New Study Reveals That Half of Auto Dealers Overspend on Marketing, With No Measurable Return On Investment
First data study focused on marketing ROI for auto dealerships finds that many dealers invest to the point of diminishing returns
Outsell, which offers the only AI-driven marketing automation platform for the automotive industry, announced that along with partners RXA and Vistadash it has completed the first data study focused completely on Marketing Return on Investment (ROMI) for U.S. auto dealerships.
Conducted in September and October 2018, the study spanned 300 dealerships, and looked at data on 420,000 customers, 3.5M customer interactions, and $72M in media spend. Outsell, RXA and Vistadash sought to measure whether auto dealers were allocating marketing spend across channels for optimal return. The study’s key finding: Half of dealers surveyed were overspending on at least one marketing channel – meaning they had invested to or past the point of diminishing returns.
Dealers struggle with measuring ROMI, and especially to attribute specific campaigns to a sale when there are always multiple touches. Outsell, RXA and Vistadash developed a methodology that enables them to calculate ROMI using the dealer’s Google Analytics and DMS data plus their self-reported media spend. This multi-touch attribution model optimizes gross profit by not wasting any money, not leaving any opportunities on the table, and finding the sweet spot for each place a dealer puts its money. 300 dealers provided these details for study analysis.
In addition to finding that half of dealers were overspending, the study found:
- Dealership size has an impact on ROMI, with smaller dealers seeing solid returns from paid media and referrals whereas larger dealers have the scale to see better performance from display and email.
- When it comes to conquest marketing, dealers need to go big or go home – if you can’t do it at scale, you shouldn’t do it at all as you’ll never achieve positive ROMI.
- About half of dealers are underspending on social media marketing.
- One out of every three dealers is overspending on Search-Engine Marketing (SEM). Most of that overspend is in branded search – paying for clicks for your dealership name. While this tactic works well for smaller dealers, it’s unnecessary for large stores who are already well known and get good results from organic search.
- While dealers have often believed they need to spend more on marketing in a large market, the study found that market size does not impact ROMI.
- Often, dealers could optimize their investments simply by shifting budget around – they don’t necessarily need to invest more.
“As John Wanamaker famously said, ‘Half the money I spend on advertising is wasted; the trouble is, I don’t know which half,’” said Mike Wethington, Founder and CEO of Outsell. “We set out to try to measure that, to set benchmarks for the industry and eventually to help any dealer calculate their own marketing ROI. The methodology we developed for this study could be applied at the dealer level to help them better understand how they can shift their marketing budget around for better returns.”
“Multi-touch attribution is a problem that’s been vexing auto marketers since the introduction of the Model T,” said Brian Pasch, founder of PCG Companies and a well-known advisor to auto dealers. “Outsell, RXA and Vistadash have cracked the code with this methodology – this data provides valuable insights that every auto marketer should take a look at.”
James Kurtenbach, Marketing Director at Schomp Automotive, was one of four representatives to the Dealer Advisory Board for the Outsell research project. Kurtenbach had the opportunity to dive into the data for one of the company’s dealerships, Schomp BMW. “This data is gold for an auto marketer,” said Kurtenbach. “We were able to see where our marketing dollars are going the furthest, and where we need to reconsider investments. By re-allocating a portion of our existing spend – and not even adding any spend – we were able to generate a 17 percent increase in gross profit.”