#123 - Are You Flushing Your Ad Dollars? with Luke and Jeff

You are listening to the Independent Dealer Podcast with hosts Luke Godwin and Jeff Watson. Thank you so much for tuning in. Let's do this.

Hey, welcome to this episode of the Independent Dealer Podcast. Hope everyone has had an awesome week. Luke, last week's episode was great. You know, we talked to Shannon over at Gravitational Marketing. We talked all about the Rich Dealer program. And you know, whether you like them or don't like them, I think that some of their concepts are super interesting.

There is very interesting. Honestly. You know, I don't necessarily agree with their, their spin, but, you know, you, you and I argued that point back and forth and that's kind of what we're going to do today.

But which. Yeah, go ahead.

You know, they have a lot of good ideas, and I think if you took those ideas and used them in your own marketing, you could probably get maybe not the same return. But I think you let me back up because I think they get it. I think you get a lot more than just ad spend from them. They have a lot of backend things a lot of people need. So I'm not putting down their product. I think it's a really good product. I know a lot of people that do it, but, you know, they really have a good message and they've tuned that message to exactly the way you sell cars.

Yeah. And that's what I find is so interesting. You know, again, I'm not in the program. I don't have any plans to get in the program. But the concepts from the program I think all dealers can use to a degree. Right. And you would argue that some of their concepts are completely in left field and you have no interest in them. But I think we can all argue that we need to set ourselves apart as dealers. We've been over that a bunch of times. I think we can find agreements on that. I think we need to have better marketing messages. There needs to be a call to action with a scarcity and a believability. I think that's a great point that they make. I think the concept of the sleeping buyer, that there's 98% of car buyers out there don't know that they need a car just yet, you know, that I can kind of buy into because I've been pulled into purchases that I wasn't planning on because it was such a great deal or because I was convinced that I needed this new feature or gadget or some nonsense. You know what I'm saying? Yeah, we all have that. So I think those can make. Makes sense. I think probably the real rub is the fact that you got to spend money to make money.

That's not a rub. I mean, that is truth. But I think that so many dealers out there think that automatically by spending more money on marketing, they're going to get more sales. I think that there are many dealers whose marketing is probably too high right now and their processes don't reflect what they, you know, what their marketing message says. And it leads get lost. I think that's the biggest thing that is really wrong with dealers marketing plans. She just. Shannon talked about speed to lead and that is so important. I never heard that concept, but I've been preaching it through our sales meetings lately, is that I believe right now, especially in the environment we're in right now with low inventory and people with money in their pocket, that if you don't get to that lead very quickly and they get lost in your CRM, you're going to lose a deal. So I think there's some really good points she made and I really think that if we went through these that we could talk to some dealers about this and really reflect on that last week's episode, how to get better at these.

Yeah, I definitely think that you've got a lot of the process situation. Right. And we talked about that before. If your process is not right, then it doesn't make any sense to pour fire. Pour gasoline on your fire. Right. Like I think of it like a bucket. Like if my bucket has got holes in it, why am I putting more water in my bucket?

You know what that so many dealers that do that. If I could just get more with leads, if I could buy some more leads, I can do that. Well, no, no, no. Let's make sure you're working the leads you have. And I think people just get, you know, get that mindset that I just need more leads. I just need more leads. I just need more leads. And that's. That's not the case. I don't recommend, you know, first thing dealers out there. The one thing you got to do, and if you can't answer this question I'm about to ask you, you need to shut your marketing off. And I know Jeff will be like, no, don't tell him to do that. But if you cannot tell me how many ups and Internet leads you had and phone calls you had last month, you need to shut your advertising off right now. I know that's drastic, but if you don't know those things, you don't know if you've got process breakdown with your SalesPeople. With your BDC, with your CRM, whatever. Because if you, if you don't know your cost per lead, you got problems. You don't know your cost per car sold, you got problems. If you don't know your cost per application, you got real problems. And just adding more leads is going to create more problems.

Yeah, yeah, absolutely. And we're not saying you need to have some big fancy, you know, algorithms and CRM and all this stuff. If you're one or two man shop or by yourself, just use a piece of paper. But make sure you're being honest with yourself. What is a walk on? What isn't phone up? What is these, These people that you're drawing to your dealership every single day? Keep track of them, add them up. Have some sort of a spreadsheet or a piece of paper where you're marking those down so you can create this trend and be able to add those up every month.

