Advertising – many general managers are reluctant to spend big bucks on it. Others don’t know where to start when it comes to creating an ad strategy. While advertising might seem like a waste of time and money, it’s become fundamental to successful marketing, especially online.
As the saying goes, “you have to spend money to make money,” and if you’re unwilling to spend money on online ads, you’re putting your business at risk. Ad spend is a powerful tool. The question is, how much should you spend on advertising, and where should you focus your attention?
What is Ad Spend and How Does it Work?
Ad spend is the amount of money your business spends on advertising campaigns, from beginning to end. When you set up a digital ad campaign, you set an ad budget which is the amount of money you’re willing to spend for that ad campaign. Your total ad budget is then broken down into a CPM (cost-per-1,000 impressions). CPMs can range from as low as $4 to as high as $500, depending on the budget you set.
There are different types of ad spend depending on the medium used. There are traditional means of advertising, like radio, newspaper, and flyers. Many dealers are familiar with these traditional marketing methods.
Then there are new types of advertising through digital media like videos, social media campaigns, shopping ads, search ads, display ads, PPC ads, and much more. In fact, Google Ads is the most popular way to advertise for digital retailers.
But how exactly does ad spend online work? Return On Ad Spend (ROAS) is the most important metric for any company. ROAS is your total conversion value (revenue you earn from a customer/purchase) divided by your advertising costs.
Let’s look at an example. If your company spends $20 on an ad to sell one unit of a product that’s priced at $200, you get a ROAS of 10X. For each dollar you spend on advertising, you get about $10 back.
How Can Ad Spend Benefit The Parts Department?
General managers everywhere are racking their brains, trying to find ways to sell more auto parts. Quality ads online are the answer. Promoting your parts web store with the right ad strategy and ad spend can help take your parts department to the next level.
When you spend money on quality ads online, you put your parts website in front of more potential customers. Limiting yourself to the local customer market makes it harder for you to gain and keep new business. Branching out to the regional and national level with online ads increases your potential customer base. More customers equal more sales, and with the right ad budget, you can get a higher ROAS.
In-House Marketing or Third-Party Agency: Which is Better?
Setting up digital ad campaigns can be challenging for first-time marketers. If your dealership isn’t familiar with these digital tools and needs a helping hand, a third-party marketing agency could be the right fit for you.
Third-party marketing agencies give dealerships a few key benefits:
They do the heavy lifting for you!
Get ad campaigns set up easily without lifting a finger. A marketing agency will help set up, budget, and target the right audiences for you.
You get custom marketing strategies.
Get ad campaigns that meet your unique needs. Help establish your brand voice across the right platforms to the right customers.
Receive consistent reporting.
Get insights into how your ads are performing with consistent metric reports and see where changes can be made to improve them.
A good third-party marketing agency should be able to integrate with your digital marketing needs easily and streamline complicated processes for you.
Spend $2K a Month on Ads For the Best Results
Part of the RevolutionParts mission is to help dealers determine the best strategy for their parts business. We’ve taken a deep dive into our customers’ marketing strategies to find the best tips and tricks to help them. This is the one thing we saw that helped dealerships the most.
Parts departments that spent around $2K monthly on ad spending saw an average ROAS of 8.3X. With a range that wide, it’s clear that $2K a month was the sweet spot for many dealers’ ad spend.
However, be sure to speak with your marketing team to determine what amount you should spend for the best results. Parts departments that followed recommendations put forth by PR’s marketing team were the #1 key behind maximizing ROAS.
Just look at the success these dealers have had!
“Our rep makes recommendations for the advertising numbers, and once we make the change, our numbers jump quite a bit,” – Jessica Rosales of Honda of Jonesboro.
“RevolutionParts helped me a lot, and my numbers skyrocketed. I went from a hundred [thousand] to 180 [thousand] because you have somebody there that is working your numbers. The challenge is to keep those numbers going up.” – Cesar Aranda of Clark Knapp Honda.
Not Convinced? We Can Help!
If you’re already using RevolutionParts, but haven’t taken advantage of RP’s Marketing Services, speak to your account manager about how you can get set up now. Our marketing experts can help you find that magic ad spend number and get your parts department on the road to maximizing revenue.
