Advertising Auto Parts and Accessories – Strategy and Budget Overview

Advertising is integral to ecommerce growth and success. While there are certainly companies that have managed to grow without any advertising, this is the exception rather than the rule. So, if you sell auto parts and accessories online (or you manufacture them) and you want to grow, the questions are:

  1. What kind of advertising should we do? What works best?
  2. How much should advertising cost?
  3. How much should we budget for advertising?

In the following article, we’ll address all three of these questions at a high level.

What Kind Of Advertising Works Best In The Parts and Accessories Business?

One of the questions we often get is “Where should we advertise? What works?” That’s a question without a definitive answer, but there are some general rules to follow.

Let your customers tell you. No matter how big or small your ad budget, your current and previous customers are a great tool for figuring out where to advertise (and what works best). If you’re a small company with just a handful of customers, consider interviewing them to ask how they found you, what they liked about your products, what website(s) they like to read regularly, what TV shows or YouTube channels they like, etc. While this data isn’t super scientific, it’s usually enough to get you started.

If you’re a larger company, you can employ surveys, audience analysis tools, and demographic analysis tools to build a comprehensive picture of your typical consumers. Multiple personas are often created, and ad campaigns for each persona are developed.

Stay true to your brand. Every company has a set of values that define it (or at least, they’re supposed to define it). If your brand is defined by both premium quality and custom manufacturing options, your ads should emphasize these things and stay away from talking about “wholesale” or “discount” pricing (for example). If your brand is defined by a serious approach to safety, your ads shouldn’t be cutesy or overly clever or appear in cutesy or overly clever publications.

Your budget will point the way. If you’re a major auto parts and accessories brand with a seven or eight figure ad budget, you probably want to look at sponsoring special events, sponsoring race teams, creating experiences for consumers that attend events, title sponsorships of popular television shows, and so on. When you’ve got a big budget, you want to think about more expensive advertising (in terms of total budget), as these opportunities tend to have a very low cost per impression (CPM).

If you’re a start-up with a $1500 budget for advertising, you want to look at pay-per-click ads, simple giveaways on social media supported by a small ad budget, and building out an email marketing program. These opportunities are not cheap on an impression basis, but they’re usually excellent in terms of return-on-ad-spend (more about that below).

Create an entire strategy, not just a campaign. In the old days, a comprehensive ad strategy was beyond the budget of most companies. Today, however, it’s entirely feasible to advertise on search engines, show ads on video platforms and popular websites, and advertise on social media networks for a small budget. Therefore, it’s a good idea to think about an entire strategy that mirrors the customer purchase process. For example, you might use a strategy like this one:

  • Build awareness of your product and brand with inexpensive video ads on social media
  • Re-target people who engage with your awareness ads on social media with more detailed text and image ads on social media
  • Re-target people who visit your website with a combination of banner ads, search ads, and YouTube ads that talk about product features and benefits
  • Re-target people who add a product to your website’s shopping cart with a discount code or special offer

While this strategy might seem complex, it’s fairly straightforward in terms of implementation. It’s also surprisingly affordable to do all of the above at a high level.

So How Much Does Auto Parts Advertising Really Cost?

When we evaluate advertising costs, we usually want to consider two different metrics (both are defined after the chart):

  1. Return on ad spend (ROAS)
  2. Cost per impression (CPM)

If we’re primarily concerned about growing revenue, we want to focus on #1. If we’re primarily concerned about branding and awareness, we want to focus on #2.

Advertising Opportunity Minimum Monthly Budget ROAS? CPM? Notes
Title sponsorship of a televised event $500,000+ Difficult to measure Excellent There’s a reason that every televised auto race has one or more title sponsors – it’s a great way to get lots of brand mentions and impressions.
Racing Team Sponsorship $75,000+ Difficult to measure Excellent if they win! If your company has ad budget to burn, this is a high-risk, high-reward opportunity.

Also, you can sponsor race teams for less if you look at less popular series.

