North Carolina dealership owner Mike Johnson and his partner are big believers in local TV advertising. They spend 80% of their advertising budgets with TV stations and expect to increase spending 10% next year. He explains his TV-focused strategy and, drawing on his experience as the former chairman of the North Carolina Dealers Association, he offers the prediction that advertising expenditures in the auto sector will increase every year over the next five years.
As a local advertiser, Mike Johnson is as close to ideal as local TV broadcasters can reasonably hope for.
He operates two dealerships — Mike Johnson’s Hickory Toyota, in Hickory, N.C., 60 miles northwest of Charlotte, N.C., and Steve Padgett’s Danville Honda, in Danville, Va., which is in south central Virginia along the North Carolina border — and has placed 80% of his advertising budgets with TV stations and expects to increase spending 10% next year.
Johnson also serves as immediate past chairman of the North Carolina Dealers Association. In this interview with TVNewsCheck Contributing Editor Janet Stilson, Johnson explains his straightforward, TV-centric advertising strategy, and grumbles about TV account executives who don’t understand it. He also shares a little of what other members of the dealers association are thinking and how they may be spending their advertising dollars.
An edited transcript:
Tell me about your media strategy for next year. I’m particularly interested in specifics about TV station spending.
Well, you know, I am probably a little bit unique in this marketplace because I have a very dominant CBS affiliate [Raycom Media’s WBTV Charlotte, N.C.], and it seems to continue that dominance year over year. I think, overall, my strategy for 2012 will be the same as it’s been for many years, and that is consistency. I have got to be consistent in my marketing message in order to remain top of mind. So when customers think about buying a car, they think of me.
We will sit down and look at some shows and some times and maybe modify the buy a little bit. If Surviver is out-performing CSI or something, we might move some show times. But we will pretty much be heavied up on news with the CBS affiliate.
What about the dealership in Virginia?
There, we use the ABC affiliate [Allbritton’s WSET Roanoke-Lynchburg].
Has the dicey economy changed the amount that you’re spending on TV?
No, not really. We modified or reduced our TV buy slightly in ’09, but we took that budget back up to the ’08 levels for ’10. In ’12 we will probably be up about 10% over ’11.
Is that true for both of your dealerships?
Why the increase next year?
We just see the market coming back. Our production has gone up. We were hit pretty heavy with the tsunami and earthquake in Japan, and so we kind of held the line a little bit. Our budget didn’t go down; we shifted some of the money into used-car marketing instead of new-car marketing this year. But the increase has mostly been due to increased capacity, more inventory. And we believe that 2012 will be slightly better than 2011 as far as new-car and used-car volume.
When you look at the overall pie of money that you spent on advertising, has the proportion allocated for TV and its various digital offshoots changed much in recent years?
It’s about the same.
What percentage is going to television?
And is that largely TV station spending?
There’s probably 80% local network affiliates, 10% cable and 10% Internet.
How do you use TV?
I think, here again, consistency is the message. I do an annual buy. So I can tell you in January what my GRPs are and what the budget will be and where I am going to place a spot for June. That’s done for the year.
I think the biggest challenge I probably have is marketing used cars on television. You don’t have enough time to get your message to the consumer. One of the advantages of a newspaper is that you can list “four doors, sunroof, five speed, 30,000 miles, one owner, candy-apple red, never been driven against the wind.” You can list a lot of vehicles and show how they’re equipped.
In a 15-second or a 30-second or even a 60-second spot, it’s very, very difficult [to convey those kinds of specifics].
Do you use TV Web sites?
No, I don’t. I have found my Web traffic to be much more efficient for me if I advertise my URL on television. I am spending some money to be high up in Google searches and Bing searches, and then the rest of my Internet money is being spent on cars.com and autotrader.com and some of the other search engines that are used-car specific.
You say your spending didn’t really change due to the turmoil in Japan. So has the business been pretty steady-as-you-go at your dealerships?
I was interviewed by the media one time, and they said, “We have heard that Toyota is going to run out of cars by — whatever it was — April 15. What are you going to do?” And I said, “You know what? This is a fluid situation. So we’re going to continue to sell new cars just like we have always sold them. And we’re going to sell them until they’re all gone. And if they’re all gone and we can’t get any used cars, I guess we will start selling hotdogs.”
The facts were, we really only lost about 30 days worth of production. To give you an idea, through that tough time I probably had about $2 million worth of cars sitting on the lot, and I am back to about $6 million today. And we’re still not full. We won’t be full probably until Thanksgiving.
