How Much an Automotive dealer Should Spend on Marketing

If you are just starting out and want to make a big impression, you may need a more aggressive budget. The budget would go towards extensive Google AdWords, SEO, public relations, and social media campaigns. The biggest changes in overall dealership expenses have been the growth in the marketing expenses and the vast array of marketing strategy options available today. Marketing expenses as a percentage of total spend have been growing.

Context and Dealership Challenge

The digital marketing landscape continues to grow and evolve. New car sales are up nationally, overall dealership expenses are increasing, dealerships are tinkering with new marketing strategies, and profit margins are shrinking from the latest NADA data and from what dealerships are telling revolves around the two questions:

What is the expected ROI for the service – how do I measure return?

The fact is that there's no set-in-stone formula when it comes to establishing your advertising budget. However, asking the right questions and keeping your sale’s goals at the forefront of the discussion can help you realize the most powerful outcomes.

Internet Marketing vs. Traditional Marketing

ROI is a direct performance measurement of your advertising budget in terms of sales generated from various advertising media. Automotive marketing on the Internet using a dealer’s website, Google AdWords, Craigslist, and email marketing gives you a higher ROI on your advertising budget. These forms of marketing have low costs, are performance based, and come with powerful analytics to help you fine-tune your strategy. It also allows customers to interact with your online ads at any time of the day, so you can reach more people at a lower cost.

Measurable Performance: Get Powerful Metrics and Analytics Data

To spend more on Internet advertising gives the availability of measurable performance metrics and analytics data. With AdWords, you only pay a "cost per click" when a person clicks on your ad displayed on the Google search network. You have complete control over how much you want to pay per click, and you can generate a lead for as low as $1. Listing cars on Craigslist and sending out emails to potential car buyers are two other advertising channels that have relatively lower cost, yet come with precise analytics data to help you understand what works and what doesn't so you can tweak the way you advertise to car buyers online.

Marketing expenses are growing as a percentage of total spend in most dealerships. The array of marketing services required to stay competitive are growing. At the same time, overall expenses in most dealerships are growing and margins are being challenged. Marketing expenses should be understood in their detail and optimized to control the expense and maximize ROI. Dealerships need to face the reality that marketing expenses will continue to grow. The way to pay for these costs is to optimize the marketing expenses and/or reduce other expenses to preserve the bottom line.