||Auto Dealers Start Shifting Ad Money to Internet
Duncan Scarry is owner of Moore & Scarry Advertising in Fort Meyers, Florida. It is a digital marketing agency formed in 2002. The firm specializes in automotive and has represented more than 300 dealers since its inception. Scarry spoke with eMarketer's Lauren McKay about the shift to digital marketing among automotive dealers.
eMarketer: How and to what extent have auto dealerships been increasing their digital marketing budgets or reallocating them from traditional to digital tactics?
Duncan Scarry: There have been major changes. In the past two to three years, we have seen our dealerships increase the digital portion of their advertising budget from 12% to 18% to 28% to 33%. In the past year there's been a huge shift in the amount of money going to digital.
While we think it should be a bigger portion of their budgets, many dealers still need some convincing before they'll spend money in online channels. It's difficult for them to feel confident about digital because they're comfortable seeing an ad on television or in a newspaper.
The vast majority of budget that auto dealers are putting toward digital is coming from print or other types of traditional display advertising.
But once we start educating them on waste rates and media impressions, they start to come around. The vast majority of budget that auto dealers are putting toward digital is coming from print or other types of traditional display advertising.
eMarketer: What digital tactics are car dealers embracing the most?
Scarry: The digital programs usually include development of their own websites, packages from third-party sites such as AutoTrader and Cars.com, and search engine marketing -- which has quickly become one of the biggest elements of digital spend. Search usually comprises one-third to half of a dealer's digital marketing budget. We have dealers that do upwards of $25,000 a month in search engine marketing.
Since marketing budgets are tight, we usually recommend that our dealers take online media one step at a time. Online display ads can run five to 10 times the cost-per-visit in comparison to search engine marketing, so we encourage our dealers to explore maximizing their search marketing budgets before they do anything in display.
eMarketer: In what ways has online search become integral to consumers' automotive purchase cycle?
Scarry: Between 74% and 90% of people who purchase a car today look at a dealership's website before they purchase at that dealership, and most of them find that website through search. From tracking 200 dealers across the country, we've seen that roughly 70% of people who visit a dealership website get there from search and close to 20% of dealer website visitors get there from search engine marketing.
eMarketer: How has the typical buying cycle for cars changed in the past several years?
Scarry: Consumers are increasing the time they shop for a car from what used to be one to two weeks to two weeks to a month. Online search ads are the third most influential medium used in the purchase process next to television and print.
Search ads trail print by 1 percentage point, which suggests that in due time, online search will be the second most influential medium with regard to vehicle purchases. Over the course of 2006 to 2010, the use of search engines has increased by about 4,000%. When you also think about social networking and consumers' maturity on the Internet, it's even clearer that the way people shop for cars has changed exponentially in the past three to four years.
As opposed to driving from dealership to dealership to see and research different vehicles, today 75% of people are doing their research online. They're finding the dealership that they want to do business with, and they're researching what vehicles those dealerships sell. It presents dealerships with the opportunity to become more influential by providing consumers with more online research tools.
eMarketer: Do you see social media playing a larger role in how consumers are researching and buying cars?
Scarry: Right now I think social media plays a negligible role in auto sales, and I think reputation management is going to be more influential sooner than social is.
If you look at what Google's doing with its Places product, they are integrating company reviews into search engine results. This is advantageous to consumers because they are able to see reviews from people like them -- and then they can get recommendations based on their preferences.
It's helpful to a business in that it can claim its listings, link to its homepage and establish a presence. The business can't, however, control what reviews consumers are going to leave about them. It then becomes more important for the business to focus on boosting its reputation. Google Places is social because it's based on user generated content, but really it's about reputation management. We encourage our dealers to focus more on reputation management in that regard than on social media.
eMarketer: Have you seen an uptake in online video advertisements among auto dealers?
Scarry: Online video is great. The more content you can create, the better. The difficulty -- we call it the "celery and the cheeseburger theory" -- is that dealers hear they should do more video, but their site isn't properly indexed, or search optimized. They're not spending money on search marketing, so when they put a video on a poorly optimized, poorly indexed, poorly marketed site it really makes no difference. If you put celery, which is healthy, on a cheeseburger, it doesn't improve your diet.
It's important that dealerships focus on the items that are the most influential and effective on their site first, and then they move on to things like video, blogging and social after they've established a well-developed core site and search strategy.
eMarketer: Any examples in which you've seen dealerships increase sales because of their digital marketing tactics?
Scarry: For many dealerships, we've replaced large chunks of direct mail spending with email marketing, which they have tracked to increased sales. They've found email to be equally effective in reaching consumers and significantly less expensive. Our dealership clients attribute 10% of their sales to email marketing.
I see the future of auto advertising hinging more on inventory than on offers. The type of inventory you have, how you price that inventory, and how you get it out to the marketplace is probably going to be one of the most important things that you can do as a dealership.
Consumers have as much if not more information than dealers. For the dealer, the differentiation will become more about managing the inventory than trying to differentiate the dealership. Online tools such as Haystack orient search engine marketing around a dealer's actual inventory. This helps connect consumers to cars that dealers actually have on the lots, rather than ones that search engines estimate that dealerships have. Our dealers that have gotten their inventory mix right and brought it online have seen tremendous success.
(Source: eMarketer, 02/18/11)