Search Budget: How Much Is Enough?

This question is usually one of the highest concerns when talking to clients. The answer is not as simple as you would like to think. Here are a four metrics to determine what a reasonable budget might be:

1. Goals & Objectives of the Campaign.

2. Your overall online advertising budget available.

3. How competitive your market and vehicle makes are.

4. Your ability to track and measure performance.

My recommendation is to first determine what your goals are for the campaign. A few questions to pose might be: Is the goal to get more leads or more phone calls? Do you want to push used or new vehicles on your Web site? Are you looking to get more calls to service? Do you want to rely more heavily on your Web site as your main lead source?

When considering overall online budget, the rule of thumb seems to be a 10 percent allocation of the total advertising budget. This is the general rule across the advertising industry. However, I know many dealers whose online is equal to or above their traditional advertising, and this isn’t a bad thing. It is all about what works for your dealership. The real measure is finding the right balance. No one said it would be easy. A few years ago, it was tough to find the sweet spot between radio, TV and newspapers. Now the balance is between online and offline media.

The best way determine the cost of a market is to do your own search for some key words. Try your make and city for starters. If there are a lot of dealers or third party lead providers at the top of the page, the market will be more expensive. Online the automotive category is generally on the ‘top five most expensive terms’ list every time. Why? People go online to get their information. You can also expect the vehicle make to be more expensive if it is doing well offline.

Once you have established goals and are clearly able to track and measure them (analytics or conversion tracking), then I recommend weighing your available budget against the Cost-Per-Click (CPC) pricing for your industry. If you are in a very competitive market, chances are the keyword bidding is escalated, and CPC prices or bids will be high. In a less competitive market or with keywords without much competition, a much lower budget is required.

Do not despair if your advertising budget will not initially allow total coverage in the engines. You can still actively participate in CPC advertising and achieve positive ROI, sales and leads. The difference here is that you will not achieve full or 100 percent exposure on all of your keywords within the campaign. Your ads will be dispersed throughout the day as evenly as the Search Engines can space them out, based upon what you’re willing to spend. Under this advertising model, it is very likely that you will try to search for your words and still not see your site. It is important to know that since it is a keyword driven program, you are still appearing to people searching for you, who are targeted and likely to convert. If it works and becomes ROI positive for you, there is more traffic to direct to your site.

Realistically, there is still a learning curve that you have to endure. When Web sites first hit the market everyone was trying to figure out what style and look to choose. Then came the evolution of sites that focused on conversion of visitors and measurement of those conversions. The same is true in online advertising, but a lot more factors are involved. The search market can go up or down for your make. Your site also plays a big role in whether Web surfers are converted to buyers. A poorly designed site with no content and incomplete inventory descriptions isn’t going to get you more conversions.