By Marianne Tappy,Senior Vice President of Digital Strategy, J.D. Power
Digital marketing has transformed auto retailing. As online advertising evolves, many dealers struggle to keep up with the changes.
Car shoppers are much less loyal than before, more time-sensitive than before and are accustomed to nearly instant gratification. In response, dealers are spending more than ever on search engine marketing and social media advertising—an average of more than $160,000 each year per dealer.
With profit margins continuing to shrink, dealers need to be smarter than ever about how they allocate their online marketing dollars.
Because a high percentage of shoppers start their journey on the internet, a critical component for dealers is how they appear in search results. The effectiveness of a dealer’s digital presence in search has profound effects on the business, so it's important for dealers to ensure that their chosen digital advertising partner is accountable.
Optimizing SEO
Arriving at the appropriate monthly budget and how it should be allocated across channels like search or video should be derived from data analysis rather than reading tea leaves or relying on gut feel. For example, in certain markets, video outperforms search, so dealers need to be equipped with data to make decisions on where the money goes.
Beyond optimizing their search presence, dealers should ensure that the inventory being promoted by their digital advertising aligns with what is actually available on their lot. It's also vital to confirm that the advertising promotes the current incentives and that the messaging is relevant and up to date.
Dealers should focus on several key areas:
By focusing on these aspects, dealers can enhance their visibility and maximize the effectiveness of their ad spend. Using data to make informed decisions ensures their digital presence is optimized to reach and convert online consumers. Leveraging various channels such as video, retargeting, display ads and social media can be crucial, depending on market demographics.
While search will always remain a significant focus, diversifying budget allocations to include these other channels can lead to better results. This is especially true where dealers may not be investing in alternate channels at all.
Working with the Right Partner
The relationship between a dealer and its digital advertising provider typically starts by aligning the advertising strategies with the dealer's objectives. This alignment can go astray over time when the marketing partner and the dealer fail to make the necessary adjustments as market conditions change. Shifting consumer demand and new incentives can alter the landscape overnight. While the initial approach might be on the money, keeping the strategies properly targeted is an ongoing challenge.
In addition to incentives, other factors such as inventory levels, product features and consumer preferences require constant attention and adjustment. For instance, the prominence of electric vehicles (EVs) and the specific features that resonate in different markets should be highlighted based on local activity.
Additionally, competitive comparisons and the promotion of new products, which often generate significant consumer interest, are crucial elements to consider. Continuing adjustments are necessary to ensure that messaging remains relevant and aligned with market dynamics.
Gauging Effectiveness
To determine if a digital ad is working, a dealer must examine whether the shopper engaged with it and followed a path that led to a purchase. This involves tracking if the shopper clicked on the ad, visited the website, stayed on the site and explored relevant content.
By analyzing this behavior, including comparing cross-brand interactions where possible, it’s possible to identify whether the ad successfully influenced the consumer's decision. If the shopper ultimately purchased a competitor's product, it can reveal potential shortcomings in the ad's messaging.
And by analyzing where a shopper dropped off in the purchase journey, one can infer what might have gone wrong. While it's challenging to track the entire path on a competitor's side, one can identify where the shopper disengaged and ultimately chose a different brand.
Using broader insights that go across brands, like those from J.D. Power, a dealer can understand what is happening in the market with specific models at that time. This can help explain why the shopper switched and where the original campaign may have fallen short.
Fighting Data Overload
Dealers often struggle with managing the overwhelming amount of digital data available to them. Typically, they lack the time and resources to analyze it effectively. This can lead to missed insights and poor decision-making.
The right data and analytics company can help by surfacing key insights from the data and ensuring that dealers have access to certified vendors. Additionally, the right data & analytics company would hold these vendors accountable by comparing their performance and helping dealers pivot to better-suited partners, when necessary.
Without revealing proprietary information, we can identify areas where a dealer is underperforming or excelling. We can also identify how a dealer measures up to others with similar demographics and store sizes and share best practices from top-performing sales strategies.
A comprehensive, customized approach to the optimization of digital products and services must focus on these key areas:
Overall, the goal is for dealers to have an effective digital storefront that is regularly updated and performs well. The happy result: better sales performance.
Marianne Tappy is Senior Vice President of Digital Strategy at J.D. Power.