On November 15, 2016, Craigslist, the 16th most popular website in the United States, changed how the motorcycle industry listed ads by enacting a $5 charge/ad. Now, dealers have to allocate a budget and determine if there is an ROI for Craigslist.
Prior to the market being paid, dealers could list as many ads as they wanted for free. A dealer could post 500 ads and only a fraction of those would remain live on the site due to flagging and ghosting. Now that Craigslist is paid, flagging and ghosting are no more.
Dealers who posted 500 ads at $5 each would now need to spend $2,500 to see those same results right? Wrong! The data we analyzed will help you understand how many ads you should list to ensure your dealership reaches its revenue goals.
Why did Craigslist go paid for motorcycle dealers?
When Craigslist was free, dealers tended to spam the marketplace by posting the same motorcycle multiple times, cross posting to too many marketplaces and posting in the wrong categories. Now that Craigslist is paid, those days are gone and ads are valid for 30 days. The user experience for consumers has become more friendly and cleaner with a true representation of local dealer inventory.
Let’s analyze the data
When dealers heard the news about Craigslist going paid, they either embraced it and pulled out their checkbook or they shut it down and decided to no longer post ads.
We looked at the data from our motorcycle dealers who use LotVantage to post on Craigslist and found very positive results:
October 2016 — Free marketplace
Motorcycle dealers posted 38,800 ads using the LotVantage software on Craigslist. Those ads generated .16 leads per ad.
December 2016 — Paid marketplace
Motorcycle dealers posted 5,969 ads using the LotVantage software on Craigslist. Those ads generated .72 leads per ad.
Once Craigslist went paid, motorcycle dealers saw exponentially better results and the reason why is simple. The number of motorcycle ads posted through LotVantage went from 38,800 to 5,969. The dealers that decided to stay on Craigslist really benefited because consumer behavior didn’t change. Craigslist had fewer ads and each ad was generating an average of .72 leads/per ad.
October 2016 - Free marketplace
Powersports dealers posted 27,990 ads using the LotVantage software on Craigslist. Those ads generated .30 leads per ad.
December 2016 - Paid marketplace
Powersports dealers posted 2,726 ads using the LotVantage software on Craigslist. Those ads generated 1.56 leads per ad.
Once Craigslist went paid, powersports dealers saw exponentially better results and the reason why is simple. The number of powersports ads posted through LotVantage went from 27,990 to 2,726. The dealers that decided to stay on Craigslist really benefited because consumer behavior didn’t change. Craigslist had fewer ads and each ad was generating an average of 1.56 leads/per ad.
What budget should you dedicate to Craigslist?
Figuring out what budget to dedicate to Craigslist takes some simple math, knowing what your close ratio is and what sales volume you are looking to accomplish. We’ll use the LotVantage posting data we analyzed to give you an example.
In December 2016, motorcycle dealers posting through our software saw .72 leads/ad.
Let’s say your dealership closes 5 percent of leads that come in and your average margin per $10,000 is 20 percent. If your dealership needs to sell six additional units a month, you would need to post 167 ads, costing your dealership $835.
In this example, we suggest 167 ads because in December 2016, dealers received .72 leads/ad. If your dealership has a five percent close ratio, you would need to generate 120 leads. Five percent of those 120 leads is six units. If you’re dealership is making $2,000 per $10,000 unit, you just spent $835 to make $10,334 profit for the month.
Here is the formula to make it even easier:
- 6 units to sell / .05 close ratio = leads needed
- Leads needed / .72 average leads per ad = ads needed
- Ads needed x $5/ ad = Total Craigslist budget
As you know, advertising means spending money to make money and it’s important you do your due diligence to understand what marketing sources are driving not only the most traffic, but leading to the most sales.
Keep in mind, the data we analyzed only shows leads that came in through calls, texts, emails. credit applications and form fills for motorcycles. We didn’t analyze walk-in traffic as we don’t record that data so that means your potential to make money from Craigslist is even higher!
If you are interested in discovering more about how Craigslist can generate profit for your dealership, at a very low cost/lead, visit lotvantage.com or call 1-888-569-3865.
Jim Jabaay is the vice president of Sales and Marketing for LotVantage, a leader in digital marketing for automotive, powersports, marine and RV dealerships. Jim has grown up in the automotive industry with the family dealership in the suburbs of Chicago. Jim started at Manheim in sales and continued to grow his career running sales teams throughout Texas for nine years. Following Manheim, Jim spent two years at Dealertrack expanding his career in the software side of the business. LotVantage utilizes data to help dealerships understand which inventory to post and when to post it for a local, national and social presence. Jim’s number one goal is helping dealers succeed in an ever growing and changing dealership world.