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Automotive Digital Marketing Laws of Nature; 4 Immutable Constants that Determine Dealer Success Yesterday, Today and Tomorrow!

The Automotive Digital Marketing Laws of Nature Include 4 Elements that Determine Dealer Success

One of the more popular cliches used too describe what is most important in automotive digital marketing, and digital marketing in general, is the 3 word phrase; "Content is King"... The person touting this phrase would most likely be someone who sells or whose job is related to the creation and maintenance of website content!

Depending on how you interpret the "Content is King" phrase will determine whether it supports or is in opposition to the automotive digital marketing strategy foundation and "Laws of Nature" that I am going to describe in this article.

However, with that said I also want to point out that what prompted me to write this article were several recent experiences, including the combination of a Forum discussion posted by Phil Zelinger, my review of the information and topics that seemed the most popular at Digital Dealer 8 in Orlando, and Steve Stauning's "No More Internet Departments..." workshop session at the 8th Digital Dealer Conference.

One of the trends I have witnessed lately, and was noticed by all who attended the 8th Digital Dealer Conference, is what I will describe as an "Arms Race" by and on behalf of car dealers to get an ever increasing amount of traffic to dealership websites, various microsites and campaign related landing pages... And, let me add that I expect to see the same emphasis on Traffic Acquisition at the 9th Digital Dealer Conference in Las Vegas, and am looking forward to such emphasis! After all, Traffic is where we start with the whole Attract-Engage-Convert-Sell Internet Marketing and Sales funnel.

However, based on over 15 years of personal experience, I know that when an automotive digital marketing strategy gets out of balance, the results CAN be a negative impact on overall dealership revenue and profits. More is not always better if the desired outcome is reversed!

If the emphasis on driving traffic from various sources, especially Search Engines and the improper use of Search Engine Marketing (which includes BOTH Paid and Organic Search Traffic), results in a lack of focus on the three key areas of automotive digital marketing strategy, or not optimizing the 3 elements that come after "Traffic", we can get negative results. The three elements of TIPS that happen after "Traffic" are what determine the user experience, and the two that happen after the customer engages via web or phone are not designed and executed properly, the results can be to drive people away from the dealership's showroom and service drive... In many cases "Traffic" is from people who would otherwise be predisposed to visiting the dealership, but who may say "Pass" on the idea of ever visiting the store when their experience is negative!
Anybody who has read my articles, publications or blog posts over the years has heard me often times refer to the basic formula for Automotive Digital Marketing that was published, taught and constituted the foundation for the strategies that my team at Cyber Car's Technology Assisted Sales (TAS) Group brought to over 2.000 dealerships between 1999 and 2003...

This basic formula is more relevant and true in 2010, will continue to be in 2011 and well beyond, than it was ten years ago. The TIPS Strategy is more effective in today's expanded universe of automotive digital marketing tactics than ever before, and TIPS addresses the need for a focus on maintaining a balanced approach to automotive digital marketing...

"Automotive Digital Marketing Laws of Nature" are the 4 immutable and constant strategic business model components that determine each dealer's Return on Investment (ROI) from digital marketing, which is the primary basis of measuring success or failure from any marketing investment. These 4 elements of Automotive Digital Marketing have been well known and recognized for the past 15 years, and they are the primary forces of nature that determine ROI today and will continue to be tomorrow. The business model I am referring to is known by an acronym as "TIPS", which stands for:

T = Traffic; the tactical activities and budget allocations used to drive targeted consumer visitors to the dealership's designated sites.

I - Interactive Content; the design, features, functionality, content, forms and engagement applications that transform visitors into revenue and business opportunities.

P = Process Management; the lead management tools, technology, people, policies, procedures, monitoring, reporting and all activities related to what the dealership's designated resources do to transform consumer engagement into showroom visits, service appointments that show up and enable actual revenue realization.

S = Showroom and Service Sales; the people, process and tools used by the dealership to maximize sales revenue from the appointments, showroom visitors and service drive traffic that results from the dealership's website Traffic, content Interaction and Process used to respond to online and phone engagements with consumers.

What has been most definitely true and has not changed in the past 15 years of automotive digital marketing activity, is that if a dealer wants to increase their sales and service profits using digital marketing strategy and tactics, then they must focus on the four major elements within the TIPS "Automotive Digital Marketing Laws of Nature" and continuously improve whichever one of the four areas are the weakest "choke point" and improve that area until one of the other 4 areas becomes the weakest link in their TIPS strategy, tactics and execution.

