Doing things you are certain are safe feels good. It’s comfortable and it doesn’t create any anxiety. But rarely does significant growth come from doing what’s safe and comfortable, instead, it’s almost certain that the unknown will have a greater impact on your business than the known. Sometimes it’s necessary to blow up the status quo to produce real change — real results.
Okay, are you nodding your head or sitting there thinking, “what is he talking about?” I know change can be hard. And, as a dealer, how can you know that change will be successful, that the outcome will be better than the status quo?
Well, do you ever find yourself thinking: “If only I could get 1% more traffic conversion,” or “I need more leads?” My bet is that you do. And, if so, changing the status quo with antifragile marketing will work for you. “What the heck is that?” you may well ask. In a nutshell, this form of marketing teaches you why the status quo is dangerous and leads to inefficient marketing spend, along with how to set yourself up to profit from uncertainty.
Let me explain:
In 2013, a man named Koch purchased 5,000 bitcoins for only $27. In just 4 years, that $27 investment grew to $66 MILLION. Pretty good return, huh? The reason he got such a high ROI is because he was willing to take a chance on something new. That’s an example of antifragility. By contrast, when bitcoin recently had a massive upswing in value – almost eclipsing $20,000 per coin – many people scrambled to get in on the action. Some, for fear of missing out on what could be a big payday; and others because, quite frankly, that’s what everyone else was doing. During its meteoric rise, speculation was that bitcoin could be worth as much as $100,000 per coin over the next 10 years.
The problem is that all the people who jumped on the bandwagon when prices were above $14,000 and didn’t cash out now have less money than they initially invested. Why? Because the bitcoin system is fragile. All it took was unforeseen circumstances to stop that meteoric rise and see the price plummet 35 percent in just days. Similarly, the automotive industry is ever evolving, as are its marketing channels and opportunities. It is also dynamic, in motion, and, for the most part, fragile. Twenty years ago it wasn’t the status quo for dealers to have their own websites. Those that took a chance and threw their business into chaos by launching one reaped the rewards. Fast forward to today and having a website and a digital marketing strategy is the status quo. Dealers are now looking for new opportunities to break through digital advertising clutter.
So, what does this all mean?
As a dealer, I’m pretty sure that most of you want to operate your dealership safely; to be profitable and protect that profitability from risk while growing. The problem with this is quite simple: Everyone is doing the same thing! Think about it. You have 20 groups where you ask your peers what is working, then go back to your store and adopt some of those strategies.
Many dealers also make marketing spend decisions by asking their account reps at various vendors to show them results from similar stores to their dealership. These decisions tend to be made in this way because they are viewed as “safe” or, at the very least, “less risky.” The fact is, this method of decision making creates fragility, because you end up too focused on the known. For the strongest growth and success, what you should be focused on is the unknown – this is the concept of antifragility. By changing your mindset to seek out the unknown you create a system which gives your marketing a greater chance of success.
Antifragility is a term coined by Nassim Taleb and the subject of his latest book; Antifragile-Things That Gain From Disorder . I predict that you will be hearing a lot about this concept in the coming months/years. Basically, antifragility applies to those things that get stronger or benefit from chaos, volatility and uncertainty. Once you’ve adopted the mindset of proactively seeking out the unknown, it is important to protect your investments while at the same time trying new things.
Antifragile marketing is where you learn how to profit from uncertainty and discover how best to use your resources to strengthen your marketing and prepare for unknown problems. I advise that you adopt a barbell strategy in your marketing – where ninety percent of your budget lies in tried and true advertising methods – you can then rest assured that most of your money is safe (as long as you really know the true results of your advertising – but that’s an article for another day!). The remaining ten percent should be focused on marketing tools and tactics that have no comparable, but also have a large upside. This limits your risk to just a small portion of your overall budget while still taking advantage of the large upside from that high-risk/high-reward ten percent. Once you have the results, adopt those tactics which prove consistently profitable and incorporate them into your ninety percent.
But how do you know if your ten percent is performing or, for that matter, your ninety percent? Once you’ve adopted the mindset of proactively seeking out the unknown, it is important to create a way to judge your new set of data in a fair and correct manner. $35 leads in 2006 were only acceptable until paid search began providing $14 dollar leads. Neither would be acceptable if they didn’t result in sales.
To make matters worse, the way many dealers judge performance is typically defined by the vendor. Who decided a .05% click through rate was acceptable for a display advertisement? The primary KPI’s you use to judge success shouldn’t come from your vendor, but should strengthen your overall business objectives. Take a good look at which KPIs you review – who said those were important in the first place? Chances are great that your success metrics were originally determined by the vendor.
Vendors don’t typically judge themselves by the amount of lead activity they provide. In fact, most vendors don’t use the CRM they sell you, or the website platform you bought from them. So, why trust them to define your success? A better way to judge performance is to look at outcomes and work your way backward. By finding the objective commonly shared amongst your vendors and your own business objectives you can find a KPI worth monitoring. If you judge your vendors by cars sold, or profit per lead, you can create a common thread that is shared by both your business and your vendors. These KPIs hold both your vendors and your dealership accountable — a win-win. The most important goal for any car dealership is sales and profit across all departments – not if your vendor said the marketing was a success. In summary, deliberate experimentation helps turn the unknown into the known.
This is at the core of the scientific method and should be included in your marketing practice. Through forms of AB testing, piloting, research and design, ten percent of your budget should be used on experimentation that has a large upside. Ninety percent of your marketing budget should be in ‘safe’ transparent mediums that are also flexible, so you can move quickly should your experiment prove fruitful. Goals can be a primary stressor to your marketing efforts, however are not generally defined by the dealership, but instead defined by the vendor. If everyone has the goal of .05% click through rate on their display advertising, we’ll create an industry of complacency, resulting in tranquility, which then leads to fragility. The KPIs that define your goals should share a common objective with your dealership.
With relatively no incentive for vendors to adopt pricing models based around your business objectives, attribution platforms allow for you both to share a common KPI across all your marketing efforts. The best attribution platforms also give your dealership specific benchmarks to judge the 10 percent of your budget dedicated to experimentation. So in summary, how can your dealership blow up the status quo to produce real, positive change? By adopting new technologies, utilizing A/B testing to measure what performs the best and using KPIs that make sense for the dealership, rather than the KPIs vendors tell you are successful, your dealership will shift away from fragility and be better positioned to take advantage of new, effective marketing techniques before they’re relegated to the “status quo.”
Author: Ben Hadley
Ben Hadley is Vice President of Strategy for Clarivoy. He is responsible for account growth and extension sales, facilitating customer satisfaction measurement, product feedback and new business development. Prior to Clarivoy Ben spent 6 years at Dealer.com where he was the youngest person ever to reach the level of Sales Director and also made it into their Presidents Club for 2016. Ben lives and breaths marketing. His experience spans across Display, Search and Social. During his career he has helped thousands of dealerships maximize their digital marketing efforts by optimizing their marketing mix. Whether it’s creating new approaches or re-engineering existing ones, Ben’s creativity and business acumen combine to provide laser-focused insights to help dealers achieve their marketing and sales objectives. Because of Ben’s experience in and passion for the auto industry, dealers trust him to help better leverage their marketing data, know more about their customers, make their marketing more efficient and effective and generate more sales. Email: firstname.lastname@example.org