More clicks, lower cost
Dealers refine Google paid-search strategy, slash online marketing fees
Prices for Google paid search -- a powerful digital marketing tool for auto dealers -- have moderated in recent months after a big run-up in the previous two years, dealers say.
Part of the reason is that dealerships have become smarter in choosing different, lower-cost key word combinations that drive traffic, and staying away from words and phrases that don't work. Asbury Automotive Inc., the nation's seventh-largest dealership group, has cut Google paid-search costs in recent months by choosing less expensive words and phrases that still attract shoppers, said Ryun Pavlicek, Asbury director of retail strategy.
Paid search works like this: Dealers bid for key ad words. When a shopper chooses those key words in a search, the dealer's ad appears in a shaded box on Google search results. If a shopper clicks on the ad, the dealer pays Google the price of that winning bid.
Asbury, which has 80 dealerships, pays an average of $1.47 nationally whenever a shopper clicks on a Google ad that carries the shopper to an Asbury dealership Web site, Pavlicek says. That's down from $2.47 per click 14 months ago.
Asbury, a relative latecomer to Google advertising, got serious about advertising on Google and other search engines 18 months ago when it hired a third-party vendor, Haystak Digital Marketing, to handle the bulk of that chore, Pavlicek said.
"Our costs have trended down as we've gotten better at" ad words, he said.
Asbury's experience is being repeated across the industry. Dealers big and small have discovered the power of search engines to drive shoppers to dealer Web sites, a crucial step in what typically is a months-long buying process.
Once a shopper enters a dealer Web site, he or she is enticed by vehicle specials, engaged by live chat and encouraged to leave contact information, or a lead, that salespeople can follow.
As the world's dominant search engine, Google is a key resource to dealers. Two of every three visitors to dealer Web sites go there directly after doing a Google search for vehicles or dealers.
Only in the past two to three years have dealers and auto manufacturers pushed heavily into paid search as they have shifted money to online marketing from traditional media such as print, TV and radio.
That paid-search demand initially caused a spike in prices. But that has calmed down as dealers have learned to be better buyers of words, dealers say. With a greater variety of words and word combinations seen as desirable options, supply and demand dictates that the price of individual words and phrases goes down.
Dealers, factories and third-party lead generators fight for visibility at the top of a Google search page by bidding for popular vehicle key words and phrases such as "2012 Ford Mustang Chicago" or "Toyota Camry Columbus."
Paid search differs markedly from banner advertising. Banner ads typically are purchased upfront for posting on Web sites. Paid search appears in shaded boxes on Google and other search engines above and to the right side of free search results, also called organic search. Google calls its key words and phrases AdWords.
$20,000 per month
Mac DeLaup, president and managing partner of John Eagle Honda of Houston, said his store is spending $20,000 per month for paid search advertising, 10 times the amount of three years ago.
As the store has learned through trial and error to buy only the words and phrases that best drive traffic, the dealership's average cost per click over that time has fallen from about $4 to half that today, DeLaup said. The store is part of the John Eagle Dealerships of Dallas.
DeLaup said that Jim Flint, the Internet marketing director of John Eagle Dealerships, has become skilled enough at ad word buying that Flint has started a separate consulting company known as Local Search Group.
Asbury has moved budget to pay-per-click because it gets results, Pavlicek said.
Since 2010, Asbury, of suburban Atlanta, has shifted from deploying 20 percent of its corporate advertising budget to 50 percent, Pavlicek said. A good chunk of the increase has gone into paid search, he said. "Everybody is dialing it up," Pavlicek said of search-engine spending.
In March alone, paid search resulted in 66,000 unique visitors to Asbury store Web sites, putting Asbury salespeople in a position to convert those visits to vehicle sales, he said.
Those 66,000 visits came from the nearly 2 million vehicle shoppers who saw Asbury ads on Google and other search engines. The 66,000 clicked on the ad they saw, generating a click-through rate of 3.3 percent -- within the 3 to 4 percent rate that Asbury expects, Pavlicek said.
Competition from factories
Not all dealers are seeing prices ease, especially for popular key words that are the subject of voracious bidding by manufacturers.
An e-commerce director for a Midwest dealership group said he has seen popular phrases for the models and brands the group sells jump in price from $2.50 per click two years ago to $9 in some cases.
Obvious phrases that include make, model, year and location command top dollar because the factories are buying heavily into those terms, said the source, who asked not to be named. The source recommended buying longer variations that might, for example, include engine size or special editions as a less-expensive alternative.
"It's getting crowded at the top of the funnel," the source said. "The factories have been buying in the past year." In auto-marketing lingo, the funnel is the route that shoppers take to go from casual researcher to prime lead ready to purchase.
General Motors spokesman Tom Henderson said GM has increased its budget for local search in the past several months, though he would not discuss specific spending amounts. "We have to be where the customers are," Henderson said.
Google is close-mouthed about how paid search has fared in automotive retail.
Across all industries, though, the average cost-per-click at Google fell 12 percent in the first quarter of 2012 compared with the same period in 2011, according to Google's public financial filings.
Pavlicek said vendors can be critical to results because they have the time and expertise to identify the best-performing key phrases and measure how many visitors the strategy is driving to adjust words and spending on the fly.
Asbury also has improved the content on its store Web sites, which helps to fetch buying discounts from Google.
Said Pavlicek: "We're seeing our Web site traffic build every month."
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