We recently conducted a survey in which we asked Internet department personnel to share some key metrics. In one question, we asked:
How much total gross does your Internet department generate for every $1,000 spent on Internet leads from all sources (SEM, independent and third-party leads, classified site subscriptions, etc.) ?
Of the 183 responses, the answers broke down:
3X or less: 33%
7X-10X or greater: 20%
Don’t Know: 29%
These answers reveal there is quite a large disparity between auto dealers’ return on investment (ROI) on Internet spending, as well as a surprisingly large percentage that don’t even know their ROI. So I wanted to know: what should a dealership target for a reasonable Internet marketing ROI?
One of the experts we consulted for measuring this metric was David Kain, President of Kain Automotive. He suggested that 5X ROI was the absolute minimum that a dealership should strive for, and ideally Internet departments should be seeing 7X ROI on their Internet spend.
But how do you calculate your ROI? Basically, ROI is what you get for what you spend. Here is a simple formula:
(Gross Profit – Marketing Investment) / Marketing Investment = ROI
This formula represents three steps.
1) Marketing investment should be simple to figure out as it is the total cost of a campaign. For instance, if you spend $1,000 per month on a Pay-Per-Click campaign, $1,000 per month on independent leads and $1,000 per month on a subscription site, then your total marketing spend on Internet leads that month is $3,000. For the sake of simplicity, I’m going to suggest here that the cost of overhead, while included in some ROI measurements, should not be included when figuring out ROI for Internet leads, regardless of source. So in this formula, don’t worry about including labor costs (for staff), web site maintenance costs, etc.
2) Gross profit is the next metric you’ll need to figure (my first GM used to say, “Volume is vanity. Gross is sanity.”). If you can pull the actual grosses on all Internet deals, that’s great. If not, take the number of sales and multiply it by your dealership’s average front and back combined gross profits. So if $3,000 in marketing spend delivers 10 sales at an average of $3000 combined gross, then your total Internet-related gross profit will be $30,000.
3) Next, you need to subtract the initial marketing investment ($3,000) from your gross profit ($30,000) for a total of $27,000.
4) Divide that number by your initial marketing investment ($27,000/$3,000) and in this scenario you end up with 9X ROI, an excellent result.
Why is it important to know your ROI? Any time you spend money on anything, whether on Internet leads or a marketing campaign, it is an investment. Like any investment, it should be measured, monitored and compared to other investments so you know where you should be spending your money.
Also, knowing the ROI for all your lead sources gives you leverage. How many Internet marketing budgets were slashed in 2009 and 2010? Perhaps some cuts were deserved, but do you know which ones? Cutting back on a lead source that returns a high ROI is only going to hurt the bottom line.
Of course, our question focused on the overall Internet marketing spend, not on the ROI of various lead sources. But applying this formula to your separate lead sources is highly recommended and gives a better measurement of success than just closing percentage or other metrics. After all, ROI is what goes to the bottom line.
I’d love to hear some feedback: how do you calculate your dealership’s ROI on your Internet leads spend? What do you consider a good ROI? In my next blog, I’m going to give some tips on how to drive your team to improve ROI.
SANTA MONICA, Calif., Jul 23, 2012 (BUSINESS WIRE) -- Edmunds.com has officially surpassed 100,000 Facebook likes, and is now the most popular automotive information website on both Facebook and Twitter. As of this morning, Edmunds.com's 101,700 Facebook likes and 34,400 Twitter followers topped all other independent automotive shopping or research sites.
"Consumer engagement is a top priority for Edmunds.com and sites like Facebook and Twitter have been our front lines to interact with online car shoppers," says Michelle Denogean, Vice President of Marketing at Edmunds.com. "Our social media team has worked tirelessly to create fun and memorable experiences that resonate with everyone from first-time car buyers to seasoned auto enthusiasts."
Edmunds.com crossed the Facebook milestone just days after launching its first ever cross-platform ad campaign. The debut TV ad "Ask the Car People" premiered July 9th on airwaves in four local markets, and has been featured on each of Edmunds.com's social media channels. Online users can watch the ad any time at http://www.edmunds.com/about/ask-the-car-people-commercial.html .
To celebrate its 100,000 likes, Edmunds.com has posted a gallery of $100,000+ dream cars selected by members of Edmunds.com's editorial staff. Fans are invited to share their opinions on these fantasy cars on Edmunds.com's $100K+ Cars for 100K+ Likes post on Facebook.
Edmunds.com's social media presence extends well beyond Twitter and Facebook. Edmunds.com on YouTube offers reviews and instructional videos, while Edmunds' InsideLine.com on YouTube showcases video of some of the rarest, fastest and most expensive cars in the world. Pinterest users can pin Edmunds.com at http://pinterest.com/edmundsinc/ and Google+ users can track Edmunds.com content at https://plus.google.com/106326607174519341980/posts .
About Edmunds.com, Inc.
Edmunds.com, the premier online resource for automotive information, launched in 1995 as the first automotive information Web site. Its acclaimed mobile site, Edmunds.com Android App and five-star Edmunds iPhone and iPad apps make car pricing and other research tools available for car shoppers at dealerships and on the go. Its automotive enthusiast web site, InsideLine.com, is the most-read car publication of its kind. Its highly regarded mobile site and iPhone app features the wireless Web's most comprehensive gallery of automotive photos and videos. Edmunds.com Inc. is headquartered in Santa Monica, California, and maintains a satellite office in suburban Detroit. Follow Edmunds.com on Twitter@edmunds and like Edmunds.com on Facebook.
TrueCar, Yahoo end exclusive partnership
TrueCar Inc., an online car-shopping service, has ended after just six months its exclusive relationship with search engine Yahoo to send auto shoppers to auto dealerships.
Yahoo Autos plans to keep TrueCar and sign other sales-lead generators, Yahoo confirmed in a statement.
Under TrueCar's original deal with Yahoo, TrueCar agreed to pay Yahoo a huge sum -- $50 million per year for three years -- to be Yahoo's exclusive auto-shopping partner. Shoppers on Yahoo Autos were referred automatically to participating TrueCar dealerships.
Under the revised deal, TrueCar's payments to Yahoo will be triggered when TrueCar receives a minimum number of leads and a minimum number of high-quality leads from Yahoo Autos, according to a TrueCar source. Terms of those minimums were not disclosed.
In a statement, TrueCar said: "The new relationship has been forged as a result of a better understanding of both parties' capabilities and aligns economics and services around a vision of mutual success."
The original deal, signed late last year, said Yahoo would deliver 10 million auto shoppers to TrueCar each month. It's not clear if Yahoo delivered that total, and statements from both companies did not address the issue. The exclusive partnership began Jan. 1.
Under the new arrangement, TrueCar will appear as a button that can be clicked on Yahoo Autos. Yahoo says it is opening Yahoo Autos to "multiple dealers and third parties."
Today, though, TrueCar was still displayed prominently on Yahoo with the phrase "Y! Autos in partnership with TrueCar."
Calls to Yahoo for more information on how shoppers will navigate the revised site were not returned.
Under the revised deal signed June 29, Yahoo Autos can sign other lead generators immediately, a TrueCar source said.