Survivors Thrive
Chris Markey, general sales manager, Sulphur Springs (Tex.) Ford/Lincoln Mercury, has a love-hate relationship with Internet lead providers. He calls them “necessary evils”—but uses 16. And though they supply half of his leads, he’s waiting for the day when he can dump them all.
At the dawn of the Net Age, car-buying Web sites convinced some dealers that paying for online leads was their only hope of surviving the new way of retailing. That dire prediction lost some of its punch as dealers took on e-commerce with sites and strategies of their own. Even so, most dealers say there’s still a place for lead providers in their marketing mix.
Car-buying sites seemed to launch almost weekly in the mid-1990s, each inviting consumers to “‘Use us instead of that nasty, mean dealer,’” says Dean Evans, vice-president of marketing, Dealix Corp. And the companies tried to convince dealers that “‘you better use our leads or you’ll go out of business.’”
Some dealers signed up for every service in town, then didn’t get the promised results, says Evans. After the dot-com crash sank many of the companies, “dealers said, ‘Ha! We told you so!’” Evans says. “Many of the original dot-coms weren’t car guys, and they were trying to replace dealers.”
That was a mistake, agrees Alex Vetter, Cars.com vice-president of sales. Those companies “didn’t understand that people want to go to a real store, see real cars, and establish relationships with real people.”
Other lead generators couldn’t afford to develop extensive Net links and dealer networks and got bought up by bigger companies. “There needed to be consolidation,” says Dennis Galbraith, senior director of automotive Web site research at J.D. Power and Associates. “Now we have aggregators that pull in from a lot of different sites.”
Some of the biggest names left in the business—Autobytel, Cars.com, Dealix, AutoTrader, Edmunds.com, and kbb.com—claim to have higher-than-average closing rates and double-digit growth in leads produced. With no industry standard for determining origination points or actual sales, their claims are hard to verify. But they’ve had a bigger effect on the market than even their own sales figures show, says Cars.com’s Vetter, because many consumers find vehicles and dealerships on these sites, then buy on their own.
Reaching a Different Segment
One claim the lead services are no longer making, though, is the ability to cut dealers out of the buying process. Now their goal is convincing today’s more electronically sophisticated dealers that they can produce customers the dealers can’t reach with their own Web sites.
Each of the three major lead sources—dealer, automaker, and third-party sites—reaches different markets, says Evans. For instance, an early-stage buyer might use a third- party site to research a model and, while there, decide to submit a purchase request; the dealership’s electronic showroom would never have seen that person, says Evans.
And although there may be some “overlap,” Evans adds, “a dealer who’s on top of the game realizes he needs to get prospects from all three sources. Otherwise, he is going to miss a slice of the population.”
Third-party sites help convert browsers into buyers and lead them into dealers’ online showrooms, says Vetter. “We move them from deciding what to buy to where to buy. We tie things together for them by providing OEM information, dealership inventory, and pricing.”
And the independent sites have a much farther reach than dealer sites, which only find people already familiar with their stores, adds Tim Rogers, Autobytel national director of field sales.
Generating Dealer Loyalty
Richard Burd, Burd Ford, Indianapolis, has used lead services for years and swears by them. His post delivery customer poll shows that about a quarter of buyers hear about his dealership, and find the vehicles they buy from him, online. “I look at [third parties] as a vehicle locator,” he says. “Most people who use them say they want, for example, a red Ford Explorer with this particular equipment, at this price, and they can find their exact car online.” The buying sites’ popularity will continue to rise, he says, as they add more and more consumer-friendly features.
Dave Handel, Internet director, Rosen Automotive Group, Gurnee, Ill., has tried all of the major lead services over the years and believes they’re “extremely important, especially for used-car sales.” The services bring in some 20 percent of his total sales, and 35 to 40 percent of his used-car sales. “You definitely need [them] for used,” where buyers are usually searching for a unique model and price that can’t be found at every dealership. “If you don’t use them, you’re losing business to your competitors.”
Classified online sales are where the action is, agrees Chip Perry, president and chief executive officer, AutoTrader.com. These buyers have typically scouted several sites to find exactly what they want before picking up the phone.
Even dealership manager Markey says the “necessary evils” are worth using, and generate 25 percent of his sales. His strategy: Use lots of them, because “you never know when a site’s hot streak will start—one month it might be Autobytel, the next Cars.com.”
Oops – They’re Dupes
Lead services do have one persistent problem—duplication. Markey says 10 to 20 percent of his leads end up being dupes because the services he uses—some of which are simply aggregators—get leads from the same source. And Cameron Johnson, sales manager, Magic City Ford, Roanoke, Va., quit using the services because often “the customer may have just visited a site to do research, but the third party tried to make it into something more.” Now he relies on his own Web site.
So does Bob Ferrando, Bob Ferrando Ford/Lincoln Mercury, Girard, Pa., who canceled a service because “they were sending me my own customers and making me pay for it. It gave me a sour taste for all the other lead generators.”
J.D. Power’s Galbraith says it’s common for consumers to submit price requests to multiple sites, which pass them on to dealers. “So it may not be the exact same lead, but it is the exact same person, and it got to the dealer two or three different ways. In an ideal world we’d be able to eliminate duplication before it gets to the dealer, but we don’t have that kind of cooperation between lead providers.”
NADAguides Dealer Leads is the only service that doesn’t buy its leads from other sources, says Lenny Sims, vice-president, NADAguides.com. Instead, it relies on the 2.8 million consumers who visit NADAguides.com monthly. “We’re all-organic,” Sims says.
His service’s filtration process eliminates “false buyers,” Sims says. “Some lead providers require consumers to give personal information—like name, address, and phone number—before they can get a price quote. So some people give fake information just to get what they want. We don’t consider that a real buyer, because the information was gotten under false pretenses. We feel we have the cleanest, most highly filtered leads in the nation.”
Grosses: Good, Bad, Indifferent
Another problem with third-party leads—lower dealership grosses—seems to have been overcome. Dealers’ profit from online sales may have started out lower because dealers “didn’t understand the process,” says Wes Lutz, Extreme Dodge, Jackson, Mich. But now they are more comfortable with the Net and make more money from it. Lutz says he earns roughly the same whether customers enter his store electronically, through the showroom door, or over the phone. The difference is that “we get to the end point faster” with Net customers, who have done their homework and know exactly what they want.
Even when grosses are a little lower, sales volume is higher and helps the dealership earn better allocation from the manufacturer, finds Martha Hanson, Internet sales consultant, Honda World Orange County (Calif.).
And sales manager Markey, who makes higher grosses on Net customers, says, “It’s a myth that all Internet customers are chiselers. The reality is that there’s the same percentage of chiselers” on the Internet as on the showroom floor.
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Mary Anne Shreve is a senior editor of AutoExec.