Phil Zelinger's recent Forum post discusses the importance of being aware of the "I" or "Interaction" component within the TIPS Automotive Digital Marketing Laws of Nature... And, I would agree that if "Interaction" (engagement) is the weakest area in a dealer's TIPS strategy and tactical execution, then "Interaction" related elements within the websites should be strengthened until it is no longer the weakest area...

Likewise, if "Traffic" (the T) in TIPS is the weakest area, then finding and improving the Traffic to the dealer's designated websites should be focused upon...

The same applies for "Process" and "Sales", the "P" and "S" in the TIPS formula... The real question is how do you measure theses four areas so you know where the weakest link is in your dealership's Automotive Digital Marketing Strategy, and determine which of the TIPS "Laws of Digital Marketing" you should focus on improving next, in order to get the maximum sales and profit results...

Website Traffic and Lead Management Process Measurement systems and tools are a known, well studied and thought out area within Automotive Digital Marketing.

There are many tools available for use by car dealers that are either already in place (ask your suppliers)
or fairly easy to put into place. Many of the most important measurements have well established auto industry benchmarks for car dealers.

Here are a few of the most important Key Performance Indicators (KPI) for the TIPS Strategy and Tactics implemented by a dealership:

Total Visitors, Unique Visitors and the referring URL's, Search Engine Keywords used, URL's directly typed in by consumers, referring links and other sources of traffic to the dealer's designated websites. The initial KPI is an absolute number, with the key objectives being to increase that number, divided by the dealer's total investment into driving traffic, which yields a Cost Per Visitor, not to be confused with Cost Per Click! Ratiors are reviewed for related components such as percentage of traffic from search engines, compared to direct URL access and Links posted on other sites, advertising and such that are clicked upon.

Primarily measured from a performance management perspective as the dealer's "Conversion Rate" for each website calculated by taking the Total website forms submitted and dividing that by the site's Total Unique Visitors. This gives us the percentage of website visitors who filled out a form OF ANY TYPE on the website. The aggregate Conversion Rate is less useful than what is generally pitched to dealers if it does not include the number of PHONE CALLS originating from a unique number published on the dealer's website, that is added to the number of lead forms to provide a more complete measurement of engagement.

Common "KPI Leaks" for measuring website conversion rates happen when the dealer has third party applications incorporated into the website or microsite which produce lead forms and phone calls that are not added to the website's quantity of interactions produced...

Examples include Black Book Online, KBB Lead Driver, DealerCentric's talking credit app, as well as any other credit application plug in application on the site.

"Click to Call" and Interactive "Live Chat" client apps should also be recorded, with each Chat engagement, regardless of whether the customer's information is collected, added to the total number of "Interactions" that the site's content produced.

Additional KPI's for the "I" component of TIPS include Average Visit Time, which sections and apps within the site are being used, downloads of video, image and brochure content, utilization of apps such as vehicle configuration tools, monthly payment calculators, TCO calculators, and my own personal favorite; "Directions to the Dealership" where the consumer enters their starting address and is able to then print out, email or send the "Turn by Turn" directions for driving to the dealership to their cell phone.

For example, anyone who has studied the difference in Visitor to Lead/Call Conversion rates between the three predominant sources of automotive digital marketing traffic has undoubtedly noted that Traffic from Search Engine Optimization converts into leads and phone calls at far lower rates than Paid Search Engine and Display Advertising sourced traffic, direct traffic from consumers typing in the dealer's URL or Traffic from Referring Domains where the dealership's links are available. So any analysis of Interaction driven by a dealer's websites, microsites and landing pages within them should include comparing the conversion rates by source of traffic.