Create a Google Doc right now, or Excel, whatever you, whatever you're used to, and just label it. You know, if you've got one or two salespeople or just one, just put different columns. You know, let it add up at the bottom so you know every day how many you have and at the end of the week, how many total you have. There's a lot of things you can do with that once you have it. I mean, I've got, you know, probably the best CRM on the planet, and I. I rely more on my Google Doc, Google spreadsheet to account for those than what's in my CRM. And I can compare them to see if they're right or not right. That's not a big deal. But I want an accountability between both so I know exactly what I'm doing. And I didn't make this up. Tracy Myers is the person who looked at me years ago and I said, tracy, I need to. I don't think my marketing is doing right. He said, well, okay, Luke, let's. Let's talk about it. Because in my opinion, Tracy's a marketing guru. So I say, tracy, how many? I said, how can I get more leads? He said, well, how many leads you get now? You know what? I said, right? I don't know.

I don't know. More.

Yeah, that's what it was. That's what it was. So once you figured out, you can get back to marketing, but if you don't know, turn it off.

Yeah. If you don't know, you know, back to the analogy. If you don't know how big your bucket is, and you don't know where the holes in your bucket are. How do you know how to plug them? Is it a lead issue? Is it a conversion issue? Is it, you know, your salesmen aren't handling them right? And when you start tracking those, you can start seeing, man, I've got a huge fall off between, you know, walk on and up to application. Or I've got a huge fall off from application to delivery because my guys don't know how to ask for the sale, they don't know how to close or I'm not getting them funded. Like, at least you know where to look for the hole in your bucket. Sorry to interrupt the podcast, but great news. The independent dealer podcast has its official first sponsor, Luke. Our very first sponsor. The great guys, Tim Taylor Byrd over at Dealer Re, have stepped up and said, hey, we're gonna sponsor the podcast. That allows us to continue to make the episodes. It allows us to increase our production value, expand our exposure, get the word out to more people. Our promise to the podcast nation, Luke, to our listeners, to those that tune in, is, is that we will not turn this into some sort of paid ad nonsense. We are only going to accept sponsors from companies that we use in our own dealerships and that we stand behind and know will benefit those that listen. Dealer Re is definitely one of those companies, right, Luke?

For sure. And you know, the history I have with Dealer Re goes all the way back from 2011. I've known Taylor probably since he was in high school, and I've known Tim for all that time. Really good people. This is a quality company. They've been doing my reinsurance since 2011. And for dealers out there don't exactly understand what reinsurance is, go back and listen to our podcast on it. But if you understand what to a point. What reinsurance is and you want to investigate it, you need to contact Villa Re. That is the single best decision I've made in the car business was setting up my reinsurance company. And I know that sounds like a huge statement, but it is the truth. It will change your life. It'll change your business and change the way you do business, and it'll help your customers as well. So, Jeff, I can't recommend anyone more highly than Delore.

Yeah, it's a great first sponsor for us. That's episode 19. If you want to go back to 19, that's mace 16th of 2019. We spoke with Tim. We talked all about reinsurance and how it's going to benefit your dealership. Tune into that. Give the guys over there, a call. Explore your options. They're doing a special for our podcast listeners. So if you do call them and you say, hey, I want the podcast special they're throwing in the College of Automotive Management. It's a federal compliance ethics course that's done online.

So.

So this is so that you can stay compliant inside your dealership. You can teach your people. It's like a $500 value that they're giving to the podcast listeners when you get signed up with them. We had to have something to sweeten the pot. And also, they know that we sent you.

Yep. And it's going to be you get this done. You won't regret it. I promise you that.

All right, back to the episode.

