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After spending the past couple of years working directly with auto dealerships around the globe, I can confidently say that auto dealers are not spending their digital budgets in the most efficient way. Over the past several years, auto dealers have become comfortable with, and accustomed to, Paid Search Marketing. This comfort in Paid Search is due to the fact that it drives leads and can more easily be measured for ROI, compared to other forms of digital marketing. Don’t get me wrong, Paid Search should certainly be a key component to a dealership’s digital marketing strategy. However, dealers should be more open to spending in Display/Video, rather than dumping more money into Paid Search campaigns that are already exhausted. Many dealers don’t understand that there is only so much Paid Search volume to go around, and if they’re located in a rural area, that volume is even smaller. On top of that, many auto companies (OEMs) are bidding on brand (make) keywords, so dealers who want to bid on those keywords don’t realize that they are overlapping with their OEM and driving up the cost of keywords for both themselves and the OEM. Rather than overlapping with your OEM, dealers should be looking into boosting their Display and Video budgets. This means spending more in traditional Display and more in Social Media Display. Paid Search drives better performance when paired with Display/Video campaigns. Your Display campaigns will help to significantly improve your dealership’s brand awareness, which results in more people searching for you online. So, if you use Display to build a larger pool of in-market consumers searching for you, you can then capitalize on that and make your Paid Search campaigns that much more effective. It’s easy to see how they work in tandem. Plus, when you can hit a consumer with similar messaging across different marketing mediums, you are more likely to get them into your dealership to purchase a car.
Now let’s take a look at the numbers
eMarketer recently conducted a study to help uncover how dealers are splitting up their digital advertising budgets. eMarketer’s findings surprised me, as they are vastly different than what I’m seeing from dealers that I work with and others that my company, Search Optics, has surveyed. According to eMarketer, the auto industry is spending virtually the same percentage of their digital budget on Display as they are Paid Search, thus far in 2016. They reported that the auto industry in the US is spending 45% of the digital budget on Display (which includes Social Media), and 45% on Paid Search, with just under 10% being spent on all other forms of digital advertising. See the chart below from eMarketer:
As I said above, this is vastly different than what is going on at the dealership level. Below is what we are seeing from dealers in the United States. As you can see, dealers in the US are spending 62% of their digital budget in Paid Search, and only 23% in Display. The gap between Paid Search and Display has shrunk slightly from 2015 to 2016, however there is still much room for Display to grow.
Not only are we seeing this in the United Sates, but we are also seeing a similar trend across Canada. Canadian dealers are spending about the same in Display as US dealers, but slightly less on Paid Search. They are also spending slightly more on other forms of digital advertising, such as classifieds/directories and email.
So why the difference?
The eMarketer study includes the entire auto industry, not just dealerships. Whereas the data I’m referencing, includes only dealerships. So, what does this tell me? It tells me that OEMs and dealership networks (tier II) are spending a larger portion of their digital advertising budget on Display than dealerships (tier III) are. So, what should dealers do? I wouldn’t recommend that they just simply take money from their Paid Search budget and add it to their Display budget. Instead, I would advise them to first do a deep dive into the performance of their Paid Search campaigns to determine if they are over-spending in Paid Search. Determine if you are paying too much for certain keywords and if there is enough quality search traffic in your area for your budget to cover. You may discover that you don’t need to spend as much in Paid Search to drive the same level of performance. If that is the case, then by all means shift that overspend into your Display budget. If that’s not the case, then you want to increase your overall digital budget, by adding more money to your Display budget. Bring that Display spend up to the same level as your Paid Search spend. In fact, I would strongly suggest that dealers take 15% of what they are spending in Television advertising, and move that into the video budget. As consumer behavior shifts away from traditional TV, and towards online video, it’s crucial that dealers stay ahead of the game. If you don’t believe me, just do a Google search for cord cutters.
Changing the way you view Display
After analyzing our survey results, I noticed something interesting around the expectations that dealers have of their Display campaigns. 40% of all dealers surveyed said that they expect Display ads to generate leads for them. In that same survey, 25% of dealers said that they felt their Display campaigns were driving performance below their expectations, while only 4% said Display was overachieving expectations. When you fit all that together, it’s easy to see that dealers are unhappy with their Display campaigns because they expect Display to drive leads. Display campaigns are meant to increase awareness, not directly drive leads. Dealers need to understand that Display increases awareness, increased awareness helps generate more search volume, more search volume can help improve your Paid Search performance, which can ultimately results in more leads. But, those leads that are generated are mostly coming from Paid Search, not Display. This is when an attribution model comes in handy, but unfortunately it is tough to get a dealer to pay attention to the high level metrics, let alone an attribution model. Bottom line, Display ads are like digital billboards. You don't expect people to immediately drive to your location just because they saw a billboard. They may visit sometime soon, but not necessarily at the time they view the billboard. Display ads should be thought of the same way, just a digital version.
Dealer groups vs individual dealers
During our survey analysis, we also noticed some interesting things about the differences in dealer groups and individual dealers. Both dealer groups and individual dealers find that measuring ROI and implementing conquest strategies are both very challenging. However, dealer groups have a harder time identifying opportunities within their database than individual dealers. This surprised me a bit, as dealer groups are normally a bit more digitally and analytically savvy, when compared to individual dealers. However, on the other hand, it could be that some of the dealer groups have more data in their database to sift through than a normal individual dealer. When we dug further, we noticed that individual dealers have a harder time understanding how to convert online leads to sales, than dealer groups do. Again, this goes back to dealer groups being a bit more digitally and analytically savvy than an individual dealer. Dealer groups will come together once a month or once a quarter to discuss the group as a whole, and many times will share ideas with one another. This is something that individual dealers miss out on. Lastly, we noticed that dealers within dealer groups are more likely to have a dedicated digital marketing expert or external agency handle their digital marketing efforts, whereas individual dealers are more likely to have their Dealer Principal or GM handle the digital efforts. We also surveyed some dealers in the UK, and we found similar results. 21% of all the UK dealers we surveyed said that they do NOT have a dedicated digital marketing person within their business. It’s certainly fine to hire an agency to handle your digital marketing efforts, but every dealership, whether in a dealer group or not, should have a dedicated digital marketing expert on their payroll. The importance of this position is only going to increase.
Let me know your thoughts. If you have any questions please don’t hesitate to contact me or post a comment.
For more auto data and info, please see my other content on LinkedIn.