The auto industry has been abuzz lately with the long anticipated release of the second phase of the National Auto Dealers Association's study on Factory Image Programs in the auto industry. Many dealers have complained for years that Original Equipment Manufacturers have not made enough of an economic case for the facility upgrades they demand.
The NADA study released in early 2012 did not directly address digital signage; it remains one area where individual auto dealers still have the final say. They know that digital signage is an investment with well-documented results. There is tangible, real-world data to demonstrate that auto dealers who have invested in LED signs have reaped the rewards as they see their revenue increase, that energy costs drop and that dealers are able to reduce their advertising budget. Here are just a few of the ways in which auto dealers are using LED signs to transform their business:
Increasing dealership revenue
Dealers understand the return on investment they can expect from their advertising investment. It's not uncommon for auto dealers to see an increase of 10-15 percent in sales the first year after installing an LED sign. With an outright purchase of a $50,000 color LED sign, even including the annual operating cost, a 5 percent increase in sales will allow the dealership to pay for the entire sign purchase in just two to three months. Beyond that point, future sales increases are money in their pocket.
Reducing advertising costs and boosting ad effectiveness
Auto dealers, on average, spend approximately $628 advertising each new car in their lot, and the average annual marketing budget for an auto dealer is $363,000 (up 10 percent from last year), according to NADA. It can be surprising to learn that for an auto dealer, advertising is the third highest expense for dealers, after payroll and rent. But dealers have had to adapt to drastic changes in the newspaper, radio and television industries. They are finding that digital signs are far more cost effective per ad impression or CPM — meaning, per viewer who sees the ad — than any other traditional advertising medium. Many auto dealers have discovered that their LED sign is such an effective marketing tool, they can even reduce their overall advertising budget by using the sign.
Reducing energy costs
Many auto dealers are opting to replace older signage with new LED signs. These old units were often very inefficient and expensive to run, so upgrading to an energy-efficient digital sign can be a sensible investment. One auto dealership we worked with recently replaced their old bulb sign with a new LED sign several times larger and were surprised to find they are saving $600 a month just in energy costs. An upgrade to LED technology can also make an auto dealer or any business owner eligible for special offers and rebates from utility companies or state and local governments. These rebates can often run in the tens of thousands of dollars, helping to offset the price of the digital sign.
More flexible, targeted messaging
LED signs are an effective advertising tool for auto dealers for two reasons: the ability to advertise different services within their dealership, and the ability to reach potential customers already at their front door. Dealers can use digital signs to display ads for repair specials or new services, advertise overstocked and used vehicles, promote high-margin accessories and to publicize rebates, financing and warranty programs. One auto dealer reports that "it's been a tremendous help when advertising service specials and targeting certain vehicles we need to sell" and "it seems any used vehicle we put up there gets sold."
Pearman is a U.S. sales manager for LED sign and digital billboard manufacturer Watchfire.