#5 - Customer Acquisition

Hey, guys, it's an awesome episode. Today we're talking about knowing your numbers when it comes to marketing. What can I do to make myself more money? What can I do to spend less money in marketing? Jeff's got some great ideas. We cover this today. Stick around and listen.

All right, you got to know your numbers, Luke. Let's go. Sales man, sales acquisition. Let's talk about that. How are you getting your leads right now, Luke? Where are you finding them? What do you think the number one sources are in today's day and age?

You know, big girls and smoke signals are the way to do it, I think.

Yeah.

No. We've been focused for the last five years on a TV branding campaign. And in a majority of our, you know, traditional advertising was in TV, you know, anywhere from 2,500 to 3,000amonth.

Wow.

And we use Truecar, you know, as an outside person. Carfax, we were on Cargurus years ago. They jacked their prices, so we left them. We haven't any loss in that, but we've been here for 34 years this year, so we have a huge reputation. And most of our sales are referrals and repeats. But the one thing about referrals and repeats is you have to have a program in place, which we do. But also, every once in a while, they need to be reminded that you're around. And so to me, branding is very important in that aspect of TV ads that you stay top of mind. With that being said, we have shut TV off going into this year, and we. Well, we wanted to try something new. We know TV works, but we want to be more online. And we've been online. We advertise Facebook, and our website is great. We use a lot of Google Analytics type stuff to really, you know, push people to our website. But what we've done this year has gone in with a local advertising. Not local advertising company. It's a company that owns the television. One of the television stations, and they have a digital package, and it's. It's retargeting. It's banner ads and all this. And so we. We actually filmed last week for that. For that advertising medium. So that's where we've gone to this year. And I don't know. I don't know if it's gonna work, but it's something different.

Nothing ads on their. On affiliate channels, like, or on there. They have owned.

No. So they. Well, they own a bunch of things, but it's. It's. It's more retargeting. So you know, they'll build a demographic for us, and everybody should know their demographic, who they sell to, and they will attack them on Facebook, on social media, and then they will follow them. So that's. That's where we are. Not necessarily. We're not taking banner ads on. On the news site. We're taking banner ads to wherever that customer goes that we are actually tracking.

Right? Yeah. So it'll show up in the. In the, in the fold or in the top or the side of some website that has the, you know, hook the connection with whatever advertising agency you guys are running through. Sure.

And also app. Yeah, also apps. You can advertise within apps and it'll do that.

So. So what I want to talk about, and I kind of want to keep this very high level because I think we could get into each one of these channels, like, very deep. You know, we could talk very much about, you know, running infomercials, you know, at night, to the Spanish clientele, and how that's the best use of your money in some markets and how you feel right now that you're going to go digital and you think banner ads and programmatic retargeting is the way to go. You know, other people could argue that, you know, anyways, we could have gone on each one of these avenues, and we should definitely do that in the future. But let's talk overall from a high level. How do you gauge that effectiveness? And the best ad dollar, you know, I mean, that's really what we're talking about. Right. Is bang for buck. And if you were getting bang for buck through television ads, and you knew that for every, you know, $3,000 that you spent, you got what? I mean, you'd have to get 10 customers. What's your. What's your acquisition per sale? What's your acquisition per application? You know, these numbers that as dealers, we need to know from every source, right?

Sure. You know, the biggest problem with. With spending money in advertising is, is figuring out where. Where it works. Right. So you've got to build something inside your dealership. Most people, CRMs will do it. You know, we use the CRM. We also use the. A spreadsheet that we built. That number one, keeps track with how many ups you got, you know, and you've got to define what up is. And so let's say right now we're, you know, let's just throw a number out there. Let's say I've got a hundred ups this month.

Right? Mm.

So how many of those hundred ups? Where are we selling you know, that's number one. So if I had a hundred ups consistently without doing any marketing or doing the marketing I'm currently doing.

Mm.

