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Advertising assistance from the OEMs, commonly referred to across various manufacturers as “co-op” when it is refunded by the OEM, can be a great help to dealers to offset advertising costs and achieve market share.  I won't say that what the OEMs deem as "co-op-able" is always the best choice for a dealer:  However, in many dealers it seems that the question “is this advertising co-op-able?” has become a standard bar to measure advertising—instead of measuring sales results!!—and that is extremely dangerous.  And stupid, really.  Especially when this sales year of 2012 is shaping up to be the first really good one in quite a while!

So, how does co-op make us stupid?  For example, let’s say an OEM-approved website vendor has a co-op-able pay-per-click (PPC) program.  Let’s do it!  Can’t be bad, right?

Except it can be and likely is.

Because if the OEM-approved website vendor is using the same PPC terms across all the dealers with the same lines in the same area, not only is this ineffective it also just burns through a PPC budget in a hurry.  And produces little, if any, sales.

And this happens every day.  I’ve seen it.

Another example of “co-op making us stupid” is limiting our advertising to only those things that are co-op-able.  Let’s say some co-op money is available for direct mail, but it’s only possible to do it twice a year and co-op the money.  So all we do is direct mail twice a year and we ignore that our market actually reacts well to direct mail quarterly or more!   And we lose sales because we forgot that advertising is about “investing money to make sales”—and not about “investing money to get co-op dollars back from the OEM.”

I will reiterate that co-op, when used correctly, can be a great help to a dealer's advertising and a great competitive advantage.  However, we need to use co-op to smartly add to our business and not to just buy inept programs because they are co-op-able and/or limit our advertising to only the advertising—good or bad—that is co-op-able. 

Remember, advertising is done to gain sales, not to gain co-op money.  If we make advertising (digital and non-digital) decisions based solely, or even in larger part, on whether the advertising is co-op-able, we are dangerously letting co-op make us stupid.

Which, in a rebound year like 2012, will still put us “back-of-the-pack” in sales.  Do we want to be “#1 in co-op”?  Or “#1 in sales”?  Easy decision when put that way.

So go be smart and sell!

by Keith Shetterly, Copyright 2012
www.keithshetterly.com  All Rights Reserved
keithshetterly@gmail.com 

Views: 985

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Comment by Stan Sher on March 8, 2012 at 5:51pm

I love your posts...

Comment by Brett Stevenson on March 8, 2012 at 4:28pm

Hi Keith, you raise great points we are involved with a lot of co-op with dealers we work with and, unfortunately, the OEMs are way behind on co-op for online.  The other creeping danger is that we are seeing the OEM's start to move toward forcing dealers to do Tier 1 branding advertising (which they are supposed to do).  The way they do this is by forcing the dealers to narrow their advertising to only what the manufacturer wants to say.  Now they are taking it further and are starting to dictate standards for all advertising, even the non-co-op.  They are looking at things you have on YouTube and saying, "That video doesn't fit our standards, so you either have to fix it or you will get a red flag on your dealership."  Remember when you used to say things like, "Johnson Mercedes, the friendliest place to buy a mercedes benz!"  That is outlawed - they don't want you to compete against the neighbor mercedes dealer.  By controlling the content of your advertising, co-op or not, they can force the local dealer to advertise the brand instead of his dealership and not have to spend OEM money on branding.  Watch what happens in the next year...it's coming fast.

Comment by Keith Shetterly on March 5, 2012 at 1:58pm

Know what I think?  We need to go "bad boy" with all these *&^%$ rules!

Comment by Aj Maida on March 5, 2012 at 1:45pm

I am in charge of the Chrysler PAP (co-op) at our store. We spend every dime of it. Do we always spend it wisely...I'd hope so but I'm sure I get a bloody nose now and again. We also spend money  on items that are not co-op eligible, why, cause it drives business to our stores. I have to agree with @Brian though. The lack of full reimbursement for Google Adwords is just silly. We put a small amount of funds into Adwords Express ( I know it's not the same) last month and submitted it at the end of last week. I will report on the success or lack there of when the approvals roll. Why didn't I submit for pre-approval? I've found that on some of the questionable ones it's better to do a test with limited funds then to just get rejected out of the box. It's worked about 50% of the time.

Comment by Tom Gorham on March 4, 2012 at 9:39pm

@Keith - I love this post because it deals with motivation.  What motivates a dealer to spend money on advertising or marketing?  Is it reimbursement or is it profit?  It is natural to want to limit your costs, but it is imperitive to look at the results.

Comment by Linn Boyd on March 4, 2012 at 5:18pm

This is very true & a great post Keith. I used to live in Houston and another spot that the dealers don't look at is what they spend for advertising for an online news paper such as chron.com and don't realize that a large portion of the traffic for those sites, over 30%, isn't from people that would be any type of potential customer, but from people that used to live in that city just reading news. Also chron.com gets a large amount of its traffic from digg.com and slashdot.org type of articles. The dealers don't analyze the where the digital traffic is coming from, and the success of the data.

Cheers!

Comment by Ralph Paglia on March 4, 2012 at 4:28pm

Keith - I deal with advertising compliance issues around dealer co-op reimbursement and approval processes almost daily and agree with you wholeheartedly.  Co-Op reimbursement eligibility should NOT be the only criteria for making advertising decisions... And, much more important is the part you wrote about advertising that is not Co-Op eligible... If it works and it helps sell more cars, producing an ROI, then Co-Op should not even be part of the discussion.

Comment by Jae Chang on March 4, 2012 at 4:05pm

All about the results and returns. If one spends half (co-op) and returns little to none, still bad.  If one spends more and returns more, win!  What do you ( open question to all ) feel is an adequate return? 3x? 5x? 10x? 10+? 

Great Post Keith!

Comment by Keith Shetterly on March 4, 2012 at 12:27pm

@ Tom:  Thanks!!

Comment by Keith Shetterly on March 4, 2012 at 12:26pm

email me Manny at keithshetterly@gmail.com

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