Although things may look a little rough now, there’s hope in the near future. We’ll pull out of this temporary slump, and the market and the economy will be back. America will survive and prosper, as it always has.

However, today is a little more challenging. As the consumer confidence index shrinks to a twelve- year low, gas prices skyrocket, and the unemployment rate increases, there are fewer buyers, and less room for error and waste. We need to buckle down, and get serious about efficiency and making it happen. This does not mean however, that we should be pulling or reducing our ad budget.

I hear so many dealers and business owners saying they are going to cut back on, or stop advertising until the market improves, or until the war is over, or until…

Reducing or suspending your advertising is a fundamental mistake. You need to maintain your equity position in the mind of the consumer. It’s far cheaper to maintain top of mind awareness, than it is to regain it once lost. And you should also be taking advantage of some of the lowest TV and radio advertising rates in years.

Just because the market has slowed, it is not dead by any means. We provide a variety of advertising and marketing services for over 1,100 businesses across the country. Most of which are car dealerships. And the majority of our clients are doing very well; some are even ahead of their planning potential and projections.

Why You Should Continue Advertising in a Slow Market

The following chart from the American Business Press compares sales for companies that cut back their advertising expenditures during the 1974-75 recession with sales for companies that did not cut back.

The companies that did not cut their advertising budgets did better in every year. By 1977 their sales volume more than doubled, while sales had barely gone up 50 percent for companies that cut their advertising. 1975 sales were down for those companies that cut their advertising, but up for those that didn’t.
Those companies that continued to advertise in the recession, made more sales during, and after the recession than their competitors who did not advertise.

 

“Studies of the last six recessions have demonstrated that companies which do not cut back their advertising budgets achieve greater increases in profit than companies which do cut back.”
— “Ogilvy on Advertising,” 1983

In a Morril survey of 40,000 men and women involved in the purchase of 23 industrial products over five years, it was found that share-of-market went up in bad times, when advertising was continued.

Those companies that continue to advertise in a slower economy gain three primary advantages over their competition:
1. They capture a greater share of the market, because many of their competitors have reduced or eliminated their advertising.
2. They hit the ground running with top of mind awareness when the market conditions do improve. Which gives them a strong competitive advantage and momentum.
3. In a slower economy, TV and radio rates soften as inventory increases, allowing for lower rates, better spot positioning, and more bonus spots and value-added.

By 1977 the net income of companies that did not cut their advertising had more than trebled, while for those companies that did cut back during the recession, it had barely doubled.
Sales and income both increased during and after the recession for those companies that continued to advertise

So whatever you do, don’t make any knee-jerk reactive decisions that will sacrifice your long-term growth and market share based on a temporary market slump.

15 Things You Can Do Now to Grow Your Sales

Here are some practical suggestions to improve your positioning, message and your bottom line in today’s economy:

1. Focus your inventory and advertising on high MPG vehicles.

2. Advertise “Value Vehicles.” Certified Pre-Owned, lower priced models, smaller, basic models.

3. Focus on customer retention and database marketing. It is far cheaper and easier to re-sell an existing customer through proper database marketing than to acquire a new one through mass media advertising. We have dealers who have never done better than they are doing now with a very simple database letter.

4. Get aggressive in the sub-prime market. This is the fastest growing segment of the market. Get the right inventory, the right lenders, and the right advertising, and get aggressive in this growing and profitable market.

5. Get real serious about sales training, guest tracking and logging, and rock solid follow-up. If you sell just one more up out of five, you will double your sales volume. Internal efficiencies and processes are more critical now than ever.

6. Get more effective and efficient at buying and placing your advertising. There is more money wasted in poor media buys than anything I have seen as it relates to advertising. If you’re not a trained expert in the area of media buying, turn it over to someone who is. The only thing more expensive than hiring a professional is doing it yourself.

7. Get better at creating effective ads that work. Understand the principles and formulas of what makes an effective print ad vs. a TV ad vs. a radio ad. Each one needs to be treated a little differently. You would be surprised at the difference a few tweaks can make. A great ad can pull over 1,000% better than an average ad. I often hear people saying “advertising doesn’t work.” I would agree that poor advertising in fact doesn’t work. On the other hand, excellent advertising that is on strategy, well founded, executed with proper targeting, frequency and consistency works wonders.

8. Tighten-up your inventory management. Less emphasis on gas-guzzlers and luxury, unless that is your market and your niche. Put less on marginal trades. Focus on turn.

9. Increase your referral generating efforts. A referral will close at 28-30%.

10. Be pro-active, creative and focused on your strategy and execution. Do it flawlessly and consistently.

11. In a down market, it’s easier to hire more quality people, as there are more of them looking for work. Clean out the dead wood and the marginal players, and hire only great people.

12. Integrate your advertising message, look and Unique Selling Proposition (USP) into all of your advertising and customer contact points. This is the quickest way to build your message frequency, and leverage your advertising investment. Make sure that every ad and every message is consistent.

13. This may be the time to create an American theme, promotion and campaign. Remember how popular American flags were following 9/11?

14. Focus your resources. It’s far more effective to move 10% of the market 100% of the way toward a sale, than to move 100% of the market only 10% of the way. Focus your budget on the most effective advertising mediums and the biggest ROI.

For example, the cheapest and most effective direct mail marketing you’ll ever do is to your own customer database.

To maximize your ROI in newspaper, run black and white ads only, and run them only in the automotive classifieds section. Newspaper advertising is only effective to those people who are in the market today, which equates to 1.3% of the adult population 18+ in the average market. These people will look for your ad in the automotive classifieds, and they will see it even if it’s only black and white. Only run a 7x15 inch ad maximum. This is known as a “page buster” and it is the most cost effective size. You don’t need a full-page full color ad to be effective.

Supplement your newspaper with TV or radio. Own a daypart, or a station. Build frequency to a targeted audience. Frequency is far more important than audience reach or size. Don’t make the biggest mistake in advertising, which is trying to be everywhere on a limited budget. Focus, and build a three frequency per week against a targeted audience.

TV and radio will build awareness for those people who are not in the market today, but will soon be. It also speaks to those who are in the market, but do not read the paper, which is a growing percentage of the market. Remember, the primary audience of the daily paper is the 45+ crowd. TV and radio also build confidence in your company, create name awareness, and hit the younger audience far better than the paper. Your print ads will also do far better if they are supported with TV or radio.

15. Remember the 10% rule. In any industry, the competitors do everything the same, and advertise and market in the same way, plus or minus 10%. Which is why there is so little real differentiation, or clear competitive advantage. Break out, and do what nobody has done before. Domino’s Pizza ran away with the pizza market because they broke out of the pack, and offered free delivery. When their competitors also started offering free delivery, Domino’s turned up the heat, and offered “free delivery within 30 minutes or it’s free.”

Carve out a position in the market, and be known in the prospects mind for something really great and substantial that benefits them. Don’t just compete… blow your competition away.

Duane Sprague is president of Dunning Sprague Marketing & Advertising, located in Foothill Ranch California. Duane has written over 60 published articles and 3 books on marketing and advertising, and is a national speaker. He can be reached at 888-264-1963 ext. 1618. Or on the web at www.dunningsprague.com. Email: dsprague@dunningsprague.com