If I spend money somewhere else, what happens? Right. So that's number one. So if, if I'm not doing, let's say I'm not doing anything and I have 50 ups every month. Okay. But then I go and I spend $2,000 on a TV campaign per month. Well, did it take it from 50 to 100? That would be my question. So if it did well and my closing percentage stayed the same, I probably did all right.

Right, right. Yeah. So you got 50 ups and you're closing at 50%. You just spent, you know, you got 25 additional sales.

Right, right. So that's great. You know, but if you spent 2 grand a month and, and you got 60 instead of 100, then you got a problem. Yeah, it's not worth it. It's not worth it if it gave.

You 10 ups and you're still closing those 10 at 50%. Because I definitely think that all ups are not created equal. You know, you definitely have to look at, okay, not only what is my lot traffic, but what is my closing ratio on those applications? And that's probably one of the big arguments against Facebook Marketplace. They're gonna say, hey, yeah, I get a ton of tire kickers and I get a ton of non qualifieds. What's the point? All of a sudden, my app, my ups went to a hundred because I'm counting each of these contacts through Facebook as maybe a potential application that I filled out, but I'm closing them at like 5%.

Well, I think you should definitely split your lot ups compared to Internet up. They're two different things, and you need to count both. We count, you know, lot ups or people that actually walk on the lot now that they come from Internet. Yeah, we can judge that too. But you know, if you, if you're, you know, if you're seeing a hundred lot ups a month and you're seeing a hundred Internet leads a month, that's it. That's a two totally different people.

Yeah. And so what if we break that down by applications and say, okay, well, let's just talk applications and how many applications did we take and what was that source? You know, because that's a physical, hey, this guy wants a car. I took an application. I'm trying to get him approved somewhere, whether it's in house buy here, pay here, outside, and just the quality of apps that I'm getting from my television commercial or My direct mail marketing response is just not good. And I'm only closing those at 10%. So what's my effective cost per sale? Is that really the bottom line? What does it cost you to acquire a customer?

Yeah. And, you know, everybody should. Should know that number. You know, ours is like, I think a lead was like 40 bucks, something to that effect. And, you know, what does it cost per deal sold? I think we were at $140, something to that effect. Now I spend a little more money than I probably should. Advertising.

No, I think, you know, and to jump on that, I looked at Niada's composite numbers. Your typical advertising, you know, acquisition of customers. About $208.

Yes. Okay.

If I'm right. So that's your average people are spending to acquire a customer.

Yeah. I think we've run anywhere from 142, 48 up to 193. I think that's the top we've ever been. I didn't see much difference in the 193 compared to the. To the 150. So we've come back down to that. Mm.

You feel like your. Your applications, your sales are staying the same. So sometimes spending a little bit more to get that customer is not a direct payoff. Sure. Because depending on your avenue. Right. I mean, you look at something like television, you spent $3,000 a month and say, that was a $200 lead. That's what, an extra 15 sales a month. What if you'd spent 6,000?

And it, you know, it can work, but you've got to. You've got to weigh what you're. You've got to know your numbers, and you've got to weigh what's worth it and what's not. Just like we're talking about. Mm.

I think that's the bottom line. And that's really what I want to drive home in this one is, is we gotta track what we expect. Right. I mean, you ask anybody, you know how. You know, you. How much money's in your bank account right now, both at your dealership and personal. Yeah. You know that you track it. You know what you spent last month, both at the dealership and at your household. Yeah. Do you know how many dollars you literally have in your wallet? You know? Yeah. You probably keep track of that number. You know where those come from, you know what you're spending. So why are we not doing that with our ups, our applications, our sales? Why are we not tracking where those come from? And I think that's what we really need to drive Home is like, did you know that this lead, you're so in love with direct mail. But each one of those sales is costing you about $300 per sale. Whereas if you were to double down on your, let's say, yeah, banner ads or your retargeting, those leads are costing you $100 per sale. Like, we've got to know that. Right?