This key element of the TIPS automotive digital marketing strategy is initially easy to measure and gets more complicated as the dealership becomes more capable of executing the tactics associated with good process... By the way, PROCESS is NOT BEST MEASURED by overall Lead to Sales closing rate! That's a myth and a detour down the wrong rabbit hole... PROCESS EXECUTION IS BEST MEASURED BY DEALERSHIP VISITS DIVIDED BY TOTAL LEADS/PHONE CALLS. The most effective and accurate Key Performance Indicator for the dealership's design and execution of processes used to handle lead forms and phone calls received is simply how many of those leads and calls resulted in a consumer physically arriving at the dealership within any given time period being measured. It does NOT MATTER whether these customers who called and submitted lead forms scheduled an appointment that was recorded or not... It helps if we focus on getting appointments and then measure the appointments generated by each process, and leads-to-appointment and calls-to-appointment ratios are very important to track, monitor and optimize, but the overall most important KPI for Process is "Leads/Calls to Dealership Visits", then within that category, we absolutely must measure appointments generated and recorded by web form leads submitted and incoming phone calls to the unique tracking numbers posted to the dealership's various sites... Further optimization can be achieved by categorizing and measuring leads/calls by source and the subject of the inquiry. For example, look at Credit Apps submitted to Showroom Visits by consumers who submitted the credit apps... If it is too low, then you may have people who are prejudging whether or not a deal can be made by the customer's credit score, which is almost always not the way to sell the most vehicles... If you have a low Showroom Visit to Trade-In Evaluation form ratio, then you may want to consider a specialized process that focuses on how much the dealership would like to purchase the customer's vehicle outright, whether or not they buy a car from the store.

4. SALES (Showtime)
I like describing the fourth element of the TIPS Automotive Digital Marketing Strategy as being what the dealership does to optimize "Showtime" which occurs whenever a customer has contacted the dealership prior to arriving in person. So, what is the KPI for the "S" in TIPS? Good old fashioned Showroom Close Ratio or Service RO to Service Drive Visitor Ratio (which better be 100%!). In the case of Showroom Visitors, the overall KPI for TIPS purposes is the Number of Showroom Visits by consumers who submitted a lead form or called the dealership on one of the website posted phone numbers who physically visited the dealership within the measured time period. So, if the store received 100 web form leads and 100 incoming phone calls within a measured month, and in that same time period received 20 Showroom Visits from people who had previously submitted a lead form or called the number on the dealer's websites, then the dealership achieved a 10% LEad-to-SHOWROOM Conversion Rate... If the number were 40 showroom visitors, then divide that by the 200 web originated leads and calls received in the same time period and you have a 20% Lead-to-Visitor ratio... Whether or not the visitors scheduled an appointment to come in does not matter... It just makes it easier to measure!

These days I like to close this type of comment or post with the guidance that all of us involved with automotive digital marketing need to exercise caution that we do not confuse "Key Performance Indicators" with "Return On Investment" (ROI)... Our ability to track and measure does not have anything to do with the ROI realized by the dealership from automotive digital marketing activities.

Why do I bring this up? Because our ability to accurately obtain any element of "Measurement" is no more related to the "ROI" achieved from the activity we seek to measure, than a digital thermometer is related to the source of heat on a hot day!

The ability to accurately track and monitor the components of an automotive digital marketing campaign, strategy or tactic has absolutely NOTHING to do with the Revenues and Profits that make up the "Return" a dealer receives from investing in that strategy or tactic... It is ONLY an indicator of our competence in the application of measurement tools and tracking systems, and has NOTHING TO DO WITH WHETHER CARS WERE SOLD OR NOT!

I have inserted several charts and illustrations below that are relevant to the topic of Automotive Digital Marketing Laws of Nature and the Immutable Constants that Determine Dealer Success Yesterday, Today and Tomorrow!

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Tags: 4, Automotive, Constants, Determine Dealer Success, Digital Marketing, Immutable, Interaction, Laws of Nature, Process, Sales, More…Showroom, TIPS, Today, Tomorrow!, Traffic, Yesterday


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Comment by Ralph Paglia on April 27, 2010 at 4:13am

There are plenty of benchmarks floating around, such as 35% Lead to Appointment, 75% Appointment to Showroom Traffic, 50% Close Rate on Shows... But they are not very applicable for how anybody should be using these metrics...

Establish your own reliable reporting and measurements... Compete against yourself by seeking to improve one metric each month. The benchmarks SHOULD be what your store does on a historical basis, NOT what some consultant tries to tell you or your dealership.

The objective is not to hand out report cards and either criticize someone, or pat them on the back. The objective is to focus on what appears to be the weakest of the 4 areas...

TRAFFIC (marketing and advertising),
INTERACTION (website visitors that submit forms, call on phone or visit the dealership in person),
PROCESS (what we do to get leads and phone calls to show up at dealership),
SALES (what we do when website visitors show up at dealership to make sure they buy a car).

