There are two colleges of thought on how dealerships ought to strategy promoting in a time of low stock.

One, mentioned Sariah Heaton, advertising director for Jerry Seiner Dealerships in Salt Lake Metropolis, is to drag again on spending whereas dealerships have so few vehicles to promote.

“Numerous dealerships are actually, actually slashing their budgets down as a result of the demand is there both approach,” she mentioned, “and we’re subscribing to that for essentially the most half.”

The second: Preserve a foot on the pedal and keep prime of thoughts with shoppers by way of model consciousness messaging till automobile provide normalizes.

For a second 12 months, dealership entrepreneurs are evaluating their promoting methods in a difficult gross sales surroundings. However in contrast to final 12 months, the purpose is not to include prices to outlive showroom and manufacturing facility closures and plunging demand. As an alternative, profitability is setting information, and demand for brand new fashions is so sizzling that automobiles are promoting earlier than they’re even constructed — a byproduct of a microchip scarcity that has contributed to the decline of greater than 1.8 million automobiles from seller inventories within the first half of 2021, in line with Cox Automotive knowledge.

Some retailers are responding by scaling again promoting budgets till stock recovers, whereas others are sustaining spending a minimum of at 2020 ranges — however transferring cash out of new-vehicle campaigns and into different areas, corresponding to used automobiles, fastened operations and “why purchase” messages, a number of dealership advertising staffers and distributors informed Automotive Information.

Colin Carrasquillo, digital advertising supervisor for Nielsen Automotive Group in East Hanover, N.J., has not lower his group’s promoting budgets because the top of the pandemic final 12 months. In some instances, he mentioned, budgets truly elevated this 12 months, regardless of the stock scarcity.

“We have positively misplaced offers primarily based upon not having a particular mannequin or trim degree that somebody’s in search of,” Carrasquillo mentioned, “however for those who do have it and you understand you possibly can promote it, it is positively necessary to be on the market.”

The chip scarcity that has crimped new-vehicle manufacturing just isn’t going away anytime quickly. Stellantis CEO Carlos Tavares informed the Automotive Press Affiliation final week that he suspects pc chips will stay scarce simply into 2022. On Thursday, July 22, Intel CEO Pat Gelsinger mentioned provide ought to enhance within the second half of this 12 months however might take two extra years to completely catch up.

By Might this 12 months, dealerships’ advertising expenses are above year-earlier levels, in line with the Nationwide Car Sellers Affiliation’s common dealership monetary profiles. Dealerships spent a mean of $204,580 on promoting by way of Might, the newest month accessible, up 13 % from $180,950 a 12 months earlier, in line with NADA.

However that spending can be extra environment friendly: $530 per new automobile retailed by way of Might, down 21 % from $667 a 12 months earlier. Knowledge by way of Might 2019 was not instantly accessible.

“You needn’t market when you do not have as many vehicles and there is an computerized demand coming from the buyer,” Lithia Motors Inc. CEO Bryan DeBoer informed Automotive Information final week.

DeBoer mentioned Lithia spent 4.9 % of its gross revenue final 12 months on promoting and advertising however solely 3.7 % to date this 12 months. Within the second quarter, it was a bit decrease, at 3.5 %, he mentioned.

“We have now been in a position to be fairly constructive in managing that price and nonetheless develop the enterprise,” DeBoer mentioned.

It is unlikely that many dealerships are spending at 2019, pre-pandemic ranges, a number of dealership advertising managers and suppliers mentioned, since some spending that was turned off in the course of the pandemic by no means restarted. Some retailers used the pandemic pause to reexamine the effectiveness of their promoting methods and say they’ve stayed lean as a result of they discovered methods to get higher outcomes at much less price.

Elevated profitability is one cause some dealerships could also be opting to briefly rein in advertising spending, mentioned Diana Lee, CEO of Constellation Company, which gives automotive advertising companies.

“It is the most well liked when it comes to gross margin that I’ve ever seen, that the seller’s ever seen, and in order that’s why there is a pullback in promoting when it comes to new-car and used-car gross sales,” Lee mentioned.

The chip scarcity has stock “tremendous low, and demand is tremendous excessive,” she added, “and they also do not feel like they need to promote as a result of they will get sticker or extra for each automobile that is on the bottom.”

At Jerry Seiner Dealerships in Utah, Heaton mentioned she lower advertising spending at its Normal Motors dealerships by 25 to 30 % since January as a result of new-vehicle provide is so constrained. Which means fewer adverts through TV, radio and junk mail and extra digital messages for fastened ops and used automobiles.

“We have been planning on doing a bit of extra broadcast, a bit of bit extra cable, a bit of bit extra of these extras,” she mentioned, “and it would not make sense when you do not have the stock.”

But specialists warning dealerships to not pull again now, calling the present problem the results of a provide chain situation, not a cash-flow situation.

“We’re not in an financial state of affairs to trigger a contraction,” mentioned Cory Mosley, principal of automotive consultancy Mosley Automotive in Richmond, Va. “And I might argue that until a dealership solely has a monetary curiosity in new-car gross sales, stepping off the gasoline — while you in all probability have more money within the financial institution than ever — when it comes to making an attempt to amass clients in several methods in all probability is not the best concept.”

Market share is a vital consideration for a way a lot to funds for advertising, mentioned Lauren Donalson, senior director of nationwide accounts for dealership advertising supplier PureCars.

“If we are able to pivot {dollars} to give you the results you want extra successfully, good. … If that signifies that your general advert spend reduces, and you are still crushing your aims and never dropping market share, nice,” she mentioned. “That signifies that your advert price per unit offered has successfully gone down, and extra [profits are] within the sellers’ pockets.”

Bobby Sight, vp of Rob Sight Ford in Kansas Metropolis, Mo., mentioned his retailer’s advertising funds has stayed largely constant since final 12 months. His purpose is to maintain the shop’s order banks full in order that automobiles flip shortly, giving the dealership the power to extend its allocation from Ford Motor Co.

Throughout the pandemic, Sight mentioned he turned his consideration to the service division, an space he hadn’t spent a lot to advertise previously past direct mailers. He mentioned he has continued digital advertising for service partly as a result of some clients may wish to hold older automobiles operating longer moderately than purchase whereas retail costs are excessive.

“Simply because you do not have stock on the bottom doesn’t suggest there aren’t different areas within the dealership that you want to market in the direction of,” Sight mentioned. “These different areas, I feel, additionally hold you related from the gross sales perspective since you all the time wish to hold your dealership identify in entrance. You by no means wish to go darkish.”

Staying in entrance of consumers all through the car-buying course of is necessary, even whereas stock is low, as a result of it might take awhile to restart the promoting pipeline when automobile provide returns, mentioned Nick Brunotte, digital options director at DHG Dealerships.

Some advertising distributors say gross sales provides and incentives will all the time have a spot, particularly as stock ranges normalize. However a few of the modifications adopted in the course of the pandemic and chip scarcity might stick, corresponding to pitches to purchase clients’ used automobiles.

“It is oriented in the direction of filling their stock at a decrease price of what they might do at public sale,” Donalson mentioned. “Now that sellers’ eyes have been opened to the elevated earnings that they see by deploying this kind of messaging, they’re going to proceed to pursue it.”

Melissa Burden contributed to this report.