It’s Hard to Dig the Well When You’re Already Thirsty: Dealership Marketing in an Economic Downturn

We first published this piece in March 2020 under a title we still like: it's hard to dig the well when you're already thirsty. A dealership that waits for sales to fall before it builds a customer list, a follow-up process and a way to measure its marketing is trying to dig while it is already thirsty. This update keeps that idea and turns it into a plan you can use in any slowdown.

It is written for the dealer principal, GM or marketing lead who has to decide what to cut, what to keep and what to move when the floor gets quiet. If your question is the yearly slow season rather than a wider downturn, read the companion piece, what to do during the dealership slow season, which covers the internal rebuild projects for quiet weeks.

Dig the well before you are thirsty

When the economy turns, three things get harder at once: new shoppers become scarcer, each sale is worth more to the store, and every dollar of marketing gets questioned. The stores that cope best already have the well dug. In practice that means five assets, built while business is good:

1. A customer database you can market from. Every owner and buyer in one record, with the unit they own, how to reach them, and what they have agreed to receive. Duplicates merged, dead contacts removed. Our guide to finding and merging duplicate customer records shows how.
2. A service relationship with your owners. Owners who already bring their units to you are the cheapest customers to reach when new-buyer demand drops.
3. A written sales and follow-up process. When there are fewer opportunities, a dropped one costs more. Managers need to see unsold and stalled deals the same day, not at the end of the month. Writing your sales process down is the first step.
4. A measurement baseline. You cannot decide what to cut if you do not know what each channel produces in sales. Start recording cost per sale by channel now (the method is below).
5. A local brand people recognize. A store that has shown up consistently in its community and online does not have to buy its way back into people's minds.

None of these can be bought quickly once sales slow. That is the whole point of the metaphor.

What the research says about cutting ads in a downturn

Most articles on this topic say the same thing: never cut your advertising in a recession. They usually back it up with an old statistic whose original study nobody links to. The academic research is more careful, and more useful, than that slogan.

• It depends on the firm. Raji Srinivasan, Gary Lilien and Arvind Rangaswamy surveyed more than 150 senior marketing executives about the previous recession (International Journal of Research in Marketing, 2005, DOI 10.1016/j.ijresmar.2004.05.002). As summarized by Penn State, firms with a strategic emphasis on marketing, an entrepreneurial culture and spare resources such as cash should invest in marketing during a recession. Firms without those resources were advised against increasing marketing spending until conditions improve.
• It depends on the business model and balance sheet. Srinivasan, Lilien and Shrihari Sridhar studied more than 10,000 firm-years of publicly listed U.S. companies from 1969 to 2008, a period with seven recessions (Journal of Marketing, 2011, DOI 10.1509/jmkg.75.3.49). They found that the payoff from recession-time advertising and R&D depends on market share, financial leverage and the type of business. A companion summary by Lilien and Srinivasan (Australasian Marketing Journal, 2010, DOI 10.1016/j.ausmj.2010.06.002) reports that for consumer services firms, advertising in recessions increased profits and stock returns, while for consumer goods firms it increased profits but decreased stock returns.
• Customers get more price-sensitive. Harald van Heerde and colleagues tracked 150 consumer-goods brands over 18 years of U.K. data (Journal of Marketing Research, 2013, DOI 10.1509/jmr.10.0414). During contractions, long-term price sensitivity rose. They also found that patterns differ across categories and brands.

None of these studies looked at powersports dealerships, so treat them as direction, not proof. What they point to for a dealer:

• There is no universal rule. A store with cash, a strong local name and a working database is in a different position from a store with heavy floorplan debt and no customer list.
• A dealership is part goods, part service. Unit sales behave like a consumer goods business; service, parts and accessories behave more like a consumer services business. Marketing the service side through a downturn has the stronger case.
• Price matters more, so be careful with it. Shoppers compare harder in a downturn. Clear pricing and honest value messages fit that mood better than vague "deals".

Cut, keep or shift: a downturn marketing budget

Rather than cutting a flat percentage from every line, sort each line by what it produces. This table is a starting point; your own cost-per-sale numbers should overrule it.

The goal is not to spend less. It is to spend where you can see a sale come back.