You know, one interesting thing that Shannon said, and I wanted to press her, I didn't. But you may be advertising to the wrong person or giving out the wrong message. So let's say I decided all I was going to go after were prime dealers. I mean, prime customers, okay? But all I had on my lot were 5 to 15,000 cars or 5 to 10,000 cars, right? And on top of that, I didn't have a way to get those prime customers financed. Now, you know, it probably. I'm probably not gonna sell a lot of cars, right? It'd be easy to handle. Those customers that I did sell would be easy to handle. But if I'm set up to only do prime, and then all of a sudden, I'm getting a lot of subprime leads, and, you know, my sales staff doesn't know how to handle my f, and I doesn't know how to handle them, and I don't have the banks to handle subprime. Well, I might be getting a lot of leads, but I might not be selling cars. And we may even be handling those leads perfectly fine. But then when they. When they step into finance office, we go, well, he's got a 500 beacon. We can't finance him a car. And they get broke. So, like you were talking about just a second ago, you've got to know each number, how many leads, how many leads are getting apps, how many apps are, you know, getting financed? Or how many appointments, says appointment shows. You got to check and make sure you don't have breakdowns in this process, because no matter how much you advertise, if you have breakdown in your process, you're not gonna sell cars.

Yeah. So that leads me, I want to further this conversation on, to say your process is as good as it's gonna get or pretty good. You're always fine tuning it. Is it okay then to turn the hose up and start really filling that bucket? And if you feel like, hey, I gotta advertise to the tune of, you know, 3 to 4 to $500 per sale, which is kind of what the gravitational marketing people would argue, that's okay because I've got the bucket. I'm handling them. Right now what I'm getting is more at bats. I'm getting more at bats, and it makes sense because I'm either getting higher sales volume or I'm able to be more picky, get a better customer, or able to hold grosses because I'm not so desperate to sell a car. If someone wants to lowball me, I'm like, no, I've got another one coming in at 3 o'.

Clock.

He's gonna pay full sticker price for this. So where is that argument of, like, trying to minimize your ad spend, or are you just trying to optimize your ad spend?

So, Jeff, you might be too young to remember this, but back in the day, we used to have. We used to have these TVs that you actually had to walk up to and turn the knob, right? And I grew up in the country. I didn't have cable tv. So we had these rabbit antennas, right? So we would have to, you know, click the button to where the channel was supposed to be. Then there was a little fine tuner on the, on the things. We had to adjust it a little bit. Then we had to take the rabbit ears and adjust it. So that's where we are there. So what you're talking about is, you may say, okay, I've got the processes in place. I've got sales staff in place. Every one of my Salespeople is selling 15 cars a month. We're doing good. I need to add one more salesperson. When you add that next salesperson, it might be time to dump some more water in that bucket. So let's say I'm sitting at $180 to $200 per car sold in advertising, and I'm selling 30 cars a month. Well, to get to 50, I may have to take the water hose and stick it in the bucket, right? So I may have to spend 500 a car to get to 50. Mm. My argument is, is once you get to 50 cars a month sold, you can take that hose pipe out of your bucket so you can start backing off your advertising. I'm saying. So, okay, fill it up, turn advertising on, and as soon as you hit 50, then, then you start. Fine. Tuning, okay, I'm gonna back off. I'm gonna go down to 350 a car sold. Then I may even be able to get all the way back to $200 a car sold at some point.

And you need to keep the volume because what you're doing is you're trying and testing. Hey, I've got this one lead source that's bringing me cars, but it's astronomically high, right. So I need to turn that off and instead re channel that money to maybe somewhere where I'm bringing in a cheaper cost of lead.

Cause let's think about this. If you're selling, if you go from 30 to 50 cars, you're selling 20 extra cars a month. That's 20 extra people walking through your door that are buying. So of those 20 people, you could probably solicit those 20 people and maybe get one per person sold. So then you start working the people in your CRM. You start working those past customers, giving them referrals. And, and so it doesn't take long for those 20 to turn into 200, to turn into 400. So I think once you get a lot of cars out there on the road, it's easier to back off your advertising.

And what you're hinting at is a lot of repeat referral too.

Repeat referral.

Because now you've built up your reputation and your client base and there's a.

Lot more of those stickers on the back of cars. There's a lot more of those cars driving around, a lot more license plate brackets on cars. People remember, just because you, let's say you spent $500 a month in advertising, you were all over TV, all radio. Well, that doesn't go away as soon as you turn that off. People still remember that. So, you know, you don't always have to be top of mind because you can be top of mind for two months and then take and slide under some digital marketing. And people still remember that top of mind message you sent out there.

