Calculating Your Break-even Cost per VDP
Listings services like AutoTrader don’t provide the inventory, pricing, and vehicle merchandising needed to turn a Vehicle Detail Page view into a lead. All that information comes from the dealer. So the activity dealers are paying the listings service for is the VDP or Vehicle Details Page view. The lower the cost per VDP the better the value to the dealer. VDPs are not measured the same way on all services, in fact it’s not clear whether they are measured the same way on any two listings sites; however, they are fairly similar. For the past six years I’ve said if a dealer does a good job with their merchandising and prices competitively, anything less than $1.00 per VDP should provide an acceptable return on investment. Only a small percentage of your VDPs will turn into a tracked contact (phone call, email, or chat). Some services are less than 2% and some may be a little higher. Even when accounting for walk-in traffic, the cost per contact is usually going to be well in excess of $20 and can be several hundred dollars. The percentage of those contacts turning into sales depends on how well your store handles the leads. Conversion rates of less than 10% are common, but it is possible to do much better. Generally I don’t think dealers should spend more than $200 or $300 per sale directly to the listings service. Listings services can work, but values vary based on geographic market, inventory size, and negotiations. The value received from the same service can be more than 10 times higher for one dealer than for another. You’ve got to know what you’re paying for, and that’s a fact.