Imagine this: your dealership decides to invest in a shiny new digital marketing strategy.
Perhaps you’ve hired an agency to develop a comprehensive marketing plan. Or maybe you’re trying out the ol’ “throw shit at the wall to see what sticks” approach, which is slightly more effective than setting your money on fire. Either way, investing in a digital marketing strategy is a big move and you undoubtedly want the maximum bang for your buck.
The thing is, automotive digital marketing is not a “one size fits all” solution. There’s a different success formula for every dealership with no single definitive equation to measure success.
So, how can you tell if you’re getting the biggest return on your digital marketing investment? How do you connect online marketing efforts to in-store actions? How do you really know when your digital marketing efforts are moving metal on the lot?
Well, the science isn’t quite in yet. But there are a number of key metrics you can measure to ensure your dealership is gaining a positive return on investment (ROI). We’ll get to those later.
“First of all, what’s ROI?”
ROI is a profitability indicator that’s generally expressed as a percentage. It’s a metric that helps dealerships make decisions about future investments, adjust budget allocation, and refine their digital marketing campaigns. In the most simplistic sense, ROI is a measurement of how much money you made as a direct result of your dealership’s digital marketing investment.
If your ROI is a negative number, then yikes. You lost money on your marketing efforts and might want to revisit your strategy. If it’s positive, job well done – continue investing away and perhaps even increase that investment!
“How do I measure my ROI?”
Kidding! It’s complicated, though. Dealers want clear data that connects online digital marketing efforts to in-store actions. But since vehicles are not sold online, it’s tricky to attribute sales in-store to specific marketing efforts online.
Although digital marketing provides a lot of easily measurable results (think web traffic, click-through-rates, conversions and so on), measuring ROI and return-on-ad-spend (ROAS) precisely is generally outside the realm of possibility for most dealers, depending on their internal processes (ie. accurate and up-to-date CRM data).
There’s a bright side! Dealerships can make correlations between vehicle sales and online digital marketing efforts by comparing metrics such as VDP views by source (i.e: VDP views generated by a specific campaign) of a particular model with actual sales of that same model. When VDP views are high, and that vehicle has received lots of interest in-store, dealers can connect digital marketing efforts to vehicle sales, although it’s a slightly hazy connection and other factors are clearly influential.
There’s more good news, though. Even though it’s tough to measure your digital marketing ROI, your dealership can still develop a measurement system to maximize returns.
The best way to track and manage your dealership’s ad spend is an ongoing measurement of key performance indicators (KPIs). There are a number of essential KPIs that your dealership should be tracking to better understand exactly how much you should be spending and which channels justify higher investment than others based on effectiveness.
5 Essential KPIs to Help Maximize ROI
Cost Per Acquisition (CPA) – The amount it costs to generate each new lead. This metric will help your dealership determine an appropriate dollar amount to be spending on acquiring new leads through digital marketing as well as compare marketing investments across platforms. The cost per lead is the total cost of your marketing campaign divided by the number of leads gained. Use this metric as a benchmark to compare, but be sure that leads are defined in the same way (i.e: forms, phone calls, etc.) when doing so.
Conversion Rates By Channel – A conversion rate is a percentage of users who perform a desired action (i.e: submit a form, view a VDP, etc.). It’s best to track conversion rates for each of your dealership’s marketing channels (including paid, organic, and social) so you can invest more in the most successful channels and revisit your strategy on the low-performing channels.
Conversion Rates by Device – By tracking the conversion rates for each device, your dealership can adjust its marketing strategy to invest in top-performing devices (which, let’s face it, is most likely mobile) and reduce or eliminate its budget for the lower performers.
Customer Lifetime Value – This is an estimate of the total profit gained throughout an entire customer relationship. For dealership’s, once a customer purchases a vehicle, there are often years of dealer maintenance services provided that will increase a customer’s lifetime value. Understanding CLV will allow you to optimize marketing investments by focusing on mediums that earn customers with the highest CLVs, rather than simply those who may spend more money up front only to never come back.
Branded Search Lift – This is a measurement of the increase in search queries that include your dealership’s name. Measure the increase of branded search queries each month to determine the impacts of your digital marketing efforts on customer searches. Again, this metric isn’t directly tied to your dealership’s ROI, but correlations can be made. If your dealership is searched more frequently, it’s a powerful indication that your digital marketing efforts are producing positive results and driving traffic to your site and your store.
Don’t forget to use sales as a metric, too. What are the growth rates of your sales and revenue? How many vehicles have been sold throughout your digital marketing campaign compared to previous campaigns? This metric isn’t exactly correlated with digital investment because it blurs the lines between your digital strategy and in-store sales process (as well as the abilities of each individual on your sales team). For example, a high ratio of internet leads relative to sales (low closing ratio) might indicate a breakdown in your sales process. On the other hand, a low number of internet leads and a high closing ratio might indicate issues with your digital strategy.
Tip: Compare these metrics year over year (YoY) to get a true sense of your marketing efforts while attempting to control for seasonal fluctuations and the impact of OEM incentives/programs. Although there’s value in comparing month over month (MoM), external forces can have a significant impact (ex: OEM employee pricing events).
Test relentlessly! Experiment with multiple ads, varying copy, and diverse audiences. Invest in the highest performing strategies and kill the poor performers!
Follow these KPI’s closely to make data-driven decisions for maximizing ROI and future digital marketing success.
Not sure where to start? Our team of Paid Search wizards will take your dealership to the next level by developing the optimal paid strategy to help you sell more vehicles and maximize your ROI. And if that’s not enough, we offer complete transparency in our Client Portal dashboard, so you can see for yourself exactly where your ad budget is going and the results it is producing, anytime.