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The automotive industry has always been marked by rapid change and adaptation. But now more than ever, automotive dealers and salespeople find themselves in a complex, shifting landscape where traditional marketing methods may no longer be sufficient.
Let's embark on a journey to explore the significance of marketing ROI for automotive dealers and uncover the enduring principles that will guide us through this ever-changing landscape.
Laying the Foundation for Success
Before diving into the complexities of measuring marketing ROI, automotive dealers must first identify the key objectives they hope to achieve.
These objectives will serve as the foundation upon which all other decisions are made and will help dealers focus their efforts on the most impactful areas.
A. Website Traffic: The lifeblood of any modern dealership is its online presence. Ensuring a steady flow of potential customers to the dealership's website is crucial for generating interest and, ultimately, sales. Some dealers rely primarily on website leads but a strong future-proofed dealership will have multiple lead streams.
B. Lead Generation: The ultimate goal of any marketing campaign is to generate high-quality leads that convert into sales. Dealers must focus on strategies that maximize the number of potential customers who show interest in their vehicles and services. Driving conversion directly within social media platforms like Facebook allows dealers to get high quality leads with strong intent.
C. Improving Conversion Rates: Attracting leads is only half the battle; dealers must also ensure that they are effectively converting those leads into sales. Identifying and addressing any barriers to conversion will be essential for maximizing marketing ROI.
Setting KPIs: Navigating the Path to Success
Once the objectives have been identified, it is essential to establish key performance indicators (KPIs) that will allow dealers to measure their progress and make data-driven decisions. While every business will have their own leading indicators for succes however below are three common KPIs that you need to be aware of. Please keep in mind that every goal (more new car sales, more service bookings, more trade-in requests, credit apps, etc) will have their own benchmark.
A. Cost per Click (CPC): This metric measures the average amount spent for each click on a paid advertisement. Monitoring CPC will help dealers optimize their ad spending and identify areas for improvement. This metric gives us information if our ads/ creative is engaging and successful. A low cost per click means the ad performed well.
B. Cost per Lead (CPL): Tracking CPL allows dealers to understand how much they are spending to generate each new lead. This information can be used to fine-tune marketing strategies and ensure that resources are being allocated effectively. This metric also gives us information on what happens after the customer clicks on the ads and where then potential friction might be. A low cost per lead means your digital retailing solution or your offer is performing well.
C. Cost per Acquisition (CPA): The ultimate measure of marketing success, CPA represents the average cost of converting a lead into a sale. By closely monitoring CPA, dealers can identify the most effective marketing channels and strategies for their specific needs. The metric can also help us determining the success of our sales team. A low cost per acquisition means your digital retailing solution and your online sales team are performing well.
Calculating ROI: The Art and Science of Measuring Success
With objectives and KPIs in place, dealers can now turn their attention to calculating marketing ROI. This is where the rubber meets the road, where the effectiveness of marketing strategies can be evaluated and optimized.
ROI = [(Revenue - Marketing Costs) / Marketing Costs] x 100
By employing this simple formula, dealers can gain valuable insights into the success of their marketing efforts and make informed decisions about where to focus their resources.
Embracing the Timeless Principles of Marketing ROI Analysis
In the ever-evolving landscape of automotive marketing, mastering the ability to measure and optimize ROI is crucial for enduring success. By adhering to these timeless principles, dealers can navigate the complexities of the industry and secure a prosperous future for their businesses.
A. Prioritize Crucial KPIs: Dealers must focus on KPIs that directly influence ROI, such as CPC, CPL, and CPA. This emphasis ensures that resources are allocated effectively, and marketing efforts are aimed at achieving the desired results.
B. Assess Net Profit: Instead of merely concentrating on revenue, dealers should evaluate net profit to understand the true financial impact of their marketing efforts. This approach enables them to optimize their marketing strategies to achieve the best possible ROI while considering expenses and other factors.
C. Harness Data Science: Leveraging data science empowers dealers to make informed decisions and refine their marketing campaigns. Data-driven insights have the potential to revolutionize the way buyers and sellers interact in the automotive market.
D. Adopt an Omnichannel Mindset: To maximize ROI, dealers should prioritize omnichannel media strategies. This approach entails reaching customers across multiple platforms and channels to provide a seamless and consistent experience.
E. Continuously Monitor and Optimize: Dealers must regularly track their marketing campaigns' performance, analyze the data, and make adjustments as necessary. This ongoing process helps them improve their marketing ROI over time.
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