When I was a kid, I watched the movie The Hunt for Red October with my dad. You might remember that was a 1984 novel by Tom Clancy that was made into a movie starring Sean Connery in 1990.
In the film, there was a maneuver used by Soviet submarines called the “Crazy Ivan” – a sharp turn that allowed the sub’s crew to see if they were being followed by checking an area directly behind the engines that normally can’t be monitored with sonar. The maneuver was sudden and unexpected in nature.
Years later when I was running a dealership, I coined the phrase Crazy Ivan when referring to a tactic I used a few times a year to measure lead counts generated by my advertising. I would have my team completely shut down all advertising campaigns and spending. Then we would meticulously measure the lead response to see exactly what happened when our advertising ship shut down all of its engines. What I wanted to know was how many leads my dealership was getting on its own, without the benefit of advertising, and how many were generated by the campaigns.
I considered the non-advertising leads to be my baseline leads.
That’s an important number to know – and along with selling ratios and ROI, it’s one of several reasons dealers should track and analyze traffic counts on the lot, on the phone and online.
Let’s walk through each of those critical advertising tests to provide practical assessment options of your current ad strategy.
BASELINE LEAD COUNTS
A baseline lead count means counting or measuring how much traffic your dealership would receive if you didn’t spend money on advertising. That’s as opposed to lead counting, which measures how much traffic your dealership receives in total, including ad efforts.
There are four methods of determining baseline lead counts: new opening, Crazy Ivan, targeted Crazy Ivan and sourcing analytics.
New opening method: In this method, a dealership counts traffic based on the fact no advertising dollars have ever been spent in the past, or no meaningful ad dollars have been spent over a sensible period of time.
Many independent startups begin with no advertising, albeit unintentionally. Most often, they have not begun to advertise because they do not know which services or companies they should invest in or with.
This provides the clearest baseline lead count. It is a given-period lead count, reflecting how many leads are truly generated organically through location, inventory and area awareness.
This method is the purest form of baseline lead counting due to the fact it has never had nor does it have advertising support.
It truly can be a pure and natural indicator of how many leads your location receives regardless of ad initiatives.
Think of a person who has never entered the gym in his lifetime. With the help of a training coach, his first session is spent going through each muscle group and conducting exercises to measure the new athlete’s ability to lift the maximum amount of weight or maximum time he can perform an accelerated aerobic exercise.
That is often called “maxing out.”
By recording that initial result, we can determine the difference when future results are recorded and compared to it. That difference – hopefully positive – shows the amount of change over a specific period through his workout strategy and efforts.
Similarly, on a new lot, we can clearly measure the difference between the initial lead count and the lead counts after the implementation of ad campaigns.
While the new opening method is a very pure form of baseline lead counting, its weakness is it is not a practical option for most dealers who have been in business longer than a few months.
And, unfortunately, far too often startup dealerships not only don’t advertise, they don’t count their traffic, either, and that oversight prevents the new dealer from comparing results once advertising does begin.
As a result, the new dealer has no data and cannot determine if his or her advertising has been effective. And that situation can create prolonged commitments to ineffective marketing as well as confusion and frustration, not to mention elevated expenses and decreased profitability.
Crazy Ivan method:
When a dealer cuts his or her ad budget to zero for a period, not only does that save the money previously spend on ads, it more importantly provides
a determination of the velocity of the ad campaign that can be measured by observing the reaction to the lead counts.
What is the response to lead counts when funding for various campaigns that are simultaneously running is suddenly and unexpectedly stopped at once?
Does the lead count increase? That would be odd.
Does it slowly fade downward over a longer period of time? Or does it begin to drop like a rock?
Often, the Crazy Ivan method quickly proves a dealership is spending the majority of its ad resources in unfruitful areas because the lead count does not drop like a rock – which would be the expectation if the campaign was working.
In fact, the faster and harder your lead counts fall using this method, the better your ad tactics and strategy are. Here’s a tip: If that’s the case, you’d better turn the ads back on – quickly!
For dealers who have no evidence of reasonable returns in the majority of their advertising campaigns, Crazy Ivan can be a quick way to prove it’s time to start over, or at least to make major modifications.
Be careful, though. This tactic is not always practical. It carries too much risk for dealers who have evidence their marketing dollars
are returning a reasonable amount of leads.
