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Seeking Facebook's ROI

July 2012, F&I and Showroom - Cover Story

by Stephanie Forshee

Back in 2009, Brian Benstock’s wife called to notify him that his credit card was declined when she attempted to make a purchase. Believing it was a mistake, he called the bank. Its response was an even bigger shock: "Mr. Benstock, we stopped your card for fraud alert. You have $60,000 worth of charges in the past two weeks — from Facebook."

Brian Benstock
Brian Benstock

Benstock, vice president and general manager of Paragon Honda and Paragon Acura in New York, says that was the day he learned firsthand the true power behind the social media network. He had taken out paid advertising with Facebook just two weeks prior after deciding that his dealer group was ready to pay per click (PPC) on Facebook for his "dollar per day" campaign, which asked customers if they would buy a new vehicle if they only had to pay $6 or $7 a day.

"They asked me what size market I wanted," Benstock recalls. "I’m kind of aggressive so I said, ‘Give me 500 miles around the dealership.’ They said, ‘Are you sure?’" Benstock has since tweaked the per-mile radius to target a more localized market, but he said the general strategy was and has remained effective.

Paid ads, though, comprise only a portion of Paragon’s online presence. Its Honda and Acura stores, which claim the top spot for Honda and Acura certified pre-owned sales in the world, boast more than 3,000 and 1,500 "Likes," respectively, with both Facebook pages monitored by Digital Air Strike (DAS), a digital marketing firm that offers a reputation management solution to dealers.

Toyota Sunnyvale in California is another success story in DAS’ books. Despite the store’s progress, Mike Shum, general manager at the Bay Area store, admits he struggles with the thought of taking out paid advertising on the social networking site. He just doesn’t know how to accurately measure his ROI on the site where 1,600-plus users "Like" his dealership. He also believes consumers are immune to online ads.

"I’m not necessarily opposed to it," he says. "It just seems like it’s going down the road of every other paid advertisement. Even though you can say paid ads on a website are effective, it’s never as effective as traffic that you’re generating in a much more natural manner."

Likeability vs. Profitability

For dealers pining over whether Facebook offers sufficient promotion, particularly after General Motors’ recent decision to pull its $10 million in advertising from the site, the answer could depend on to what degree the

dealership operates on social media.

While it is encouraging that 84 percent of vehicle shoppers use Facebook — as indicated in a recent study from Dealer.com, DriverSide and GfK Automotive Research — auto dealers strive to reel in that audience to land sales. And to Shum’s point about paid ads, a separate study from Greenlight, an international digital marketing firm, indicates that 44 percent of Facebook users say they never click on sponsored ads. But even that stat comes with a catch.

"For Greenlight and many other agencies and brands, advertising on Facebook has become part of the ‘usual mix,’" the report states. "For Greenlight specifically, we saw our Facebook investment (client media spend) overtake both Yahoo and Bing collectively at the start of 2011, hinting the channel had constant growth and was delivering a strong enough return to invest more."

Benstock and Shum, though, find that Facebook is geared more toward communication with clients rather than converting them into buyers. Shum points out that shoppers likely visit multiple websites before stepping foot in the dealership, making it tricky to gauge which site is responsible for each lead. For now, he relies on what his customers tell him.

"I’m OK that information is a little tough to come by," he says. "It doesn’t bother me that I can’t say I know that exactly 25 car sales this month are directly attributed to Facebook."

Founded in 1986, Toyota Sunnyvale prides itself on its connection with the local community. J.D. Power and Associates recently ranked the dealership No. 1 in customer satisfaction among Northern California dealers.
Founded in 1986, Toyota Sunnyvale prides itself on its connection with the local community. J.D. Power and Associates recently ranked the dealership No. 1 in customer satisfaction among Northern California dealers.

But Shum does notice that analytics are doing a better job of identifying the connection point. Benstock would welcome better metrics as well, but he thinks dealers make the mistake of viewing the Facebook phenomenon as an instant ROI product like other marketing mediums.

"It’s not like an ad in the newspaper that says: ‘We have this special this day; come and get it.’ It’s a communication tool that allows me to talk to my Facebook database for free," he says.

"For the dealer that goes on, tries a couple campaigns, then pulls out and says ‘Facebook is no good,’ I think they’re making a mistake."

That’s why Benstock shakes his head when he sees dealerships posting print ads on their Facebook pages. Another mistake dealers make, he adds, is focusing too much on how many fans their pages have. A better metric, he says, is interaction with users, which Facebook tracks.

"It’s not a numbers game in terms of fans," he explains. "We’ve found it’s the number of engagements you can have with clients."

The downside of opening this communication channel is consumers are more prone to post complaints. In fact, 41 percent of consumers polled in the Dealer.com study said they are likely to communicate a bad experience to vent or warn others. Another 40 percent, however, said they would recommend their choice dealership to friends via Facebook or Twitter. That’s why Benstock views Facebook as another way to track and even improve customer satisfaction.

"When a customer complains, we get back to them very quickly," he says. "And if you have one particular [employee] who’s had four or five complaints, you have to address that. That person has to change his or her approach."

Despite its kinks, the ROI with social media is becoming increasingly easier to determine, according to Dr. Natalie Petouhoff, social media professor and director at the University of California, Los Angeles. "To be successful in social, you need to determine why you’re doing it and what strategic objectives you’re trying to reach," she says.

Petouhoff teaches a six-step process for promoting on Facebook, which she says is designed to help businesses determine, track and achieve what they’re after. "Most companies jump to Step 5, which is setting up engagement interactions, or setting up and posting on Facebook and Twitter," Petouhoff notes. "But what makes a more comprehensive strategy is to spend the time prior to jumping on an engagement platform doing a couple of other things."

Those things, which make up Step 1 of her process, require that marketers invest in social monitoring tools to figure out what people are saying about their brand and their competitor’s brand. The second step is to develop a way to measure a campaign’s effectiveness, which many companies skip over, she says, because they simply don’t know how to do so.

Petouhoff, former chief strategist for public relations firm Weber Shandwick, has a formula for measuring ROI. It calls for marketers to subtract the realized benefits by the investment costs. That number is then divided by the investment cost and then multiplied by 100. Petouhoff says dealers shouldn’t confuse "benefits" for converted sales; rather, the term in her formula refers to the savings realized by communicating with customers for free on Facebook vs. traditional advertising methods. That’s why her last three steps focus heavily on the content marketers post, the engagement it delivers, and its ability to reach people outside of the dealer’s fan base.

Comment

  1. 1. Jeremy Warnick [ August 06, 2012 @ 10:51AM ]

    Great article! What a lot of dealers need to embrace social media-wise is the fact that they have an opportunity to reach an engaged audience. At LoJack, we've seen connections between brand loyalty and our social media followers. The most engaged followers have multiple LoJack products. By keeping them engaged, we have an opportunity to enhance their advocacy.

 

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