Yeah, yeah. I would say getting that, building that client base and building that clientele is obviously crucial. So if you look at a long term dealership that's been in the community for 30 plus years, right. They're gonna spend a bit less per car sold because of the reputation, because of the goodwill what they've built up. Obviously we know repeat referral is the cheapest and best advertising source that we have. Tell me this, Luke, I want to transition real quick. So say your buckets, good, decent, you're turning it up for those dealers out there that want more sales. Right? I mean, that's really the bottom line. If you want more sales, you're gonna spend more. You need to spend, and we've talked about this before, spend to where you want to be. If you want to be a 50 car store, you've got to spend the advertising of a 50 car store. And that's hard because people think they're going to get to 50 and then they'll have the money to spend on advertising. No, you got to spend it to get there. Right? So when those come in, I listened to a podcast today and they said that every dealership should have a bdc. Every dealership should have a bdc. With the COVID thing and digital retailing and salesmen just inherently being maybe a little more lazy than they used to be. The speed to lead being so important, you can't rely on your salesman to contact someone who's content, you know, to get a hold of, to interact with the customers because they're delivering cars, they're doing this, they're on their lunch break, they took the day off. You have to have a BDC that's going to work those leads accurately. Do you feel that's a true statement? So don't have one. So I ask you that, knowing you don't have a dedicated bdc, even one person, right?

No, I don't. And Alexa has argued that we need somebody, huh? You know, I think it depends on your volume of leads. I know very successful dealers who don't have a BDC, and I know very successful dealers that do have BDCs. I think BDCs are super important for subprime dealers.

Interesting.

Yeah.

And you'd argue that with new car stores. Of course, new car stores. BDCs are just, I mean, that's the standard now. You don't run a new car store without a bdc. I don't.

They have Internet sales, they have Internet salespeople, so that's all.

And they can still do cradle the grave in the Internet sales.

But, but I like, I like, I.

Find it interesting that you believe that though, because I do know there are dealerships out there, larger buyer payers that they know they have to have a BDC because they got to weed through a lot of stuff. And without a bdc, your salesmen are chasing a lot of dead ends.

I think with the bdc, you've got a bunch of lazy salespeople. That's my.

Their pay plans got to change, right? I mean, you're not getting paid if you got someone Feeding you appointments all day long, then.

Yeah. So the guy who sells the most cars in our 20 group has a super successful BDC. And that. That simple thing took him from, I think, 40 or 50 cars a month to 100 cars a month by hiring the right person for his bdc. And he doesn't spend hardly any money on advertising. All he does is that BDC calls, calls asking for referrals, asking for repeats, and he does it right. I don't know what his special sauce is, but I know this. He sells a lot of cars. And the reason he'll tell you is, is because of the BDC. So I think BDCs do have a place. I'm not sold on one.

Here's my argument. Here's my argument. A, they specialize in the conversation and the process, right? They're not worried about make trim, you know, test drive, blah, blah, blah, blah. Their whole situation is to get you set, get you down the funnel, whatever you are, buy here, pay here, retail, or get an appointment set. And so they're good on the phones. They're first to communicate. They can be remote if you're limited in space. And thirdly, dude, I cannot hire a salesman. We talked about this, too. I cannot hire a salesman to save my life. If I say, hey, you're gonna make 60 to 90 grand a year, I can't get anyone. It's been frustrating, but if I say you're gonna make $25 an hour, it's flooded, right? 20 to $30 an hour for someone to sit and make phone calls is like, people jump all over. Then all you gotta have is a good phone voice.

Well, you gotta have. You've got to have the right attitude, too. And you've got to be trained. You can't just. You can't just hire a CSM from somewhere and expect them to know what to say. So I think there's a lot of.

Training, the right scripts, the right processes, for sure, with anybody. But what I'm saying is I think the labor force for a BDC is way easier to get. I think you're better off having two salesmen and two BDC agents than having four salesmen. I think it's just an easier thing to staff.

Okay. I'm not against that. I think before I hired another salesperson, Jeff, I think I'd hire a BDC person in my office. And I'm not somebody who think who sold them, but I think that.