Modified Crazy Ivan method: Instead of cutting off all ad spending, target one advertising source and shut it down, leaving the other initiatives untouched. Then monitor the lead response.
That method incurs less risk, though it does require substantially more time for dealers to categorically test each campaign.
The advantage to this method is it can offer the same information as a Crazy Ivan for a particular campaign without the risk of interrupting the entirety of your advertising and potentially crippling your lead count for the short term.
By defunding one isolated ad at a time while the majority of ads continue uninterrupted, a dealer can see what that ad was contributing by observing the lead counts from the isolated campaign or source.
Does dropping the isolated source result in a lead count that increases, decreases or maintains over a period? That information allows the dealer to see proof of the isolated ad campaign’s effectiveness.
This method is more flexible and more accurate than others because one source can be defunded as long as needed – providing even more accurate
data – without risking exponential dips in the overall lead total.
The disadvantage is it can take much longer to work through and prove the effectiveness (or lack of same) of your lead sources.
Conducting multiple isolations at the same time can make it more difficult to pinpoint the results
and might complicate or confuse the experiment. And one thing you certainly want to avoid is compromising the analysis, which would equate to lost time and money.
Direct method: A well designed system to gather information from leads about the advertising sources that catalyzed their action.
The best systems are simple but consistent and updated. An example of using the direct method is asking prospects what brought them into the dealership that day.
The direct method does not fund or defund ad campaigns to analyze effectiveness or lead counts. Rather, it simply measures results in real time, gathering information directly from prospects.
The advantage to this method is that it avoids any ad campaign disruption while still managing to gather pertinent information. The disadvantage is the infrastructure required to collect the data.
In his book Good to Great, Jim Collins wrote extensively about the critical importance of true and accurate data to decision-makers in order to make sound business decisions.
How can any dealer possibly make smart advertising decisions if the information on the report in his hand includes bad data?
My personal preference is to use the new opening method if you are opening a new dealership and the Crazy Ivan if you don’t believe the majority of your advertising is effective. For the vast majority of dealers, the modified Crazy Ivan is the best method. Those dealers have effective advertising but want to systematically perfect the efficiency of their ad tactics over time.
In addition, whatever method they use, all dealers should also put in place a simple and sound system to measure their results, live, using the direct method. After all, your customers are the most reliable source possible about why they came to your dealership.
Now that we have reviewed baseline lead counting, let’s discuss how those methods can be used to develop selling ratios.
Selling ratios simply reflect the result of activities conducted by a dealership’s staff through a specific process. Closing rate, for example, is a commonly known selling ratio.
Is it important to know selling ratios? Yes, because it shows definitively whether you are maximizing your advertising dollars.
If a dealer spends $10,000 in a given period to receive 200 leads, selling ratios
will indicate how many of
the 200 leads the team is capable of closing.
If the industry benchmark reports the very best close 60 of 200 (a 30 percent closing rate) and your team closes 40 of 200 leads (20 percent), you are justified in expecting better results from your team.
Ultimately, selling ratios are all about getting the most out of your advertising spend. Improving your team’s capabilities is a byproduct, but not the primary reason behind the ratios. Those measurements are conducted to help dealers make the wisest advertising investments possible and to truly generate the most desirable leads. Remember, a sales team’s selling ratios can be somewhat subjective – it’s affected not only by your marketing but by the skills of the individual salespeople. How many leads you receive from a marketing campaign is not (unless you are branding). ROI Lead counting is the foundation of determining return on investment. Using the various methods, we can produce very accurate lead counts and selling ratios.
Those two critical data points provide dealers with the necessary information to evaluate their return on the money they’ve invested in specific ad campaigns. And that eliminates relying on emotion or gut feeling to direct a large and extremely variable business expense.
Once you become proficient with the methods, it becomes more natural
to eliminate costly but ineffective ad campaigns and increase the investment in effective campaigns. That allows you to experiment with new ideas with confidence in your ability to measure their results.
Recently, I launched NIADA’s newest training workshop: Digital Marketing and Social Media. In that class, we carefully work through these fundamentals to gain proficiency, then use the concepts to discover current social media and digital advertising tools that are working in today’s market with today’s prospects.