By Alex Russo, Director of Product Management, CDK Global
I am hearing many dealers questioning the digital strategies used by their agencies and vendors in the Tier 2 advertising space. Given the history of Tier 2, and how much these programs have changed in recent years, I’m not surprised by the skepticism. That said, I believe in the power of Tier 2 advertising. And, with some strategy changes, dealers would start to believe in it as well.
When Tier 2 advertising was originally developed, traditional television was the main media channel, and television drove how Tier 2 was set up. Tier 2 advertising started as a way to buy local television spots that might not have been available to individual dealerships, which is why this tier is often organized around Nielsen’s Designated Marketing Areas (DMAs).
Over the years, as digital became a more important advertising channel, some ad budgets moved from television to digital. As a result, the structures and strategies from Tier 2 television buys moved to digital, too. Dealers and OEMs still pooled their budgets to make a single media buy in a DMA. However, digital advertising is a different beast from television. We all expect more from digital advertising that television cannot provide, such as hyper-local targeting and more granular reporting of performance.
Given the large budgets in Tier 2, many dealers feel the standard approaches in digital aren’t working. For one, dealers have little or no transparency in the performance. Most Tier 2 digital campaigns include the market’s name, some region-specific offer, and the ad clicks to a Tier 2 portal site. These campaigns are relevant to local shoppers, aligned well with the existing television creative, and are easy to execute. However, these ads drive traffic to a Tier 2 portal, not a dealer’s website. Dealers measure their digital performance through their website. If you’re landing shoppers on a Tier 2 portal, it’s hard for a dealer to see (or feel) the impact their advertising dollars are making.
Also, I’ve noticed that shoppers receive a questionable experience from digital campaigns that drive traffic to a Tier 2 portal. If a shopper sees a relevant Tier 2 offer and clicks the ad, we want to get that shopper directly to the right inventory on a dealer’s website, so we don’t delay the dealership visit. It makes sense to begin the shopper’s relationship with the right local dealership since we know the shopper is in-market and interested in the offer with the ad click. However, most Tier 2 ads don’t do this. Instead, ads that drive traffic to Tier 2 portals force shoppers to visit the portal before they get a dealer’s website and inventory. As advertisers, we should already know the shopper’s location, the types of vehicles he or she wants to buy, and the dealership that’s the right fit.
With all these issues in Tier 2, many in the industry question whether or not Tier 2 needs to exist. And I believe the answer is, yes, it should. It’s still an important tactic for building dealer and OEM partnerships to drive new vehicle sales in a specific market. OEMs help fund regional offers and incentives, which encourage shoppers to visit a local dealership. But, the technology is advanced enough so that we don’t need to make digital buys at the DMA-level to achieve Tier 2’s goal of driving sales in a market. With more granular location and audience targeting, along with better reporting at the dealer-level, I know we can build a more robust solution for digital advertising in Tier 2 that provides better benefits to dealers and OEMs alike.
“Direct-to-dealer ads use OEM-quality media and creative, along with the OEM’s regional offers and incentives, just like the standard Tier 2 advertising program.”
Direct-to-Dealer Ads
The best advertising solution I’ve seen to overcome the issues in Tier 2 is what I call “Direct-to-Dealer.”
Direct-to-dealer ads use OEM-quality media and creative, along with the OEM’s regional offers and incentives, just like the standard Tier 2 advertising program. The difference is these ads are “Dealerized,” which means the creative contains the right local dealer’s name or logo. These ads click directly to the dealer’s website, so a dealership can see the performance and impact for themselves. There are no intermediary Tier 2 portals, which stand in the way of a shopper visiting a dealership.
Some people claim Tier 2 portal advertising is “direct-to-dealer,” but it’s not. To be a true “Direct-to-Dealer” advertising program, you must meet the following criteria: 1) Your ad creative needs to contain a dealer’s name or logo, 2) Your ads must click directly to a dealer’s website, and 3) you must be able to measure the impact of your ads on a dealer’s website. And, most Tier 2 portals I’ve seen don’t meet this minimum bar.
Requirements for a high-performing Direct-to-Dealer advertising program:
1. Creative & Media: OEMs have a high bar for the creative shown, as well as the media where it is shown. Your agency needs to meet that high bar and scale it across all dealers in the market.
2. Budget Management: Your agency needs to be “Fair and Equitable” about how ad spend is allocated across dealers in the market. Tier 2 advertising costs dealers a pretty penny, so they need to make sure all dealerships get the value they deserve.
3. Reporting: Not only does your agency need to report on all the standard KPIs you measure for other Tier 2 campaigns, but they need to be able to track that performance for specific dealers in the market. That means correctly tagging all media and dealer websites.
4. Machine Learning: With all the campaigns, channels, creatives, and incentives managed, your agency needs an automated, AI-driven system to optimize performance. You can’t run these optimizations manually by simply hiring more people.
So, why aren’t more Tier 2 programs using Direct-to-Dealer ads today? There’s a simple answer; it’s pretty difficult. Duplicating all of your ads across all dealers in a market, along with optimizing and tracking the performance correctly, requires a lot of knowledge and expertise.
Luckily, most digital agencies have access to the tools needed to build a Direct-to-Dealer advertising program for your local market. I’ve laid out the requirements that are particularly important when your agency runs a high-performing Direct-to-Dealer advertising program.
Next time you’re in a dealer association meeting, ask yourself and the rest of the group, “Can our agency be doing better with our Tier 2 funds?” If the answer is “Yes,” then a Direct-to-Dealer advertising program might be the right solution.
ARTICLE BY Alex Russo
Alex Russo has 15 years of marketing, technology, and consulting experience. He is the Director of Product Management for Digital Advertising at CDK Global, working with various manufacturers and dealer groups across all tiers of automotive advertising.