Search engine marketing - “SEM” - is a new buzz term in the auto industry, and it’s one that dealers should pay attention to.  If done well, SEM provides an extremely efficient and cost-effective way for dealers to acquire new customers. In addition, as with third party sales leads, you can measure the performance of your SEM program, and make adjustments to maximize your ROI.  This is something that is much harder to do with radio, TV, and print advertising. Customer acquisition costs with SEM are also comparable to third party leads, in the range of $150 - $250 per vehicle sold; which is a far cry from the cost of traditional advertising, which averages around $550 per vehicle sold.

As the number of online vehicle consumers continues to grow, so does their use of search engines. According to J.D. Power and Associates’ 2005 New Auto Shopper Survey, 89% of online vehicle shoppers used a search engine during their buying process. And, as Dennis Galbraith, senior director of Internet studies and marketing solutions at J.D. Power, says, “Dealer ad dollars should move as consumers do.” Right now, the fastest growing area in dealers’ online ad spends is in “paid listings” - search engine marketing. According to industry data, this number is expected to reach $465M by 2007, up from $6.2M in 2003 and $51M in 2004.

Top automotive sites employ SEM to get maximum exposure in search results. But dealers can use SEM to get the most relevant exposure to local customers.

SEO or SEM? Common Terms Used in Search Engine Marketing

Since SEM is relatively new, here’s a list of terms to help breakdown the buzz:

• Search Engine Optimization (SEO) – SEO is a process designed to attract search engine “spiders” to a website.  Spiders “crawl” the Web to match consumers’ search terms with relevant content.  SEO increases the odds your site will get high rankings in “organic” search results, which are free; as opposed to paid advertisements.  SEO also incorporates keywords popular with consumers into your website copy, making it more search engine friendly.  Your website provider should supply this service to you.

• Search Engine Marketing (SEM) – SEM is a “catch all” term that includes the different techniques used to get your website optimal placement in search engine results.  SEM includes search engine optimization, paid placement, paid call, contextual advertising, etc.

• Keywords – Keywords are words and phrases used to find relevant websites.  The goal of search engine marketers is to match their advertisements with popular keywords used by potential customers.

• “Organic” Search Results (Algorithmic Results or Natural Results) – Organic search results are ads and website links returned by a search engine based on the relevancy of the search query to various websites.  If you search for something with Google, the results you get in the middle of the page are the “organic” listings; while those at the very top and to the right are paid advertisements.

• Paid Listings (Paid Placement, Sponsored Links, or Pay per Click Advertising) – Advertisers pay to have their ads displayed at the top, or on the right side, of the free listings, or "organic" search results. Advertisers bid on keywords in an online auction setting in an effort to get optimal placement. Those that bid more for keywords, and also get the most clicks on their ads, have the best odds of premium placement in search results.

• Pay for Performance - Pay for performance relates to the paid advertising part of SEM. Advertisers pay the search engine (or Web publisher) when a prospect takes a desired action, such as clicking on their ad, hence “cost per click.” The pay for performance model can work in other ways too, such as the advertiser paying when a prospect calls a trackable phone number in their ad.

• Cost Per Click (CPC) – CPC is what the advertiser pays the search engine when someone clicks on their ad in search results.  CPC is the most common pay for performance program in search engine marketing.  While some CPC rates may seem quite low, around $0.05 or $0.15 per click, they can also go as high as $8.00 or more.  You need to ask yourself if it’s worth it to pay $0.05, $2.00, or $8.00 every time someone clicks on your ad.

• Paid Inclusion (Trusted Feed) – Paid inclusion allows you to pay a per click fee to submit to a search engine or directory via XML to a Web page(s) that is indexed in organic search results. CPC can occur from Paid Inclusion.

• Pay per Call – As noted above, pay per call is a pay for performance program where the call to action is for the prospect to make a telephone call (usually to a trackable phone number.)

• Cost per Acquisition (Cost per Lead) – Your average cost generated when a prospect calls, fills out a form, sends an email, or otherwise submits a sales lead.  Calculation: # of clicks it takes to generate one lead multiplied by the cost per click.