Do those figures apply to both of your dealerships?
Yes, and actually the Honda store was hurt worse. Honda was not able to rebound as quickly as Toyota was.
I want to also get some thoughts from you that pertain to the North Carolina Auto Dealers Association. In your conversations with other members of that organization, have they expressed any concerns about what they’re experiencing with TV advertising? Or have you noted any changes in the way that they’re advertising?
Obviously, there are different challenges with different manufacturing relationships. What Chrysler dealers are going through right now and through the downturn has been different from what Toyota dealers were experiencing. I think those challenges were much more on the operational side than they were on the marketing side. Whether you were buying television to advertise your Fords or you were buying television to advertise your Hondas, I don’t think there were any issues statewide.
Do you see your competitors changing their spending habits at all? For example, the domestic auto dealers?
I think as the business has come back, everybody is spending a little bit more. And I think a lot of the guys — Ford dealers, Chevrolet dealers, Chrysler dealers who were in a pretty dismal situation a few years ago — see the light at the end of the tunnel. So I would anticipate that advertising expenditures in the auto sector should increase over the next five years every year.
In your dealings with TV stations, are there certain things that sales people do that are deal killers, that make you want to place your business elsewhere?
Absolutely, several things. There are a lot of account executives that are calling on me and other dealers to try and sell us television simply to hit a sales objective they’re chasing or their boss is forcing them to hit.
They’re driven, and that’s certainly understandable. But it’s my opinion that they would be much better served to take the demographic, the audience that they have, and focus it on a retailer that could benefit from that demographic. If your station is drawing 18-to-24 year-olds, what are you doing talking to a Toyota dealer? My demographic is 55 plus — certainly 45 to 65 or so. So if your station is delivering 18-year-olds at a record rate, go talk to somebody who is selling iPads or iPhones. That’s just not my market.
So it sounds like they don’t do their research.
I think that most of these AEs watch the competition, and they say, “Aha, Mike Johnson’s on CBS, he is not on my station, ABC. I am going to go talk him into spending some money on Channel 7.” Well that’s not the right approach.
It’s almost like they know who’s spending the money, and they think they’re spending it for frivolous reasons, you know, like the drunken sailor.
Is there anything else that they can do better?
Well, I have got to tell you my absolute pet peeve is the AE that tells me that if I don’t do some business with them they’re going to take me off her account. Well, I don’t care. You know, I hope you do well, but I don’t care who has my account. Why are you even telling me that?
Do you have frustrations during election cycles, in terms of where you are able to advertise? Are stations able to resolve any conflicts?
We have always been able to work through that pretty good. I have been preempted a little bit, but because I make an annual buy, they’re usually able to do make-goods and get through that situation.
One of the things that Toyota had to deal with this last year was the whole issue of reliability. Does that factor into your promos at all?
No, it really hasn’t. A lot of the lawsuits were thrown out of court. Really the only issue that Toyota had through that whole deal was that if you used a non-factory floor mat or you put towels or household carpeting on your floorboard of your Toyota, it could get hung up on your pedal.
There are certainly arguments to say, “What are you doing putting household carpeting in your car? What are you doing putting towels down on your floorboards for?” Now, the reality is that Americans do those things, and so Toyota needs to build a car that won’t have that entrapment issue. But the facts were that if you used the mats that came with the car, you didn’t have any problems.
I understand that there’s a general rule of thumb among auto companies that you spend about $1,000 on advertising per car sold. Is that true for you?
No. I think that’s a terrible, terrible philosophy. There are all kinds of industry norms out there: $300 a car, $1,000 a car, 2% of gross sales, a half percent of the distance between the U.S. and the moon. To me that’s ludicrous.
What the philosophy should be is, you should know, as an automobile dealer, how many people you need to talk to on average to sell one car. We call that a closing ratio. It’s real simple. It’s kind of like the Fuller Brush guy. He knows if he knocks on 20 doors he sells one set of brushes. So if he wants to sell two sets of brushes, guess what? He has got to knock on 40 doors. It’s just math.
So my philosophy is, I have got to first decide how many cars I need to sell in the month of November and then once I know that, I know what my average closing ratio is. So that is how many people do I need to talk to in order to sell the number of cars I need to sell. Then how much money do I need to spend to attract that many people here? That’s the number; that’s what you have got to spend.