This article was originally posted on August 25th, on the Digital Dealer site.
The 2% Rule is one of the most effective and profitable concepts that you can implement in your dealership today. It’s a rule that will help you win more sales and save more money – hey that’s not an entirely bad thing, is it?
The 2% Rule will challenge many of the assumptions and assertions that most of your digital marketing guru’s and experts are espousing today. But don’t worry, it’s not too sophisticated as a matter of fact it’s quite elementary, simply common sense once you understand it. If you join me at my session on selling more in a down market at Digital Dealer 23 in Vegas you’ll learn even more about the 2% Rule. As a matter of fact, when we’re done with my session you’ll be a 2% Rule Guru yourself.
Okay let’s get on with it. Here are the fundamentals that we need to cover to make the 2% rule work for you. I promise, I’ll get to the rule in a moment but we first need to cover some current 2017 automotive retail basics that relate to the 2% rule.
The 2% Rule is mostly about conversion, converting traffic that’s on your dealership website as such let’s quickly talk about some basic precepts in that regard. First and foremost, “traffic.”
Traffic in the automotive digital sense are visitors to your website. Today we break traffic down into two primary groups: 1) Organic Traffic, and 2) Paid Traffic. Organic traffic is currently those visitors on your website that are there essentially on their own volition. Contrast that with the notion of Paid Traffic, those visitors that are on your website because they were led there directly by any one of your Search Engine Marketing (SEM) campaigns. For example, Pay Per Click (PPC) campaigns or Retargeting Campaigns or YouTube Video campaigns.
Looking at PPC closely it’s important to understand three characteristics about these visitors as they’re distinguished from organic visitors. “Paid traffic” (visitors) represents approximately 20% of your total website traffic whereas organic traffic represents 80% of your website traffic. In truth, there are far more people that choose to be on your site than those that are brought there by your SEM campaigns. Another important characteristic about your paid traffic visitors is that they convert (submit a website lead or make a phone call from your website) at a much lower rate than organic traffic does, and third they close or buy a vehicle from you at a much lower rate than organic traffic does. This stands to reason of course as the organic traffic chose to visit, chose to be on our site whilst your paid traffic was induced, tricked, and led to believe they should be on your website from some advertisement of yours.
Another thing that’s important to understand is the notion of “highly engaged” visitors. This one’s fairly simple when using on the sales lot car shopper-buyer parlance: you have tire kickers and you buyers. Few of the visitors on your lot are ready, willing, and able buyers. The same is true for your website. You have visitors that are just checking colors, prices, features, and wishing. Others are nearer the end of their purchase journey, toward the bottom of the funnel as we salespeople like to say. And just as you can quickly tell the difference from behaviors on the sales lot between casual shoppers and buyers (buying signals) so too can you identify patterns of behavior on your website that distinguishes casual shoppers from “highly engaged” visitors. These “highly engaged” visitors typically purchase their next vehicle within 30 days. From you, your competitor, an independent, a third-party site, or a private seller. “Highly engaged” visitors buy much sooner than a casual visitor.
The good news is that 20% of the average dealers’ website traffic is “highly engaged” visitors. The bad news is, that without technology to help you, you can’t identify whom those visitors are. Actually, by the time that you took to read this article this far, highly engaged visitors visited and left your website and moved on to your competitors’ completely unbeknownst to you. Yeah, I know, frustrating, right?
Now there’s one more concept that we need to discuss before we get into the 2% Rule; the concept of driving traffic, or more specifically you as a dealership paying to drive traffic to your site. Typically to Google, Bing, Yahoo, or Facebook, with Google getting the lion-share of that paid search budget. By lion-share I mean about 8.7:1 in terms of US Dollars in the automotive retail space. So, dealers spend a ton of money on people that are searching for their product in their market to induce a visitor to visit their website by way of PPC or retargeting ad units. It’s a lot like a drug addiction in many ways. Dealers want more traffic to their site, Google tells them that there are people on their search engine (thousands of them in your market) looking for and interested in your product, so you pay a vendor to craft ad units to attract visitors to click and visit your site. You know those same visitors that not only convert at a lower rate than organic visitors but those same visitors that would have found you “organically” anyway through your basic Search Engine Optimization efforts. Ah, but I digress.
So now that we’ve talked about traffic, conversion, and paid traffic as it relates to your website let’s talk about the 2% Rule. But first: WHY do dealers spend more and more money on paid traffic? Because the average conversion rate of a website visitor is in the vicinity of 2%. So, the thinking (quite aged thinking from decades ago) is that if I as a dealership have a bigger pie, then my 2% conversion will produce even more sales. Yes, that’s true. But it’s also true that you can sell cars in a funeral home if you try hard enough but that’s not the best strategy, now is it?
Okay, here’s the 2% Rule:
“Any additional 2% in conversion of engaged visitors sells more cars than any 20% increase in quality website traffic.”
So, let’s see it in action:
Assume your website has 10,000 unique visitors per month, and further assume that your website converts at the industry average of 2%. This means that currently you’re generating 200 leads.
Now, let’s add 20% or 2,000 more unique visitors. You now have12,000 MUV and at a 2% conversion rate you now have 240 leads!
So, bring in the 2% rule: let’s look at increasing our conversion rate from 2% to 4% – just two more points. We have 10,000 MUV and we now convert at 4%, which is now 400 leads!
Your dealership has a lead to sales rate of 10%, so which is better:
240 leads X 10% close rate = 24 sales,
OR
400 leads x 10% close rate = 40 sales?
And there you have it, you now understand the 2% Rule! But wait there’s more… it typically costs about $6K ($3 CPC) to drive an additional 2K visitors to your site… where’s another 2% in conversion rate would cost your dealership about $1K per month. Go effect the 2% Rule!
Join Ronald Morrison for his session “Selling More Cars, with Even Less Website Traffic” at the Digital Dealer 23 Conference & Expo. Register Now to attend Digital Dealer 23 this Sept 18-20th and start building your agenda by choosing from more than 100 educational sessions.
Ronald Morrison is CEO and founder of both technology and marketing companies. Ron is an experienced marketer in the automotive space, 24 years of it. He’s led sales teams, built marketing teams and he’s described as an “executive level sales and business development executive” with more than 24 years of experience in delivering profitable sales results, sustained incremental and recurring revenue. EMAIL: ronmorrison@pureinfluencer.net