The Dealership Marketing ROI Formula and How to Use It
The dealership marketing ROI formula is simple arithmetic. The hard part is deciding what goes into it. Get the inputs right once and you can rank every vendor and channel on the same scale every month.
The formula
ROI equals gross profit from the marketing, minus the cost of the marketing, divided by the cost of the marketing. Multiply by 100 to state it as a percentage.
Written out: ROI = (gross profit minus marketing cost) divided by marketing cost, times 100.
If a campaign produced gross profit equal to three times its cost, the ROI is 200%, because two of those three parts are return above what you spent. An ROI of zero means you got your money back and nothing more. A negative ROI means the campaign lost money.
What counts as gross profit
Use gross profit, not revenue. A sold vehicle is a large sale price with a much smaller profit, and dividing revenue by ad cost makes every campaign look brilliant. Decide which of these your store will include and then apply the same definition to every source:
- Front-end gross on the vehicle
- Finance and insurance gross
- Profit on the trade-in once it is retailed or wholesaled
- Expected service and parts gross from a new customer, if you have a reliable way to estimate it
Most stores use front and back gross for the monthly calculation and track trade and service value as a separate note. Consistency matters more than which choice you make.
What counts as cost
Undercounting cost is the most common error. Include everything it took to produce the sales:
- Media spend paid to the platform or publisher
- Agency or vendor fees
- Creative, video and printing costs
- Software or tools bought for the campaign
- Any incentive or giveaway offered to shoppers
Co-op reimbursement lowers your net cost, so calculate ROI both before and after co-op to understand what the program earns on its own.
Getting attribution close enough
The formula needs to know which sales came from which marketing. Perfect attribution does not exist, but three habits get you close:
- Source every lead in the CRM. Make the lead source field required and limit the choices to a short, clean list.
- Run a matchback. Compare the list of people who responded to a campaign against your sold records by name, phone and email for the following 90 days.
- Ask and record. Have salespeople ask every customer what brought them in and log the answer.
When a buyer touched several sources, pick one rule, such as crediting the source that produced the appointment, and use it every month.
Step-by-step for a single source
Take one lead source and work through it for last month. Add up all costs. Count the units sold to shoppers from that source using the CRM and a matchback. Add the gross on those deals. Subtract cost from gross, divide by cost, and multiply by 100. Then calculate two companion numbers: cost per sold unit, which is cost divided by units, and average gross per unit. Repeat for each source and sort the list from highest ROI to lowest.
As a point of reference, Willowood Ventures dealer partners see approximately 800% average ROI on Facebook Sales Events, and 90% of dealers rebook.
Using ROI to make decisions
A ranked list is only useful if it changes the budget. Move money in small steps from the lowest sources to the highest and recheck the following month. Watch volume as well as percentage. A tiny campaign can show a huge ROI on two sales, while a larger one with a lower percentage delivers far more total gross. Look at ROI, total gross and cost per sale together before cutting or expanding anything. And give slow-building channels such as search visibility a longer window than a short sales event.
Frequently asked questions
What is a good marketing ROI for a dealership?
It varies by channel and by what you count as gross. The more useful question is which of your own sources rank highest when measured the same way.
How is ROI different from cost per sale?
Cost per sale tells you what you paid for each unit. ROI adds the gross you earned, so it shows whether those sales were worth the cost.
How often should ROI be calculated?
Monthly for ongoing channels, and after each sales event with a matchback at 30, 60 and 90 days to capture later purchases.
See what an event would look like for your store
Willowood Ventures runs Facebook Sales Events for 600+ dealer partners and manages $4 million per month in social advertising. Dealers see approximately 800% average ROI, and 90% of them rebook. Book a demo and we will walk through your market, your inventory and your set appointment target.
