How to calculate automotive marketing ROI for your dealership

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According to 2017 data collected by the National Automobile Dealers Association (NADA), dealerships across the United States are spending over 55 percent of their advertising budget on internet ads. (This figure works out to an average monthly ad spend of $26,750 per month.)

And this research tracks with another study of over 300 dealerships, which reveals that more than half of all dealers are overspending on at least one marketing channel. This study also found that half of those surveyed are underspending on social media marketing, and that one in three are overspending on search-engine marketing.

When taken together, these studies indicate that dealerships all across the country are struggling to select the best marketing channels for their messaging — this is exactly where analysis of automotive marketing ROI becomes critical for dealers.

Why does automotive marketing ROI matter?

There are three main reasons why analysis of your automotive marketing ROI is crucial to your overall business strategy:

  1. Compare your performance to competitors: There are a variety of software tools out there that reveal what your competitors are spending on marketing, as well as their ROI. Understanding your own ROI gives you a standard through which you can compare your performance to your competitors’.
  2. Gain a deeper understanding of your marketing spend: Regardless of whether you think a marketing campaign or strategy is a good idea, your boss cares about the amount of revenue created from your marketing spending. Knowing your automotive marketing ROI means you can better justify your budget.
  3. Learn how to better leverage touchpoints: If your marketing touchpoints and organic content are not leading to conversions, then it’s time to re-evaluate your strategy. A deep analysis of your ROI will ensure you’re only investing in high-value marketing channels and touchpoints that consistently drive conversions.

Ultimately, understanding your ROI keeps both you and your team accountable. It can also aid with setting goals and selecting the right KPIs to track, which in turn helps you get better at tracking, analyzing, and improving your marketing.

Calculating automotive marketing ROI

The standard formula for calculating marketing ROI is:

(Sales growth – Marketing Cost) / Marketing Cost = Marketing ROI

Determining your revenue and plugging in numbers to this equation is the easy part; knowing exactly what figures to include is where the challenge begins

This is why it’s critical to track every single dollar you spend on advertising and marketing campaigns. You also should include the cost of any software, apps, freelancers, administrative tools, and even work-hours. Whether you’re paid hourly, biweekly, or monthly, you need to include this cost into the formula along with expenses for any other staff working on the project.

In addition to tracking all of your marketing expenses, it’s also crucial to analyze your customer data — while revenue is a key variable for any automotive marketing ROI calculation, it’s important to understand the story behind the numbers. Tracking touchpoints where customers interact with your dealership and matching this data to your ROI lets you see where the highest returns are happening, while also illuminating areas where improvement is needed.

How to analyze your automotive marketing ROI & enhance attribution

ROI analysis allows you to attach values to your various marketing channels, depending on the revenue these channels are generating for your dealership. For example, centering your analysis purely on clickthroughs or pageviews might make you think that your promotional emails are having the greatest impact.

However, an in-depth calculation of your your ROI will provide you with a more accurate view of a marketing channel’s real value and influence. So while promotional emails may drive customers to your inventory pages, a retargeted paid ad may actually lead to more purchases.

On the other hand, you may find that a marketing channel is successful at getting your customers from the ‘interest’ to the ‘decision’ stage of the customer journey, but it is eating up most of your budget. In cases like this, careful ROI analysis may reveal  a more cost-effective way to accomplish your goals, while also optimizing your ad spend and sharpening your keyword research for better SEO results.

But either way, the lesson learned is the same: The most effective way to achieve accurate attribution for your marketing channels is through the calculation and analysis of your ROI.

ROI: The key to understanding what works

NADA’s findings reveal that many dealerships are still struggling to effectively calculate and understand their marketing ROI. 

The challenge lies in establishing the right kinds of processes that allow you to accurately track your marketing expenses, and then using that information to create and execute an effective dealership marketing strategy. Part of this process involves tracking as much customer data as possible — this will provide you with the qualitative data you need to make an informed judgment call on the effectiveness of your marketing.

By following these steps, you will not only achieve a more accurate calculation of your automotive marketing ROI, you’ll also be able to decisively prove how much value your marketing strategy is generating for your business.

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