And you'd have to restructure your salesman's pay plans, right? In that Situation if that BDC rep is, is the first contact on every lead.

Yeah, I would probably cut off my salespeople's guarantee and make them all straight. Not commission, but, you know, flat based situation and hit numbers. But my salespeople, man, each one of them makes 50 phone calls, text or emails a day. I mean, that's. They do that and I can show you that they do it, but they've been trained to do it. I didn't hire salespeople. I hired people in the service industry and put them to work because I knew that that's what I wanted. I wanted people who were just very friendly. So, you know, BDCs are good, but make sure you have the lead volume to have a bdc. I think some people hop in it without enough lead volume.

Yeah, yeah. Which came first, the BDC agent or the leads?

Yeah, I think the leads have to come first is my opinion.

So you want to make sure that I'm mishandling enough leads to justify getting someone in.

I want water coming out of, I want water coming out of the top of that bucket.

Let me look at my bucket real quick. We are now an hour into the day for me. I've got, you know, technically I've got 72 unworked web leads over the last weekend. Some of those are some repeats and some second tasks that have popped up. So, yeah, I say my bucket's pretty close to overflowing. I'm fully confident when I hear messages come from the receptionist to say, hey, this is a message from Bob. You said you never called him back.

You know, I get, I get that.

Makes my blood boil.

I get Facebook messages all the time. Hey, I submitted this lead, you know, an hour ago and it happened.

They said they submitted an online app and you never. And they didn't hear back from you. I'm like, what the.

And let me tell you what happens there sometimes too is that they forget they gave you a fake phone number or a fake email.

For sure. For sure. But when, when it becomes a habit, you know that. Yeah. And it might be a completely dead end lead in the salesman scared to call them back and tell them they don't have a chance. But still, that's the issue is what. When you get overwhelmed as salesman, you're handling who's in front of you and you're not working, you're not working for the sales. You're just taking the people coming in with the mattress on their back.

And there are times when we get too busy and we can't work our Leads. And it doesn't happen a lot, but it happens a couple times a year.

And it's when you track that, you know that that unanswered phone call and unanswered web lead cost you a sale. How much, Luke? How much did it cost you to get it, to get that phone call? 70 bucks.

$16.

$16 to get a lead to get a phone call.

Yeah.

Right. So you might as well take chuck it right down the toilet.

Right down the toilet. That's like, when you see a lead, you should know if you see a customer walking around your lot, you should know how much it costs you to get that customer there.

Yeah.

And if a salesperson is too lazy to go out and work that customer, you say, give me. Give me $16. And I'm like, why am I giving you $16? So that customer just got back in their car. You didn't talk to them. That cost me $16. Give it to me, please. Yeah, you do that a couple times, they start understanding.

And that's low, I think, Luke.

It is low.

Got a very low lead. I know I'm more than that.

Most, I think most is probably would be in the 20 to, let's say 25 to 35 range is probably what a lead cost. But ours is. And that doesn't include just walk ups. That includes walk ups, phone calls, and.

Any opportunity, any at bat, any conversation, phone call, web lead. Yeah, your walk ups.

And just think, if it's costing you $16 to get the lead, you know, the appointment set is going to probably cost you 50 to $60. Show is going to cost you double that. So it's probably about $100. Right. And then sold is gonna cost you $200. So these are things you've got to know, because if you don't think of every customer, phone call or web lead or walk up that doesn't get touched as money out of your pocket, it is. And you got to remember that, because you start thinking that way, you start not. You start getting on your sales people, make sure they're. They're touching leads.

Luke, I hope everyone got enriched, enlightened by our conversation today. I know I did. I know it redoubles my effort to say, I know it's important, but you inspect what you expect, right?

Yep.

And so you need to be in your CRM. You need to be in your salesman's tracking sheet or your own. And you got to have that standard. You know you do. That's what I'm going to do. Ryan, we hang up let's do it. All right, guys, have a good week.

Thank you for joining us today. Hope this episode inspired you to take positive action. Remember to subscribe so you get each episode the day it comes out, and we would love your help spreading the word. Leave us a review and share this podcast with your dealer friends. Dealers helping dealers learn and grow together.