Advertising – many GMs and parts managers are reluctant to spend big bucks on it. Others don’t know where to start when it comes to creating an ad strategy. While advertising might seem like a waste of time and money, it’s become a fundamental part of successful marketing, especially online.
As the saying goes, “you have to spend money to make money,” and if you’re unwilling to spend money on online ads, you’re putting your business at risk. Ad spend is a powerful tool. The question is, how much should you spend on advertising, and where should you focus your attention?
What is Ad Spend and How Does it Work?
Ad spend is the amount of money your business spends on advertising campaigns, from beginning to end. There are different types of ad spend depending on the medium used. There are traditional means of advertising like radio ads, newspaper ads, flyers. Then there are new types of advertising through online media like videos, social media campaigns, shopping ads, and more.
But how exactly does ad spend online work? The most important metric for any company to follow is Return On Ad Spend (ROAS). ROAS is your total conversion value (revenue you earn from a customer/purchase) divided by your advertising costs. Let’s look at an example. If your company spends $20 on an ad to sell one unit of a product that’s priced at $300, you get a ROAS of 15x. For each dollar you spend on advertising, you get about $15 back.
How Can Ad Spend Help Your Parts Department?
Parts managers everywhere are racking their brains, trying to find ways to sell parts. Quality ads online are the answer. Promoting your parts web store with the right ad strategy and ad spend can help take your parts department to the next level.
When you spend money on quality ads online, you put your parts website in front of more potential customers. Limiting yourself to the local customer market makes it harder for you to gain new business and keep it. Branching out to the regional and national level with online ads increases your potential customer base. More customers equal more sales, and with the right ad spend budget, you can get a higher ROAS.
How Much You Should Spend on Ads For the Best Results
Part of the RevolutionParts mission is to help dealers determine the best strategy for their parts business. We’ve taken a deep dive into the marketing strategies of our customers to find out the best tips and tricks that have helped them across the board. This is the one thing we saw across the board that helped dealerships the most.
Parts departments that spent around $1k a month on ad spending saw an average ROAS of 8.3x. Some even saw a ROAS as high as 30x. With a range that wide, it’s clear that $1k a month was the sweet spot for many dealer’s ad spend.
However, be sure to speak with your marketing team to figure out what amount you should be spending for the best results. Above all else, we found that parts departments that followed recommendations put forth by RP’s marketing team was the #1 key behind maximizing ROAS.
Just look at the success these dealers have had!
“Our rep makes recommendations for the advertising numbers, and once we make the change, our numbers jump quite a bit,” – Jessica Rosales of Honda of Jonesboro.
“RevolutionParts helped me a lot, and my numbers skyrocketed. I went from a hundred [thousand] to 180 [thousand] because you have somebody there that is working your numbers. The challenge is to keep those numbers going up.” – Cesar Aranda of Clark Knapp Honda.
If You’re Still Not Convinced, We Can Help
If you’re already using RevolutionParts, but haven’t taken advantage of RP’s Marketing Services, speak to your account manager about how you can get set up. We can help you find that magic ad spend number and get your parts department on the road to maximizing revenue.