You do. And that's, you know, that's the, that's a one issue with TV and radio and a lot of traditional things like that is unless you have a true landing page for, you know, people you're pushing via that way it's sometimes it's hard to track. You know, I can tell you that, that 70% of our customers come from repeat and referrals. I can tell you that number. But how many of those people who repeats the referrals actually came back to us because they saw us on tv? So sometimes it's hard to really get a good grasp on that. Although with Internet advertising you can get a really dialed down exact. This customer came from here. This is how much it's costing Cargurus. Very simple. If the lead comes in, you know where it came from. Right? If the lead came in, you know where it came from. Autotrader probably is about the same. Now don't get me wrong, every once in a while people will walk in and you kind of have to dig a little further. But that's part of your sales process.

Yeah, I think that's, that's salesman training. And to your bigger point, you don't always know the difference between your marketing and your advertising.

Right, right.

You know, you're advertising and you're pushing directly towards a car. Whereas yes, with your television you are more branding and you're just putting your name out there and that may push them towards your Internet side, it may push them towards your car gurus listing. It may push them towards. Or at least when they see your name on that car guru listing, they're going to click on yours because of the brand recognition from your television ads. So is it fair to let those types of mediums get away with that? Like is it fair for TV and radio and, and direct mail to say, oh well, we're more branding, you know, it's more top of mind awareness. So you need to spend money with us, even though you can't pinpoint any one sale that came from that radio campaign, you need to spend with us because it's top of mind.

What you can do is this. You can look at what times you ran Your TV spots, your radio spots. And it should be a direct correlation to traffic on your website. And if that's not happening, it's not working. Your message isn't right or something's wrong. And that's hard to do. Sometimes it's hard to have the right message. You know, you think you know your clientele when maybe you don't. So if you run an ad and it doesn't work, you don't see it. Well, it may not be the medium, it may be your message. So you've got to. Sometimes you got a dial, you know, got to turn the dial a little bit to figure out what's going on. But there always should be a direct correlation between when your ad runs and your website traffic.

Yeah, that's true. And I think to your point of, it's not always the medium, it's the message. I talk to a lot of people, and I'm a pretty big fan of running Facebook campaigns. And specifically inside of Ads Manager, and I'll talk to some dealers, and they're like, oh, we tried running Facebook ads and it doesn't work. And when I dial down into it, I say, no, no, no. What you did was you put a picture of a car on your page and you boosted it for 20 bucks.

Yeah, that's not. That's not.

That's not advertising. That's not Facebook. That's just getting in someone's way, you know, and hoping that they. That guy saw your white minivan and decided that's what he wanted. So huge is message. But even better than that, we do need to create ways to track these things. Right? We need to make sure we're using our Google Analytics and our Facebook Pixel. And if you're running a TV ad, why not push them to a separate landing page or push them to a separate phone number that you can get for free? Why not make your direct mail a call to action that is physically brought into you, and you're tracking those just like you're tracking your referrals. Right. You know, if you're going to pay a referral to someone, you know exactly who sent you three referrals this year, you know exactly who sent you four referrals and who. Those real fanatics of your business are.

Sure not the ones just want $100. Yeah, yeah, yeah.

And even those. And that's what I really find is interesting. You know, I look at some of the new mediums and I've, you know, I've kind of. Kind of shied away from radio for quite a While, because I feel it's such a shotgun approach to marketing and advertising, you know, where if I can't narrow myself down to my exact demographic and get real specific with whom I'm putting my message in front of, you know, and I think that as a consumer man, you know, you're bombarded with so much, you know, you get so many radio and Facebook ads and Instagram and banner ads and everything else that's being served to you daily by someone who thinks you're interested. If that can't break through and speak to me, I'm not paying attention to it.

I agree.

But if it jumps out and says, hey, are you a 37 year old male in, you know, southern Utah that likes to go outdoors? Well, yes, you're right, I am. What, what do you got for me? You know what I'm saying? I feel like I'm going into those messages more and they're getting my attention more so than just, you know, kind of pray and pray method.

