see a drop in interest rates. Half, three-quarters, or a point interest rate would really make a difference both in our carrying cost floor plan and in what we're able to do with consumers and getting them financed and into new cars. So I'm hoping we're at the peak of the interest rates and we see some amount of relief soon, and particularly if we do see that interest rate relief, I think the year is gonna be steady.”

Ed Steenman runs a full-service boutique digital advertising agency that’s created highly successful digital and traditional marketing campaigns for Tier 3 dealerships. He has been a contributing writer for Dealer Marketing Magazine for over 20 years.

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 areas of dealership advertising, sales training, and culture development.

Matthew Phillips is CEO of the Car Pros Automotive Group, and a well-respected automotive industry veteran, change management leader, franchise retail advocate, and EV evangelist. Founded in 1993, Car Pros began as a small used car lot. Together, Matthew and his family built it from two employees into an automotive group with over 700 employees and nine stores in Western Washington and Southern California, representing Kia, Hyundai, Honda, BMW, and MINI. Car Pros sells over 25,000 cars per year with annual sales of over $1 billion, and is currently the top Kia retailer in the United States, having retailed over 175,000 new Kia models.

Dustin Schuler is Marketing Manager at Bud Clary Auto Group based in Longview Washington with 14 dealerships, 4 fleet dealers, and a body shop. He is a forward-thinking and versatile marketing leader driving automotive marketing campaigns through campaign leadership, industry partnerships, and skillful analytics integration for both traditional and online campaigns.