Owner and service marketing first

In a downturn, the customers most likely to spend with you are the ones who already have. Put them first, in this order:

1. Service-due owners. Pull owners whose units are due by hours, miles or months and invite them in with a real, priced service offer you can staff.
2. Owners with an upgrade in sight. Equity alone is not a reason to call. Look for signs of intent: website visits to new models, a trade question, a service visit on an older unit. Call those owners personally.
3. Lapsed customers. Customers with no visit in 18 months or more need a reason to come back, not a coupon. Our guide on how to win back lost dealership customers gives the sequence.
4. Loyal owners. Keep your owner program running. Events, clinics and recognition cost little and keep your best customers close. See how to run a powersports owner retention program.

Talk with these customers, not at them. A single "blast" sent to everyone in the database trains people to ignore you. Messages based on what an owner owns and what they have done recently get read.

This is general information, not legal advice. Marketing texts and calls need the right consent, and commercial email needs a working opt-out. Our guide to texting customers the right way covers the rules.

Measure cost per sale, not cost per lead

When every dollar is questioned, cost per lead is the wrong number. It rewards cheap leads that never buy. Cost per sale ties spend to what matters.

How to calculate it

1. List each channel and its total cost for the month, including fees and the time your team spends on it where you can estimate it.
2. Tag every lead with its source in the CRM, and keep tagging it after the first touch.
3. Count the sales each source produced in the period, allowing for your normal time from lead to sale.
4. Divide cost by sales. That is cost per sale for that channel.
5. Compare it with the gross profit of an average deal. A channel whose cost per sale is close to the gross it brings in is not paying its way.

A worked example (illustrative numbers)

Judged on cost per lead, the third-party source looks twice as good. Judged on cost per sale, the owner program is more than twice as efficient. Our article on what data-driven marketing means for a dealership covers the wider measurement setup.

Keep the brand visible without shouting

Going silent has a cost that is hard to see at first: when buyers return, they return to the stores they remember. Staying visible does not have to mean a big budget.

• Keep your free and owned channels active: your website, Google Business Profile, social pages and owner emails.
• Post useful things, not only offers: ride routes, maintenance tips, new arrivals, owner stories told with permission.
• Show up locally: club rides, trail clean-ups, safety clinics. They are inexpensive and they reach riders.
• Keep the message honest. In a downturn, shoppers notice inflated claims. Clear prices and straightforward service beat urgency.

To choose which channels carry the load, use our guide to which marketing channels powersports dealers should use, and set it out in a one-page annual marketing plan.

A 30-day downturn checklist

• Pull last year's sales, service and leads by month and by source.
• Calculate cost per sale for every paid channel.
• Sort every spend line into cut, keep or shift.
• Build four lists: service-due owners, owners showing upgrade intent, lapsed customers, loyal owners.
• Check consent and contact details on each list before sending.
• Set a daily manager review of unsold and stalled opportunities.
• Confirm website hours, prices and inventory are accurate.
• Plan one local, low-cost event for the next 60 days.
• Agree which numbers you will review every month, and who owns each.

Where PSX Ascend fits

The plan above runs on the customer record. The PSX Ascend AI-powered CRM connects customer data, sales workflows and lead follow-up, and gives managers a clearer way to coach execution. AMP, PSX Ascend's marketing automation, uses customer stage, inventory interest and behavior to shape communication instead of sending the same message to everyone, and is run as a managed service with campaign setup, proven email templates and monitored touchpoints.

When fewer opportunities come in, none should be dropped. In the follow-up model PSX promotes, salespeople work each new lead with quick touches and leave accurate notes and dispositions, managers are prompted to review stalled deals, and then ALMA, the Automated Lead Management Assistant, takes on the repetitive work of re-engaging stalled prospects to bring them back to a live conversation with a person.

You can also see the same AI-powered powersports CRM on our sister site, PSXDigital's AI-powered powersports CRM page.

Sources

• Srinivasan, Lilien and Sridhar, "Should firms spend more on research and development and advertising during recessions?", Journal of Marketing 75(3), 2011, DOI 10.1509/jmkg.75.3.49 (Penn State research record)
• Lilien and Srinivasan, "Marketing spending strategy in recessions", Australasian Marketing Journal 18(3), 2010, DOI 10.1016/j.ausmj.2010.06.002 (Penn State research record)
• Penn State News, "Companies strong in marketing should increase efforts during recession" (21 Feb 2008), on Srinivasan, Rangaswamy and Lilien, International Journal of Research in Marketing, 2005
• Van Heerde, Gijsenberg, Dekimpe and Steenkamp, "Price and Advertising Effectiveness over the Business Cycle", Journal of Marketing Research 50, 2013, DOI 10.1509/jmr.10.0414 (University of Groningen research record)