I frequently get asked to put a number on what dealers should be spending on Facebook ads. Every dealership is different, and advertising budgets vary from month to month. But unless you are a very small dealership, you should be spending at least $3,000/mo on Facebook ads. If you are spending less than that, you are missing out. Here’s why:
1. Facebook Advertising Works and Most Businesses Know It
According to the NADA, the average U.S. franchise dealer spends about $200,000/year on internet advertising. eMarketer estimates that in 2017, Facebook in the U.S. accounted for about 21% of the digital ad business. Doing the quick math, that means if you are an average dealership that matched the average U.S. business for digital ad allocation, you’d be spending over $40,000 annually on Facebook, or about $3300/mo. Large dealerships should easily be spending two to three times that amount.
Of course, this isn’t to say that if everyone jumped off a bridge, you should, too. But when I see big dealerships spending $500-1000/mo (or less!) on Facebook I can’t help but wonder why they are dramatically underspending the rest of the economy (and their competitors) on this important channel. I believe that there are many good reasons why dealerships should be allocating a much higher proportion of ad spend to Facebook (keep reading below!).
2. Better Results with Testing
Any good digital marketer will test, test, and test in order to optimize ad spend. But if you aren’t spending enough, you can’t run effective tests! Your sample sizes are too small to know what actually worked. For example, let’s say you only have a $400 budget and you want to generate leads. If you test two ad creatives to two audiences, each ad only receives $100. If leads cost around $20, that means your sample size on each ad was only five. Statistically, you’ll never really know which audience or which creative was more effective. With a $4,000 budget, your sample size for each ad is 50, and now you can confidently say what worked and what didn’t.
3. Full Funnel Marketing
Far too many businesses use digital advertising exclusively at the point of purchase. This is because many online advertising tools (e.g. Google AdWords) work best when people are searching with purchase intent. While it is critical to reach that segment of people, it is also expensive and there is a limited inventory. Reaching consumers earlier in their customer journey is easily done on Facebook, opening many more avenues to effectively advertise to prospects who may buy down the road (more details here).
4. Better Tools with More Budget
There are a whole host of products that can make your Facebook advertising perform better: the Facebook Marketing API, CRM/DMS integrations, inventory feeds, offline conversion tracking tools, Marketplace listings, Oracle private data, and more. Proper use of these tools can dramatically improve the performance of your ads as well as help your organization more seamlessly integrate the results of those ads into your process. But if you are only spending a few hundred dollars a month, flat rate charges (such as for DMS integration) probably become cost prohibitive. Or you aren’t meeting the minimums of vendors who have access to Oracle data. If you’re looking for a cost-effective way to streamline all these tools, check out SocialDrive.
5. Facebook Focus
When you spend more with Facebook, you get more attention from them. Vendors with many clients spend millions of dollars on Facebook each year and they get dedicated resources from Facebook, early access to new products, and more. Facebook will also spend time and effort working with vendors to optimize ads for specific clients with large spend.
If you want better results from Facebook ads, quit hanging on the sidelines and invest meaningful budget. For most franchise dealerships, that means at least $3,000/mo.
