We keep pounding the message that dealers should spend more money on Internet-related marketing channels. But most dealer principals and general managers are unsure if their Internet departments are making money — which, of course, is the only reason for an Internet department.
Still, dealers are starting to throw real money at the Web. U.S. dealers spent about 10% (or nearly $800 million) of their overall ad budget on Internet-related channels in 2005, according to the National Automobile Dealers Assn.
But many dealers are missing out on one of the key benefits online marketing provides. It is this: ad effectiveness can be tracked. We have all heard the old saying “I know half my advertising works, I just don't know which half.” Well, the Internet destroys that uncertainty.
The following steps determine if your Internet department is providing a return on your investment.
Determine marketing spending.
Here are some of the costs to figure in:
- Dealership website or websites. You could have more than one website if you maintain sites independent of your manufacturers' mandated site. If part of a dealer group, then you could be paying for several websites. Check your dealer parts statement to determine the costs of any manufacturer sites.
- Manufacturer leads. Several manufacturers provide leads from 3rd party sources and charge for these on a per-lead basis or a subscription basis. These typically are charged on the dealer parts statement.
- Third-party lead sources. Dealix, AutoUSA, Autobytel, etc.
- Online classified sources. Cars.com, AutoTrader.com, etc.
- Inventory uploads. Several dealerships use companies to take their vehicle photos and put them on all the sites listing inventory.
- Lead-management tool or a portion of your CRM (customer-relationship management) tool. Any costs associated with this are part of your Internet marketing.
- Call-tracking tools. Who's Calling, CallCommand, CallSource, CallBright.
- Internet operation personnel and any BDC (business development center) personnel that handle Internet activities.
Determine monthly sales.
We can debate all day what constitutes an Internet sale, but for our purposes we use the two criteria below.
- Any lead that comes into your lead management/CRM system that leads to a purchase of a new- or used-vehicle within 180 days. It does not matter whether the Internet team makes the sale. The dealership wins either way. But to assign proper credit, differentiate between Internet department sales and Internet sales by the floor sales team.
- Any tracked phone call generated from your Internet marketing. There should be an automated process placing these calls into your lead management/CRM system. The same 180-day time line and variables apply. The lead management system should allow you to track the source of each lead.
Determine the gross profit.
Once you have decided which sales to credit to your Internet marketing activities, calculate the front and back end gross and total it up.
Calculate return on investment.
Now that you have all the variables, it is a simple calculation to determine whether your Internet operations are profitable.
Take your Internet-generated gross, minus your Internet-operational costs and the remainder is your return on investment. Obviously there are other factors that can be added or subtracted depending on your general operational methodology. But this should let you know generally if your Internet operation is making money.
Your Internet operation should increase your overall dealership sales and make consistent profits month in and month out. The goal of Internet marketing is increased sales at lower costs.
David Kain is president of Kain Automotive Inc. He can be reached at [email protected] 859-533-2626.