What dealer, when facing their annual budget, doesn’t look at the marketing line and wonder if they’re spending too much. Or even wonder if it’s not enough?
No business succeeds or grows without marketing. Some amount of spend is necessary. Without it, you’d be reliant on repeat customers, word of mouth, or just capturing prospects who are driving by.
However, without proper strategy and oversight, some dealerships could spend all their profit on advertising.
The ideal scenario is to spend enough to be effective, place your dollars in the right channels to meet growth targets.
So where do you start? First, get your bearings with a point of reference.
Let’s take a look at how much do most automotive dealerships spend on marketing each year.
Don’t feel like reading? Listen to the podcast version of this article!
Marketing Spend in the Automotive Industry
Marketing spending depends on the industry. American marketing behemoths like Coca-Cola spend 10% of total revenue on marketing ($4 billion in 2023), and Procter & Gamble also plunks down more than $4 billion annually to support brands like Tide, Crest and Downy.
In the automotive industry, Ford Motor Company spent $1.4 billion in 2022 (down from a high of $2.68 billion in 2015). And GM spent $3.25 billion the same year.
Let’s narrow it down to more reasonable budgets. A recent survey from Statista indicated that in 2022, the average spend per auto dealer was more than $500,000. But even that number should be taken with a grain of salt. This is an average, and big franchise dealerships with big spends are mixed with far more numerous independents.
The important takeaway from Statista’s data is that digital marketing is the top channel for automotive dealers’ marketing spend. In fact: dealers spend 10 times more on digital marketing than any other kind of advertising.
Statista’s findings show that more than 5 percent of all U.S. digital advertising revenue came from the automotive industry in 2022. A year before, online display ads for autos reached around 1.6 billion U.S. dollars. That’s 135 percent growth over the prior year.
And for car dealerships, digital advertising comprises 65 percent of total marketing dollars.
So, what does that mean for the majority of dealers? Where should you be placing your budget for maximum return?
Recommended Spend Levels
Whether you are a large franchise dealership or a smaller independent organization, here are some rules of thumb that we use at AutoSweet as guidance for our partners.
Of course, our recommendations always depend on a number of factors. Some of the variables we consider when recommending spend to our partners:
- Amount of inventory – The more inventory you have, the bigger the needed budget to support a healthy sales pipeline.
- Competition – Keep in mind the field you’re playing on… if you have numerous same-make dealerships in close proximity, chances are you’ll need to spend more to have the desired effect.
- Demographics – Do you sell what’s popular in your area? For example, trucks aren’t as likely to sell in populous areas like downtown in major cities.
Dealerships should look for a cost per unit sold on any marketing channel at around $250 per unit. So if you are selling 50 vehicles per month, you should plan to spend around $12,500 per month on marketing. This is where most of our customers set their budgets. It’s a conservative number, coming in below NADA and NIADA recommendations.
If you set your digital marketing mix to 65% of your total marketing budget (the average cited by Statista, as mentioned above), you will arrive at a good estimate of what your total budget should be.
Franchise Dealers – Recommended Monthly Spend
With these variables in mind, our general rule of thumb for small franchise dealers is:
*dependent on variables, basic guideline only
Independent Dealerships – Recommended Monthly Spend
Independent dealerships are a different animal, and can generally count on lower budgets as compared to a larger franchise.
However, you still need to achieve critical mass in your marketing spend because you aren’t trading on the brand identity of a large franchise name.
With that in mind, our general recommended monthly spend is:
*dependent on variables, basic guideline only
Set Strategic Goals
Regardless of spend, your digital marketing efforts should be goal-focused. Goals include:
- Driving quality website traffic
- Converting traffic to low-funnel leads
- Ensuring you have a solution that can verify offline sales by matching back to your online advertising.
A partner with a strong inventory marketing solution like AutoSweet can help you develop a digital marketing campaign that meets these goals while planning an affordable and effective marketing budget.
Putting your budget towards Dynamic Search Ads on Google will help drive traffic to your site.
You can also use Facebook and Instagram to capture shoppers currently in the market for a vehicle and send them right to your site.
You can use the same tools (Google, Facebook) to then re-target shoppers with messaging that keeps your inventory top of mind on their path to purchase, advancing them through the marketing funnel.
And with a DMS integration, you can see which shoppers were served ads, how they interacted with the ad, and hashed sales data in real-time, giving you the data to prove the ROI on your ad spend.
Invest in Your Growth
Determining the right marketing budget for your dealership requires a strategic and informed approach. Comparing your marketing spend to other dealerships can be a helpful point of reference, but setting your budget to meet your goals is critical.
Marketing isn’t just an expense, it’s an investment in the growth and success of your business. By leveraging the power of digital channels, adapting to market dynamics, and staying true to your brand, you’ll not only reach your target audience but also create lasting connections that drive sustained growth.
Want to learn more? Download AutoSweet’s free playbook, Digital Marketing For Dealerships, and learn how to invest your ad spend the right way for more leads and maximum return!
