DMA Points To ROI: Direct Works For Cars

by Karl Greenberg, Jan 31, 2008, 5:00 AM

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Auto dealers spent $7.3 billion on direct marketing campaigns in 2007. But according to the Direct Marketing Association (DMA), that outlay resulted in $248.1 billion in sales. The industry and lobbying group's first "Direct Marketing Facts and Figures in the Automotive Industry" report says that boils down to $9.68 return on investment for every dollar spent.

Anne Frankel, senior research manager, says the numbers in the report are derived from calculation of the direct-marketing driven sale with ad expenditure. "There's always a code or key associated with direct-market efforts, so the sale can be tracked to the source of expenditures. That's the strength of the direct market: you can track effective outlays."

The group's study said that in the third quarter last year, Toyota led the industry in mail drops for dealership service promotions. Of the domestic brands, Ford, Chrysler and Dodge sent out the most direct mail sales campaigns during that period. Toyota, Mercedes-Benz, and Honda topped import brands.

The firm says campaigns offering direct-order opportunities (versus lead generation) produced at least 40% of direct-marketing sales last year.

Frankel says that last year, 17.8% of new-vehicle sales came via manufacturers' direct-marketing efforts, and that by 2012 it will likely hit 21.2%. The study predicts that by 2012, auto manufacturers will spend $9.8 billion on direct marketing, which the group says will return $108.1 billion in sales.

"The compounded annual growth rate [of direct-marketing sales] is running at a faster pace than overall sales for the entire industry," she says. "It's growing twice as fast."

While the group's purpose may place a big question mark on the study's objectivity, Frankel says the firm does not generate its own data, but contracts to third-party firms--in this case Lexington, Mass.-based Global Insight, which "developed models and provided the data," says Frankel.

"We actually thought the numbers they provided weren't conservative enough," she says, adding that the numbers and projections in the DMA's study reflect a more conservative estimate. "And we use external consultants to review reports to make sure what we are reporting is consistent with what they have observed. So, we have a number of checks and balances."

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