Well, that, yeah, that goes back to your, your topic of how did you send that message? Is it just a car? Did I just boost a car? That, that's the same thing. So it's just. Why would, why would I just go boost a car on Facebook and hope that the right person is scrolling through Facebook at the right time to see that car won't, you know? Yeah, it just makes sense. And people tune it out. People tune out radio commercials, people tune out TV commercials because it doesn't apply to them. So it's hard. But if you, if you target the right people, which you can do with Facebook, you can do with Google, you can do it through targeting. Know those people are in the market for a car and you send them the right message, of course that's going to be the best, best bet. Don't you know, there's no need for me to want to advertise to bad credit people. There's no need for me to advertise on cnbc. So know your medium, know what you're doing and find a way to, to quantify it. If you can't quantify it, don't spend the money doing it.

Yeah. And that is what's interesting. We're in a very unique business model where most of us are limited by our physical, you know, geographic location. You know, so there are some of these mediums that are too broad for us. You know, most of us deal probably within a 50 or 100 mile radius of our dealership. Depending on how big our city is. Some of them might be A one or two mile radius in these big cities. You know, how do you specifically get at those people in your area? And that, that medium, the marketing message is the variable. We actually have a full time in house social media marketing person. That's a position I brought in two years ago where I said, look, I don't want to trust other people to put together my message. I don't want to pay every time I want a video made or a 30 second infomercial that I want to run on pre roll Google or pre roll YouTube. I want it done in house because I want to change that message every Monday morning. So we brought them in and they come here and they film and they do videos and we do shticks and we try to provide some entertainment through any of our sources, whether it be direct mail, radio, Google and all those areas. I think that's something that everyone needs to look at. You're really just trying to get people's attention, right?

That's it.

That's ultimately it.

Yeah. I mean I love the idea of having somebody in the house doing that. I, we rely on me for some creative stuff and my wife Alexis, she, she comes from marketing background so she, she has it, she knows what to do. We do, we have hired a, a person here locally that does, that handles our social media with our creative thought process. But you know, I rely on our sales staff to do some videos and things like that. But you definitely need to, you need to do the videos, you need to brand yourself out there and you need to have a good message and the message needs to change often like you're talking about. That's, that's awesome.

So if I were to wrap this up Luke, in kind of a summary, I think for us as dealers we need to know a, what is an effective message for our market. You really got to think who is your target demographic? You know, how am I going to reach that person? How do I put myself in their shoes so that I can market to them? B, what avenues are they looking at? Where am I going to get in front of them? You know, see, what is that going to cost me to get in front of them? What is that going to cost me per sale, per lead and then fourth, is that perpetual? Can I double down on that? Can I triple down on it? What's the depth of that market? You know, hey, I've completely tapped it out after X amount of sales and now I need to move on to something or else or no, this is an avenue that's working for me. I'm just going to go really, really deep into Facebook marketplace and I'm getting all the sales I need at the right cost per sale. So I think really, dealers all want to know what the silver bullet is. What is it? Car gurus? Is it one of these websites that's just going to start feeding them leads every day because they turned on the spigot? Or is it the dealers have really got to dig into it and say, yeah, I gotta. I gotta know my numbers.

That's number one. You know, Know your numbers. And you and I being in 20 groups, we're forced to know our numbers, right? And that. That's it. Know your numbers. Track everything you possibly can track. And you may not. You may not track it all right now, but as you go along, you'll find something else that you need to track and do it. And then, you know, turn on another medium, turn it off, depending on. See what happens.

Okay. I like it, Luke. Thanks, everybody. We will wrap this up. I think we'll probably get into some of these avenues in depth. Man, I really like your ideas. I mean, I'd love to talk to you more about your referral program and, you know, we can discuss some of these new mediums and how to get out there on them best, but we'll save that for another episode. Luke, you got anything to say in signing off?

That's it, Jeff, Thanks a lot, buddy.