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How Digital Marketing is Effecting the Car Business

Joe Tarell, Performance Improvement Consultant
by Joe Tarell, Performance Improvement Consultant

The Fall of Vehicle Sales Profits = The Rise of the 'Automotive Agent'

When the Internet caught hold in the 90’s, consumers became more educated about what they should pay for a new car. Subsequently, many dealers adopted new tactics (like adding more services and accessories) and refined old ones to help sustain their profit margins. Today, the Internet continues to erode these areas even more and according to NADA, new car sales profits keep declining

So, What's a Dealer to Do?

The good news is that sales have grown quickly in the last few years. The average age of a new car

has finally flattened in 2014 after climbing steadily since 2008 and now stands at about 11.4 years old. Consumers burned by the financial meltdown in the fall of 2008, combined with the quality of the cars built in the last ten years contributed to annual sales figures in the 10-13 million range. The new marketplace shows approximately 5,000 fewer dealerships than 2007 and sales that are expecting to remain at or above 15 million for annual volume. With fewer stores, the average store total sales have climbed an astounding 55% since 2009 according to NADA, but the gross margin has fallen almost 12% in that same time period.

What it Means for Your Dealership

Fewer stores and more car sales mean that dealers are selling more cars per rooftop than ever before. The problem is that net profit on a new car sale averages $69, so the stores that are really earning money are making it elsewhere. Used cars are harder to get and the cost is high so while the average net profit is higher than a new car at $254, there is a lot of risk involved for low profit. Fixed Operations is the opportunity for the best profit margin and the Internet is the place to make this happen.

In a recent study by Google, 7 out of 10 purchasers started their aftermarket purchase search on the web. Although online purchases continue to grow, this is not a real opportunity for most car dealerships because they don't have the infrastructure in place to compete for online sales.

So what can you do? By embracing digital media and changing your in-store processes, you have an opportunity to cultivate a long-term relationship with a customer that will be more profitable. The sales process must set the table for the fixed operations department. Instituting a concierge-like service in the sales process can win customers for the service department by promoting the increased level of service. This new car customer is encouraged to call their “Automotive Agent” (think of it like an insurance agent) for any automotive needs and questions.

In order to make a process like this work, the dealership digital marketing campaigns and website should be filled with helpful tips and videos that promote the increased service commitment. You should work on building strong content that will gain followers online and create wonderful landing pages for your ad campaigns.

For example, having real employees illustrate how to change the oil or check the battery in their car will be indelible. Every department in the store can get involved and these should be placed not only on your dealership website but on your social media properties. Combine these with dealership events that cater to your market demographics, encourage your customers to stay engaged with your store personnel, and your relationship with your current and future customers will strengthen.

Imagine the impact of building an aggressive digital marketing and advertising plan and your in-store processes with online aftermarket shoppers in mind. If cars start showing up for service appointments with license plate frames from the competition as well as your own, you will know the program is effective. Assign these new owners an “Automotive Agent” from your sales team and implement a email marketing plan that matches customer preferences with their vehicle lifecycle and a lifetime customer loyalty will grow.

What else are you doing in your dealership to overcome our shrinking margins? Please share your tactics in the comments below.

About the Author

Joe Tarell, Performance Improvement Consultant Joe Tarell is a Performance Improvement Consultant at Cobalt. He brings a rare blend of offline advertising, agency management and over 15 years of automotive digital advertising expertise. He spent nearly two years as an Internet marketing consultant including working with Gulf States Marketing helping Toyota’s Signature dealers improve their marketing and lead handling processes. He has presented to NADA 20 groups, OEM regional teams for Hyundai, General Motors and Toyota and worked directly with some of the largest dealer groups in the country.Feel free to reach out to Joe at

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Tags: Joe, Tarell, advertising, dealership, digital, in-store, marketing, process, purchase


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Comment by Alexander Lau on September 25, 2014 at 6:41am

What dealerships need is a digital marketing strategy. Such as what we perform, from a digital marketing standpoint below. Stop buying into individual services, without a strategy. BTW, you'll get much more tender love and care and an explanation / report on your ROI with us.

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