LAS VEGAS – Social media is becoming a critical sales-lead generator for new-car dealers, and unless they know where those referrals are coming from they could be putting their business at risk, says an analyst.

Experts on hand here for the DrivingSales Executive Summit presented with WardsAuto continually point to the growing power of social-media services such as Facebook and Twitter to influence buying decisions, citing stats that show 38% of consumers plan to use social media to research their next vehicle purchase.

That means some current customers could be the biggest factors in why others choose one dealership over another, but not many dealers know the key influencers who are driving many of their sales.

“You’ve got to integrate your social media with your CRM (customer relationship management system),” Dennis Galbraith, founder of Revenue Guru, tells conference attendees. “You don’t want your (best customer) to come in and not be treated like a prince or princess.

“Social media is a long-term investment that can be destroyed in just a few hours.”

Galbraith presents a complex formula to determine whether social-media activities represent a good return on investment. Dealers have been told social-media activity is a must, but they aren’t necessarily convinced it’s adding to their bottom lines.

But Galbraith says forget the complicated ROI formula and focus on whether the activity is a breakeven proposition. That’s a much simpler calculation that compares labor and other expenses with the amount of business generated over time.

“If the left side of the equation (income) is bigger than the right side (expenses), then go baby,” he says.

Dealers can minimize social-media costs by reallocating some underutilized resources, Galbraith notes.

“When you have too much labor in the service department,” he says, “customer service actually goes down, because the workers spend their time on social interaction with each other while the customer walks right on by.”

He also recommends finding out which customers are most responsible for touting the merits of the dealership via social media – buyers he designates as 5s on a scale of 5 – and spending more relationship-management effort on them.

“How many customers would you rate a 5?” he asks. “Probably not many. It might be better to invest more in them to make them a ‘hyper 5,” then focus on making the 4s become 5s.

“Then you’ll have some of the 3s say, ‘I want some of that love,’” he says. “You’ve got customers coming into your stores who want to feel like winners.

“It’s a new world,” Galbraith adds. “If you’re going to run your dealership like I was operating (as a car salesman) in 1979, then you might as well stay out of social media altogether.”

dzoia@wardsauto.com