The growing popularity of search engines is making sites like Yahoo and Google essential fixtures in the online car buying process. Today, 89 percent of online new car buyers use a search engine at some point in their purchase.
By contrast, traditional advertising’s role in automotive marketing continues to shrink. At most, only 12 percent of new car buyers say traditional media played a role in their final decision - compare that to 27 percent who say third party Web sites played a role:
Media Importance in Final Vehicle Selection*
Third Party Web sites
Source: J.D. Power & Associates, September 2005 New Autoshopper.com StudySM.
Meanwhile, the Web’s reach continues to grow at a fever-pitch. Cisco Systems estimates that 60 million people gain access to the Internet every six months. Emails now out-number regular mail by ten to one. Conversely, even newspaper advertising - the most effective traditional media - is experiencing a dive in visibility. Dealers need to ask themselves if they still want to spend top dollar on lower numbers.
Average weekday circulation for the six months ending 9/30/05
Change from 2004
- 0.6 percent
The New York Times
The Washington Post
Los Angeles Times
San Francisco Chronicle
Source: Audit Bureau of Circulations.
According to Jupiter Media Metrix, the Internet will generate approximately 5.7 million new car sales in 2006. This estimate of actual sales far outnumbers even the total circulation of the nation’s top three newspapers. Internet placement through search engine marketing has the ability to outdraw even the most prime television time-slots. And, SEM is exponentially more affordable than a Super Bowl commercial - leaving dealers enough capital to optimize their Internet marketing mix.
SEM’s Role in the Internet Marketing Mix
SEM is a complementary element in the overall Internet marketing mix. Each component of this mix, including third party leads and dealer site leads, makes the others more efficient and more successful.
Despite the prevalence of search engines, 73 percent of new car buyers still go directly to third party auto sites when shopping for a vehicle. Top third party auto sites effectively use search engine marketing to attract a broad national audience. Dealers, on the other hand, can best employ SEM to maximize local visibility and gain competitive advantage in their regional markets. Dealers who use SEM for their own Web sites and capitalize on the SEM efforts of third party sites will have the advantage. The key is getting as many high quality leads as possible, wherever they originate.
Where the Top 100 e-Dealers Get Their Leads
Third Party Sites
Source: Ward's Dealers Business, April 2005.
While dealers can generate high quality leads at their own sites, they’ll miss a huge part of the market by ignoring third party leads. Going by the statistics above, if a dealer gets a total of 900 leads per month, roughly 477 of them will be from an independent auto site.
During traditional advertising’s golden age, auto dealers used all the major channels to ensure visibility - print, television, and radio. This idea of holistic marketing maximized their visibility with the overall media audience.
Fast forward to the current era of the Internet. In order to ensure visibility with the staggering number of online consumers, a dealer is wise to have a holistic presence as well - using search engine marketing and a partnership with a top third party lead provider in order to connect with as many online buyers as possible.
SEM’s cost structure is a pay for performance play - something that is new and unique in advertising.
Dealers do not pay for SEM unless the consumer takes a pre-specified action, such as clicking on the dealer’s ad. These actions can be tracked so that dealers not only know if their ad is visible; they also know if buyers are acting on it.
Traditional media gives no such assurance. Even if a dealer’s ad dollars are spent on a full page print ad or a primetime TV spot, there is no guarantee of its visibility. Nor is there any reflection of selective viewing in the overall cost. Traditional campaign costs remain the same whether they inspire consumer response or not.
Unfortunately, the average dealership is still relying on traditional media to connect with new vehicle buyers. According to NADA, the average dealership spent $493 to retail a new vehicle in 2004. Automotive News puts that figure higher at $628 per vehicle. These figures are unsettling – given traditional advertising’s lack of accountability. By contrast, Internet marketing, such as SEM, offers detailed statistics regarding performance, cost, and results – at a fraction of the cost:
If a dealer Web site converts 3 percent of visitors into e-mail leads and the typical store needs ten leads to produce one sale, the dealer needs 333 Web site visitors to sell one car. At the current average SEM cost per click of $0.71, a dealer can sell one car at a marketing cost of $236.43.
Compared to the average traditional marketing cost of $493, third party sales leads, which average a cost per sale of $200, and dealer site leads gleaned from SEM can increase the overall profit of a sale by $250 or more. These real numbers translate to a real opportunity.
At a time when newspaper circulation is declining and traditional advertising costs are increasing, search engines present a new marketing venue that provides immediate results and ongoing media accountability. The most progressive dealers are now demanding trackable, pay-for-performance advertising tools using SEM and third party Internet leads, and shifting ad dollars away from traditional media.
1 J.D. Power & Associates, September 2005 New Autoshopper.com StudySM.