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What percentage of the sale price for a BMW or Mercedes is acceptable for a dealer to spend on online leads to generate a sale?
Hello! Thanks for asking Wonder about the percentage of the sale price for a BMW or Mercedes that is acceptable for a dealer to spend on online leads to generate a sale. In short, after an exhaustive search through industry reports, advertising statistics sources, and company financial data, I've determined the data you want is not publicly available because the metrics used to measure results in the auto dealership industry typically focus on cost per click, cost per sale, or conversion rates, rather than percentage of the sale price. However, I was able to learn that the average cost per sale for BMW may be as high as $215.93, while the average for non-luxury vehicles is closer to $93.48. Based on an average cost per sale of $215.93 and an average sale price of $66,625, the percentage of a BMW's sales price that is acceptable for a dealer to spend on online leads to generate a sale would be less than 1%. Below, please find the results of my research.
METHODOLOGY
I began by searching for the specific metric you requested - percentage of the sale price as it relates to online lead generation costs. After an extensive search, I was unable to find this metric for any brand or the automotive sector in general. So then I searched more broadly for metrics related to lead generation and online advertising. I found some interesting statistics, which I've shared below, but nothing specific to BMW or Mercedes. During this process, I stumbled on the term "cost per sale," which is the closest metric I could identify to answer your question. However, most of the information I found related to this metric was in the form of sales pitches by lead generation services or sales associate resumes, touting their abilities to reduce cost per sale. I finally found two sources that allowed me to provide a glimpse into average cost per sale figures, which I outline below.
COST PER SALE
The most pointed data I could find to answer your question was in relation to cost per sale metrics. A 2015 report by HookLogic looked at lead generation and ROI metrics for four car brands: Ford, Chrysler, Volkswagen, and Suburu. The average cost per sale was $93.48 with Suburu having the the lowest cost per sale at $66.69 and Volkswagen having the highest at $128.28. The LinkedIn profile for a German BMW specialist notes an average cost per sale of under 190€ ($215.93 US) in 2011, but that is the only figure I could find specific to either BMW or Mercedes. Data at TrueCar suggests that the average price of a BMW is $66,625 (with starting prices between $30,025 and $103,22). Using this average price and the potential average cost per sale of $215,93, the acceptable percentage of the sale price spent on lead generation could be less than 1%.
AUTOMOTIVE INDUSTRY - ONLINE ADVERTISING
Reports on the auto industry by Borell state that dealers allocate over 60% of their media budget on online advertising. Furthermore, per-vehicle ad spend has decreased from $664 in 2009 to $518 in 2016, a 22% decrease.
WordStream, an online advertising service, offers some useful statistics regarding online advertising in the automotive industry. Car shoppers do a lot of online research before buying a car, with 69% of people searching Google for automotive services. There are approximately 9 billion search queries and 742 million ad clicks per year related to automotive sales.
The WordStream article notes that the auto industry has a higher-than-average click through rate (CTR) at 2.14%, compared to the 1.91% average across industries. In terms of pay-per-click (PPC) advertising, the automotive industry enjoys a relatively low $1.43 average cost per click (CPC). In terms of search queries, most searches are related to a specific brand. Of the top 20 search queries related to automotive sales, BMW comes in at #10, and Mercedes takes the #19 spot.
According to an article at Intice, an incentive marketing company, the average lead to visitor (LTV) conversion rate for auto dealerships is between 1.4% and 2.1%. It also offers some automotive website traffic benchmarks, based on data from the month of July, noting that website visitors viewed about 6 pages and considered 3.6 cars, but only 1.8% filled out a lead form. An article at 9Clouds suggests that 1% is a good website-to-lead conversion rate.
An article by Michael Thomas, Senior Director, Online-to-Offline Analytics at J.D. Power, discusses the digital marketing by auto dealers. He notes that the US auto industry, in general, is "spending 45% of the digital budget on Display (which includes Social Media), and 45% on Paid Search, with just under 10% being spent on all other forms of digital advertising." He then compares this data to the digital marketing spend of dealerships, which shows that dealers spend 62% of their budget on paid search and 23% on display ads. He then analyzes this data and suggests that dealers are not spending enough on display ads because they don't understand their intent. Display ads generate awareness, not leads. Display ads are important because the awareness they create generates more searches, which improves paid search results, which potentially results in more leads.
BMW AND MERCEDES
The only information I found specifically related to BMW or Mercedes' lead generation costs was a case study at Driftrock discussing BMW's success with reducing its cost per lead while increasing the number of leads using Facebook ads. Using custom lead forms, CRM integration, and location reporting features, BMW was able to reduce "its cost per lead by 56% and saw a 2.8 times increase in leads when it switched to Facebook lead adverts."
SUMMARY
To sum up, the average cost per sale for BMW may be as high as $215.93, while the average for non-luxury vehicles is closer to $93.48. Based on average sale prices and cost per sale, the percentage of a BMW's sales price that is acceptable for a dealer to spend on online leads to generate a sale would be less than 1%.
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