ROI

Dustin Lyons
So here is a question for the group. Probably mostly for Principles and GMs, but would love feedback from anyone. What is the target ROI that you would expect to get out of a marketing program that has a monthly maintenance fee? If the cost was around what you would gross on 1 car deal per month, but the program brought in 10 car deals per month is that something that would make it an easy decision? What other factors would you be considering when looking at a new marketing program? And I am interested in learning your input whether it is direct mail, online advertising, or any other type of program.
mark rask
Good questions....we use cost per vdl for most of our online vendors
Timothy Martell
Before I left retail our minimum performance expectation was 500% ROI. If a product can't be tangibly measured to produce 5 times the investment, in gross, the margin just wan't there. As a vendor we aim for 1,500% ROI on our marketing initiatives.
Dustin Lyons
Thank you for the insight, obviously even a 2 to 1 return on investment means more profit, but I was looking for the point that the margin becomes more of a no brainer. And I agree as a vendor I think a return of anywhere between 10-1 or even 20-1 is a very good return for a dealer to strongly consider.
Timothy Martell
Remember Dustin, that particularly as it regards products oriented to generate vehicle sales are measured against gross profit. But its not a simple comparison of gross profit to marketing costs. There are many other costs that take a pieces of gross away to yield the net profit. Chances are if a marketing product is producing less than 500% ROI in gross, that the dealer may be losing money on the sale or at best, barely break even.
Dustin Lyons
Oh yes I totally understand that, there are a lot of costs to running a business and a to of marketing programs unfortunately focus on price which tends to reduce gross. I am used to having the dealership pack, pack, and then pack some more to the cost of both new and used vehicles which tends to at least help them feel better about those costs that eat away at gross and result in the net profit. But if a marketing program or something designed to generate leads etc... cost the dealership around $2k a month, and that dealers PVR was around $2k (before you add pack back in), and that program generated 15-20 extra car deals a month and did it in a way that did not degrade the PVR by blowout prices etc... that would be a good program to use correct? And I understand what you are saying, I was one of the Costco managers at my dealership, and we paid them a monthly fee for them to send us leads, which was only about 10 a month on a good month, but everyone one of them was a below invoice price and the majority of the customers paid cash and didn't buy any accessories or F&I products. So the dealership probably net lost quite a bit by using the Costco program.

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