• Cost per Vehicle Retailed (Cost per Vehicle Sold) – Your average cost accrued from your SEM efforts to sell one vehicle. Calculation: total cost of the SEM program for a given month (or set time period) divided by the number of sales generated from the program in that time period.

• User Centric Design (Site Optimization) – Designing the layout and functionality on your website in order to convert visitors into leads. For instance, you can show incentives and special offers on your home page to give added incentive for your visitor to take action. 

Getting the Most from Your SEM Efforts - Local vs. National Search

While SEM promises to be cost-effective, you could still end up paying a lot of money if your program isn’t well managed.  Bidding on search terms on a local level, or using a “geographic modifier,” is where your dealership can distinguish itself in your local area.  For example, a Mercedes dealer in Minneapolis will most likely want their ad to appear when a consumer types “St. Paul Mercedes dealer” or “Twin Cities, Mercedes.”  You may also want your ad to appear when a consumer types “Lexus dealer, Minneapolis” in hopes of gaining a conquest sale.  Visitors to your site resulting from these “localized” searches have better odds of becoming good leads.

On the other hand, if a consumer searches under a more general or “national” term, such as “luxury car” or “2005 Mercedes SLK,” you may not want your ad to appear.  Popular terms can be quite expensive to bid on, as you could be competing with your OEM, large dealer groups, and third party auto sites for those keywords.  Even if your ad does show up in a consumer’s more general results, there’s no guarantee that the consumer is located near your dealership.

Your dealership can distinguish itself among local search results by branding your search ad, including your dealership’s phone number, address, and cross street.
 

Compete Locally, and Let Your 3^rd Party Aggregator Compete Nationally

Competing on the national level with search engine marketing is where your third party lead aggregator comes in. According to Ward’s, J.D. Power, and other industry sources, the majority of consumers prefer to submit leads at third party auto sites.  Some consumers, already familiar with strong brand names such as Yahoo Autos, AOL Autos, MotorTrend, etc., may start at these sites, or they may find them in a search. If a consumer is doing some comparison shopping among different brands and enters the search term "coupe," for example, they're necessarily looking for a manufacturer's or individual dealership's site.

The best third party sites employ SEM to gain top placement in search results for national or general terms like “Used SUVs” or “New Honda Accord.”  Through direct partnerships with hundreds of these auto sites, some of which are exclusive, lead aggregators like Dealix can provide a “basket” of solid leads. The lead aggregator's job is to source, scrub, and distribute the right customers to your dealership, no matter where they originate.  Your efficiency improves and you benefit from the economies of scale that a lead aggregator can provide.

The most successful dealers today, such as the Ward’s e-Dealer 100, employ a holistic approach to their online customer acquisition efforts, using a combination of leads generated from their own site, via local awareness and local search; their OEM; and third party aggregators.  “Third party sites,” says Chip Perry, CEO of AutoTrader, “provide car buyers with an organized experience that they can’t get anywhere else.”

Performance: It’s Still about ROI and Cost per Unit Sold

As with any marketing program, the most important measurements of success with your SEM program are your return on investment (ROI) and your cost per vehicle sold. With search engine marketing it’s important to keep in mind that you’re paying for site visitors and not individual sales leads. In order to judge the success of your program, you’ll need to track key metrics such as site visitors, which keywords were clicked on, overall cost per click, and close rates for SEM leads vs. other lead sources. Outsourcing this complicated and time consuming work can be the difference in whether your SEM program hits top speed, or runs out of gas.

The following table gives you an idea of why tracking key metrics is important in your SEM program along with your other advertising. By comparing these figures, you can see what’s working and what isn’t. Keep in mind that these figures are examples and will vary depending on your franchise, sales process, website company, third party lead provider, etc.

Sources: 2005 Automotive News Market Data Book, N.A.D.A Data, Google, Yahoo Compete June 2005 Survey, and Cobalt and Dealix Corporation Data. Figures are general guidelines and will vary depending on make, geographical area, dealership, and other market conditions.

Along with tracking key metrics, there are other detailed aspects to managing your search engine marketing efforts. There are literally thousands of local and national keyword combinations which vary in cost daily. It’s also important to remember that leads generated from your own SEM efforts are not “scrubbed” the way third party leads are.  As a consequence, even though your site visitors will increase with SEM, your closing ratio for these leads is likely to decrease.