How Do You Measure Internet Lead ROI?

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By Josh Vajda

We recently con­ducted a sur­vey in which we asked Inter­net depart­ment per­son­nel to share some key met­rics. In one ques­tion, we asked: How much total gross does your Inter­net depart­ment gen­er­ate for every $1,000 spent on Inter­net leads from all sources?

The answers we received revealed that there is quite a large dis­par­ity between auto deal­ers’ return on invest­ment (ROI) on Inter­net spend­ing, as well as a sur­pris­ingly large per­cent­age that don’t even know their ROI. So I wanted to know: what should a deal­er­ship tar­get for a rea­son­able Inter­net mar­ket­ing ROI?

One of the experts we con­sulted for mea­sur­ing this met­ric was David Kain, Pres­i­dent of Kain Auto­mo­tive. He sug­gested that 5X ROI was the absolute min­i­mum that a deal­er­ship should strive for, and ide­ally Inter­net depart­ments should be see­ing 7X ROI on their Inter­net spend.

But how do you cal­cu­late your ROI? Basi­cally, ROI is what you get for what you spend. Here is a sim­ple for­mula: (Gross Profit – Mar­ket­ing Invest­ment) / Mar­ket­ing Invest­ment = ROI.

This for­mula rep­re­sents three steps.

1. Mar­ket­ing invest­ment should be sim­ple to fig­ure out as it is the total cost of a cam­paign. For instance, if you spend $1,000 per month on a Pay-Per-Click cam­paign, $1,000 per month on inde­pen­dent leads and $1,000 per month on a sub­scrip­tion site, then your total mar­ket­ing spend on Inter­net leads that month is $3,000. For the sake of sim­plic­ity don’t worry about includ­ing labor costs (for staff), web site main­te­nance costs, etc.

2. Gross profit is the next met­ric you’ll need to fig­ure. If you can pull the actual grosses on all Inter­net deals, that’s great. If not, take the num­ber of sales and mul­ti­ply it by your dealership’s aver­age front and back com­bined gross prof­its. So if $3,000 in mar­ket­ing spend deliv­ers 10 sales at an aver­age of $3000 com­bined gross, then your total Internet-related gross profit will be $30,000.

3. Next, you need to sub­tract the ini­tial mar­ket­ing invest­ment ($3,000) from your gross profit ($30,000) for a total of $27,000.

4. Divide that num­ber by your ini­tial mar­ket­ing invest­ment ($27,000/$3,000) and in this sce­nario you end up with 9X ROI, an excel­lent result.

Why is it impor­tant to know your ROI? Any time you spend money on any­thing, whether on Inter­net leads or a mar­ket­ing cam­paign, it is an invest­ment. Like any invest­ment, it should be mea­sured, mon­i­tored and com­pared to other invest­ments so you know where you should be spend­ing your money.

Josh Vajda is Direc­tor of Inside Sales at AutoUSA Inter­net Sales Solu­tions and can be reached at vajdaj@autousa.com.

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