Listening to or reading dealership ads makes it sound like an easy process. Talk up your dealership, use some sales buzzwords and send your message far and wide. While it may sound simple, it’s not, particularly if you want to spend your ad dollars effectively. You need to have a viable plan before you can execute your ad program. You need a strategy and, mostly importantly, a budget. Following is a step-by-step guide to setting up an auto dealership advertising budget. At the end of the article, there is a good template with a column for dollar amounts that you can use as a framework for planning your advertising program and budget.
How Much Should I Spend? Remember “The $350 Plan”
The best place to start strategizing is to think about how much you want to spend. This is easier said than done. Before you can even outline the parameters of the ballpark, you need to think about what you’re trying to accomplish. Following is a good formula: first, figure out how many cars you want to sell and multiply that by $350 per car. For example, if you’re hoping to sell 100 cars next month, your budget should be about $35,000. If you’re hoping to sell 300 cars, you may need to spend $105,000 a month to reach that goal.
Of course, this guidance isn’t carved in stone. The formula can vary depending on a variety of factors, including the location of your store in relation to a media market. Example: If your dealership is located between two designated market areas (DMAs), you may need to spend a little more per car ($550 is a good estimate) because you’ll need to buy in two media markets. This means you’ll have increased cost for your paid search (in comparison with purchasing in only one market) because you’ll need to advertise with more TV providers, radio stations, newspapers, etc. The best practice is to aim for the $350 per car plan but be flexible based on outside factors.
Get as Much Off the Budget as Possible
You don’t want to waste media dollars by allocating money for things that aren’t really advertising. For example, your “schedule service tool,” your “credit app tool” or your internet service provider costs should not be listed in your advertising budget. Those items belong in a different account on your financial statement. You should also separate out charitable donations. Your advertising budget should include only your web site, digital advertising, third-party sites, traditional advertising, merchandising, production and such.
Splitting Up the Pie
Following is a list of categories (sometimes known as marketing channels) you can allocate your budget among:
- Web management and search engine optimization (SEO);
- Search engine marketing (SEM)/paid search;
- Social media;
- Custom digital campaigns;
- Lead providers/third-party sites;
- Direct mail;
- Print advertising;
- Service marketing
- Outdoor (billboards, etc.);
- Radio; and
The general new rule of thumb is that you should be spending 25 percent of your total advertising budget on digital. This means that with a $100,000 advertising budget, you should be spending at least $25,000 on web management, search engine marketing, search engine optimization, social media and custom digital categories.
Laying in the Fixed Expenses
The next part of the advertising budget is laying in your fixed expenses. Add up what you need to spend money on every month for your core marketing and record that amount. These fixed expenses will mostly be programs that have contracts such as your web site, Auto Trader, search engine marketing budget, etc. Once you lay those in, you’ll see what you have left for discretionary ad spending money. This will be the money you use to come up with your advertising strategy.
Allocating What’s Left
You may need some help allocating your discretionary advertising dollars. It’s too easy to waste money on poor choices in advertising. Once you have your fixed expenses locked in and you’ve divided up your digital dollars, it’s time to figure out what else you’re going to do in terms of advertising your dealership. Whether it turns out to be direct mail, radio, television, custom digital or something entirely different, it’s important to remember one thing: every place is different. Just because something works for a Ford store in Chicago doesn’t mean it’s going to be an effective strategy for a Ford store in a small town in Massachusetts. So much of the strategy boils down to the market, including what type of area your store is located in, the demographics of the region, the media landscape and the shopping and buying habits of your consumers.
It’s recommended that you work with an experienced in-house marketing person or an advertising agency to help you formulate your most effective strategy.
Following is a budget template that shows how the categories above are listed out. For the sake of example, the dollar amounts are (obviously) generic. Click here to download (PDF): Marketing Budget Template