Napkin Math: Understanding your SEO and AdWords Spend

Millions of dollars are spent annually on automotive online marketing, and Google AdWords represents almost 50 percent of that budget for franchise dealers.  But, how do you know if you’re making the most of your spend with Google AdWords or with SEO?  How do you know if putting more towards SEO and AdWords will bring more ready-to-buy auto shoppers to your website?  It’s a big decision, dealers most likely have to move money around, stop running radio ads or shift media investments if last click methods are the goal.  It’s hard to answer that question without the right education into SEO and the right reporting.  There is a simple way to figure it out, though, and dealers must take a hard look at the value of each component of their marketing campaign before moving money around.

There are a few things dealers can ask themselves to calculate the best ROI and to know where they should be spending their money and where they should NOT be spending their money.  First, dealers need to survey the landscape of their current marketing spend across all channels and review their marketing budget.  This includes everything they spend on marketing for their dealership; AdWords, retargeting, pre-roll, newspaper, radio, cable, social media, billboards, direct mail, team sponsorships, online radio, Facebook along with third party vendors like Cars.com and others.  This may seem a bit daunting at first looking at all media.  But, fully understanding the value of any one channel means a holistic view of the whole marketing spend is necessary to know where to make improvements.

Now, after looking at the whole marketing spend across all channels, ask ‘do the marketing goals align with the current marketing strategy and where messages are placed for the right target audience?’  Most dealers would agree that everything in a marketing campaign (radio, tv, Google AdWords, etc.) are designed to bring more in market auto shoppers to the dealership in some fashion.  This can be either physically on the lot or to the dealer’s website or to submit a lead.  The specific goals depend upon the dealers, but reviewing current marketing spend and where money is spent can shed light on any blind spots in the marketing strategy that need to be updated and or changed.  Goals must be aligned with the right media especially when determining if money needs shifted to optimize one or more goals that are falling short.

This is where taking a step back and analyzing the value of every medium against the total marketing spend can come in handy as compared to individual goals.  For instance, take a look at cost per VDP from third party vendors, like Cars.com, against last click-focused vendors like Google AdWords where the goal is to drive clicks to the dealer’s website.

Take this example of Napkin Math, for argument’s sake, let’s say a dealer has a monthly budget of $70,000 for all media for their marketing.  From this, calculate the monthly amount of spend for their third party vendors.  In this example, let’s say that number is $15,000.

Subtract the third party investment total ($15,000) from the total budget ($70,000).  The net budget allocated to drive traffic to the dealer’s website is $55,000.

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Next, take the budget to drive consumers to the dealer’s website ($55,000) and divide it by the total VDP views that the dealer received on their website for the previous full month.  This can often be obtained inside their website reporting dashboard.  This will give you the total advertising effectiveness to compare to third party sites, again like Cars.com. For this example, let’s say that the dealer received 15,000 VDP views for the previous month to their website.

Let’s assume that none of the dealer’s third party partners brought traffic to their website.  All 15,000 VDPs were driven by first party marketing strategies.  Let’s continue to assume all 15,000 VDPs did exactly what the dealer wanted them to do and viewed their inventory.

In this example, that means the dealer is paying $3.66 for their first party campaigns to connect their inventory with in market auto shoppers.  Meanwhile, dealers can make another calculation looking at specific third party partners like Cars.com.

In another example, if the dealer is paying $4,100 dollars per month with Cars.com and looking at the previous full month’s VDPs of 6,500, in this example, that’s roughly .63 cents per VDP.  Comparing these two cost per VDPs numbers, the dealer is spending a little less than 6 times more per VDP with first party marketing channels compared to the likes of Cars.com.

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Furthermore, with Cars.com’s audience influencing 36 percent of all vehicle sales in 2015² and seeing an average of 30 million visits³ each month of ready-to-buy in market auto shoppers, it’s a compelling case to continue investing with Cars.com versus moving money and putting that towards SEO or Google AdWords.

If dealers are actively considering moving money from third party ad spend with the likes of Cars.com or others, this is a great exercise to look at where their ROI is being placed to make sure the right audience is reached.  Why wouldn’t dealers want to be where quality in market auto shoppers go to connect with dealer inventory³ for .63 cents per VDP?  Add to that an average of 16 million⁴ of Cars.com’s monthly visits are from quality shoppers on mobile phones with 68 percent returning to Cars.com within 10 days to continue researching, it’s a convincing argument⁵.

Before firing lowest cost third party partners that connect vehicle inventory with this audience, perhaps they should identify the cost per VDP of all marketing channels and eliminate some of the highest costing media that have a less quality in market audience.

[1] Dealer Deployment of Google AdWords, PCG Research, August 2016
[2] Oracle Data Cloud, March 2016
[3] Cars.com Site Data, May 2016
[4] Cars.com internal data, May 2016
[5] Cars.com Behavioral Analytics on Mobile Study, April 2016

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