Optimizing your Dealership’s Marketing and Advertising Budget

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One of the more frequent discussions I find myself engaged in with dealers Lightbox centers around what techniques best determine how much money should be invested each month into their various marketing activities. There seems to be a tendency for people in the car business towant marketing professionals to declare a fixed dollar amount for each category of marketing service or advertising spend—as if there is a “best practice spend” amount: X dollars for search engine advertising (SEA), Y dollars for online display advertising (ODA), and Z dollars for social media advertising (SMA). That would make marketing management a far easier job than it really is in the competitive automotive marketing space.

What I am about to describe can be applied across all dealership advertising categories, but for the sake of this article I will focus on digital marketing channels. During the development and launching of digital advertising solutions at a major DMS provider, I created an “Advertising Budget Optimization Cascade” in the form of an advanced Excel spreadsheet, specifically for the purpose of optimizing budget allocations across multiple media channels. The primary principle that drives this concept is that every advertising channel used by a local dealership has a “sweet spot”—a dollar amount where the ROI for each dollar spent by the dealership is at its highest level. Go above that sweet spot and the ROI will continue to accrue, but at a steadily declining level for each additional dollar spent. Let me explain the idea in a specific example using SEA results per dollar spent as shown in the following matrix:

SEA Budget Amount/Month

Leads Generated

Cost Per Lead













In the chart shown above, the growth in sales opportunities generated continues as the budget increases, but the cost per lead generated is at its lowest level at the $4,500 monthly budget, for this specific dealership. Every dealership will have a different peak ROI budget level, and those peak points can vary from month to month based on a variety of factors, some of which are outside the control of an individual dealership.

Each advertising medium will have variable ROI at different budget levels; the key is to track these ROI points across various budget levels over time, so that you can create a chart which looks like a series of “budget cascades” with overlapping variations on a bell curve. The following chart is an example of an analysis for a specific dealership where we have plotted ROI points for the three types of digital advertising mentioned earlier: SEA, ODA and SMA. SEA is primarily Google Adwords; ODA is behavioral targeting and retargeting advertising using animated display that appears on national websites when a dealership’s local area (geo-targeted) visitors who are known to be “in-market” visit any of those hundreds of popular websites; SMA is primarily Facebook and YouTube advertising, such as “sponsored stories” and display ads that appear on top of the play space within YouTube videos, targeted by keywords used in their descriptions and by category.

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In the chart shown above the peak ROI points for each respective media channel’s budget levels occur at $4,750 for SEA, $7,500 for ODA and $2,200 for SMA. The sum of these three peak, ROI levels results in the optimum digital advertising monthly budget for this specific dealership, which equals $14,450.

The most interesting aspect of this approach is the impact it has on results. When a dealership funds their respective media channels at the optimum spend for maximum ROI, and the messaging is consistent across each channel, the synergy achieved results in a boost to ROI for the total advertising budget that exceeds the average across all the channels. The ROI for SEA increases an average of 22 percent because of the impact that ODA and SMA have on the mix of search queries and their respective conversion rates—the cost per lead drops across the board!

Here is a list of action items to take away from this article.

1. Track the ROI of each media channel that your dealership uses to generate opportunities by calculating the cost per phone call, showroom visit, lead, and chat session.

2. Create an Excel spreadsheet that tracks these ROI levels over time. There are several examples available for download in the Forum section at www.ADMPC.com.

3. Determine the peak ROI point for each media channel. Total each channel’s peak ROI budget level to determine your recommended advertising budget total for the channels tracked.

4. Continue measuring these ROI levels with the objective of raising the overall ROI level based on shifting and adjusting each media channel’s budget allocation over time.

Ralph Paglia is vice president of digital for Tier 10 Marketing and editor-in-chief of the Automotive Digital Marketing Professional Community (www.automotivedigitalmarketing.com).



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