TV ads (including cable) $5,000+ Difficult to measure Excellent TV advertising is effective because it’s a cheap way to reach a lot of people. It can be difficult to attribute revenue to TV ads, however.
Print ads in popular automotive magazines $2,500+ Difficult to measure Mediocre There are certainly quite a few people reading magazines, but how many of those people see the ads?
YouTube channel/creator sponsorship $1,000+ Difficult to measure Good to great Sponsoring a YouTube channel is a great way to get a lot of eyeballs for a relatively low cost. However, just like TV, it’s hard to measure.
Pay-per-click advertising (AdWords, Bing Ads, Facebook Ads) $1,000+ Excellent Good If your company is trying to grow revenue right away, look no further.

If your company is trying to boost awareness on a small budget, this is a great option.

Online banner ads $500+ Mediocre Poor While banner advertising is typically overpriced, it strikes a decent balance between ROAS and CPM.
YouTube video advertising $500+ Mediocre Good YouTube makes it easy to show consumers 6, 15, or 30 second ads based on their activity and/or interests.
Instagram profile sponsor $500+ Difficult to measure Mediocre to good If you sponsor the right Instagram profile, this can be a great way to boost awareness and generate sales. If you sponsor an Instagram profile that has mostly bots for followers, it’s a waste of money.
Forum/website sponsorship $250+ Poor Mediocre Forum and website sponsorship is a hit or miss advertising opportunity. Most of the time, these perform poorly. Every once in a while, however, a diamond is found.

 

Return On Ad Spend (ROAS) Explained

Return on ad spend (ROAS) is a metric for determining how much revenue any given advertisement generated. If you’re advertising to try and grow sales, ROAS is a pretty important metric.

© Christitze

ROAS is calculated by divide total revenue earned from an ad campaign over the cost of the ad campaign. Then, multiply by 100 to get your percentage. Example:

You spend $4,000 on a 1/4 page magazine ad. Using a special tracking phone number and website URL in the ad, you know that your ad generated at least $8,000 in revenue. That gives you a ROAS of 200% ($8000/$4000 * 100).

So, what’s a good ROAS?

  1. If your advertising goal is to generate revenue, any ROAS over 100% is a step in the right direction.
  2. If your advertising goal is to grow profits, then your ROAS needs to be high enough to have profits cover ad spend costs.
  3. If your advertising goal is to boost awareness and/or grow your brand, ROAS isn’t a metric you need to care about.

Generally speaking, auto parts and accessory ads that are intended to grow profits have a ROAS of 500-1000%.

Cost Per Impression (CPM) Explained

Many advertising platforms will talk about cost per impression, also referred to as CPM or cost per thousand views. With this metric, you can analyze how many eyeballs saw your ad. While this metric isn’t too significant from a performance standpoint, it’s generally considered a good basis for comparing brand-level ad opportunities.

Say, for example, that you have a budget of $250,000 for brand ads. You could:

  • Sponsor a race team
  • Sponsor a television show or popular YouTube channel (perhaps a few)
  • Be one of the title sponsors for an individual event
  • Fund a large Facebook or YouTube ad campaign
  • Buy up a bunch of full-page ads in popular print magazines

Which of these is going to deliver the most eyeballs, aka have the lowest CPM? Knowing that will help guide your decision making (of course, that’s not the only consideration).

How Much Should We Budget For Ads?

Last but not least, the question of “how much should we spend on ads?” There are a few ways to look at this:

  • If you’re trying to grow and not concerned about profits, your budget should be as much as you can afford to spend. The key is to make sure you’re spending money responsibly – if the ads aren’t growing revenue, they’re a waste.
  • If you’re trying to grow while maintaining a reasonable profit margin, the SBA recommends a marketing budget from 3% to 8% of total revenue, assuming your annual revenue is less than $5 million.
  • If you’re just interested in testing some advertising, a budget of $1500 a month is usually enough to try something simple.

Whatever you decide to spend, it’s important to understand what the ads are supposed to accomplish. If the goal is revenue, you need to be able to track both direct and indirect revenue from your ads. If the goal is branding, you need to make an effort to measure recall and awareness before and after the campaign.

Summing Up

There’s a nearly unlimited supply of advertising options for companies in the auto parts and accessories industry. As a result, it can be difficult to decide where to put your company’s ad dollars. Hopefully, this article gives you some direction.

 

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