As the growing majority of car buyers use the Internet in their buying process, some dealers claim these well-informed prospects can chip away at profit margins. It's true the days of beginning a negotiation above MSRP may be gone, as many Internet-savvy car buyers already know invoice price. Remarkably, the most successful and progressive dealers today cater to Internet customers and make a higher gross with Internet sales than floor sales.

A prime example is Galpin Automotive Group. According to Reuben Muinos, formerly Galpin's Internet director (now the national director for Web Link) and a pioneer in the use of Internet leads, Galpin's total gross with Internet sales is far above retail. How do they do it? "I realize it's a cliché to say building relationships is important," says Muinos. "But in our case, this is the key to working with Internet customers. Internet dealers have to build the relationship with the customer in order to get them to come into the dealership. So, we may give a little on the front end to a customer who is very focused on that initial transaction. As a result, because of the relationship we develop, we make up for any lost margin on the back end. F&I sales are far easier with Internet customers. This is a departure from what traditionally happens on the floor."

In addition to gaining higher back end profits, the best Internet dealers keep front end margins high. Dealers surveyed in the latest J.D. Power Study, Dealer Satisfaction with Online Buying Services, said that of all automotive sales people, including floor sales people and fleet managers, dedicated Internet sales professionals generate the highest profit margins with Internet customers. This is especially the case when they offer an upfront price with room for negotiation. In fact, ISPs that offer reasonable upfront prices yield higher profit margins than floor sales people who offer rock bottom prices to Internet prospects. Again, it goes back to trust and building the relationship with the customer.

For this reason, it's important for floor sales people to develop specific skills for selling to Internet customers. Even if a prospect walks on to the lot on a Saturday afternoon, the odds are they've already been exposed to information on the Internet, including invoice price. A floor sales person who is not prepared to handle this type of customer could lose the sale, or a decent gross.

Some dealers will continue to insist they make a higher gross from non-Internet customers. However, by ignoring Internet customers completely, they face a future of diminishing returns. Car buyers who use the Internet in their buying process are the rapidly growing majority. The best dealers have a defined strategy in place to use the Internet to their advantage with ISPs dedicated to working with Internet customers, lower customer acquisition costs through Internet sales leads, and a strategy for making money on the back end. Dealers, like Galpin Automotive, who understand this can create a winning formula that will net out to higher overall profit margins.

Dean L. Evans is the vice president of marketing for Dealix Corporation.

Kristen M. Stanton is the marketing manager for Dealix Corporation.