I hear a lot of unreasonable numbers thrown out and some measurements of questionable value... Here are the most important:

Total Visits to Site(s) - should be over 3,000 for ANY dealer...
Unique Visitors (monthly) - should be over 2,000 for ANY dealer...
Traffic Sources by Referring Domain -
Total Traffic broken into Source Type: Search Engine Sourced, Direct Access (URL), Referring Sites (from links on sites and in emails, usually) - Should be equal thirds, too much search traffic yields lower conversion rates

Total Leads & Phone Calls DIVIDED by Unique Visitors (Conversion Rate)
Avg Time per Visit - should be over 3 minutes, but over 5 minutes means your site does not suck!
Avg Time per Visit by Source Type
Total Page Views
Average Page Views per Visit Session
Average Page Views per Unique Visitor
Total Form Views
Total Lead Forms Submitted DIVIDED by Total Form Views (subtract from 1 to get form abandonment rate)
Conversion Rate by Traffic Source Type
Site Exit Pages ranked by number of visitors LEAVING from that page
Site Entry Pages ranked by number of visitors ARRIVING on that page
Destination Pages Ranked by Volume of Visitors who left and went there
Bounce Rates (overall and by entry page)
Total Inventory Detail Pages Viewed

Appointment Ratio: Appointments Generated DIVIDED by Leads/Phone Calls Received
Appointment Show Ratio; Total Showroom Visits DIVIDED by Appointments Generated and Scheduled in CRM/LMT
Lead to Showroom Conversion Rate; Showroom Visits (all) DIVIDED by Leads/Calls Received (does not matter whether an appointment was scheduled or not)

Contact Ratio; Customers Spoken to on Phone DIVIDED by Total eLeads Assigned
Capture Ratio: Total Customer Data Entires w/Name, Phone, email and Vehicle of Interest DIVIDED by Total Calls to Toll Free Tracking Numbers

Lead Follow-Up Validation:
30 days Leads/Sales Close Ratio (10% as example)
60 days Leads/Sales Close Ratio (4% as example)
90 days Leads/Sales Close Ratio (2% as example)
(above example yields 16% close rate with 6% from ongoing follow-up)

Previous 90 days; Leads/Phone Calls that Visit Dealership (Total Showroom Visits)
Vehicles Sold DIVIDED by Total Showroom Visits (from leads and calls)

Phone Call and Eleads that Showed up, were sold and turned to Finance
Phone Calls/eLeads that Showed up and were Delivered and funded
(always track both because if there are not enough deals that were lost due to finance, then you are not bringing in enough people!)
Comment by Lisa Lashes on April 26, 2010 at 1:53am
Amazing resource. Really its useful information.
Comment by David Johnson on April 25, 2010 at 1:18pm
very well done Ralph! I'm highly impressed, thank you for sharing!
Comment by Scott N. Mynuk on April 25, 2010 at 12:21pm
This was probably one of the best posts I've seen in some time. Really good drill down for ROI measurement.
Comment by Ralph Paglia on April 25, 2010 at 11:10am
For those that have sent me messages asking for the spreadsheet used to monitor Internet Sales Process Performance shown above with the Green, Yellow and Red automated performance gap "Traffic Signals" here's a template to use in making one for your dealership or client. The only thing I ask is for "Attribution Credit"... Let them know Ralph Paglia created it!
Internet Sales Process Report - Annual.xlsx
Comment by Ralph Paglia on April 25, 2010 at 10:49am
PLEASE NOTE: Any of the charts or illustrations shown in the above blog article can be viewed in a full size version by clicking on them to open a new window with the full sized image.
Comment by Ralph Paglia on April 25, 2010 at 10:47am
@JJ - After speaking with so many dealers and ISM's at #DD8 who I realized did not have a foundation in TIPS, I thought it would be useful to give everyone a basic TIPS Primer... Without this foundation, it is easy to get caught up in the "Bird Dog" syndrome or the "Crow Factor"... The Bird Dog syndrome is chasing whatever pops up in front of you as being the issue of the moment. The Crow Factor is spending time, money and effort on the shiniest object that appears in front of you.

New techniques, strategies and technology is great, everyone knows I am constantly looking for ways to improve. But, improve upon what? and for what objective? TIPS is a great strategy that never goes out of style, works and is focused on selling more cars! When we look at various aspects of people, process and technology, the TIPS Strategy gives us a framework to put it all into proper perspective while staying focused on the strategic components that sell more cars... When we constantly improve the weakest link in the TIPS steps to the sale, we know what to look for in people, process and technology, and What's Important For Me (WIFM) right now...

Comment by Jim Jensen on April 25, 2010 at 6:30am
Great post, Ralph...very useful for all skill levels of ADM members. JJ

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