Special Report

e-Dealer 100

While visiting his hometown of Rapid City, SD, something occurred to Dean Evans, chief marketing officer for Dealer.com, an online sales-lead and marketing firm.

“I realized none of the dealerships in town were Dealer.com customers,” he says. He set out to try to change that.

Evans, raised on a farm near the city of 59,607 people, visited the various dealerships in town. Using his powers of persuasion, he pitched the benefits of systematically using the Internet to market and advertise, manage customer relationships, convert leads into sales, participate in social networking and more.

It all fell on deaf ears, he woefully reports.

“They said, ‘Dean, that isn’t happening here.’ And maybe that is the case there and in certain small markets. But if you are a Honda dealer in Los Angeles taking that position, sorry, you’re going to be out of business.”

In the early days, dealers dreaded the Internet, thinking it would replace them as the middlemen of auto retailing.

Fifteen years later, most dealers embrace it. And not just big-city dealers. For instance, in Kellogg, ID, Dave Smith Motors uses the Internet to achieve impressive sales results, even though CEO Ken Smith jokingly refers to his location as “Nowhereville USA.”

No.2 on the list this year, the store consistently has occupied a high place on the Ward’s e-Dealer 100 since the pioneering list, now in its 10th year, first appeared.

At that time, the inaugural e-Dealer 100 story quoted automotive consultant Mark Rikkess citing research indicating only about 10% of dealers had any sort of Internet strategy beyond an obligatory and limited-use website.

Today, although some dealers in smaller markets use the Internet to extend their geographic reach, clearly big dealerships in big markets are most likely to use the Internet in a big way.

“Bigger dealership groups tend to ‘get it’ more,” Evans says. “They will assign an Internet director to oversee operations at all the stores. That person is considered very important and digital is considered the No.1 strategy.”

He often is on the lookout for trends. He noticed a new one at February’s National Automobile Dealers Assn. convention in Orlando, FL.

“In past years, visitors to our booth were largely Internet directors,” Evans says. “Now we’re talking to their bosses, the dealers. They are seeing the financial statements and becoming believers in the Internet and in Web commerce.”

Typically, it costs $500 in traditional marketing to get a dealership customer in a car. The Internet can trim that to $200. But there’s a catch or two. For one thing, Internet selling requires more work and more persistence in customer communications and follow-up. For another, the margins tend to be tighter.

Internet marketing, with the likes of search-engine optimization and systematically tracking leads, “is more complex than putting an ad in the Sunday newspaper,” Evans says.

The Internet customers are not immediately showing up at the dealership, he notes. “They are coming in through that darn computer screen. A dealership has to have employees that look good there and have these new skill sets.

“And it takes time to turn an Internet lead into a sale. And it takes follow-ups and effective use of CRM.”

So why do it? Because that is where so many consumers are.

“It may be a little more work, but it is how customers are doing business with you,” Evans says. “And it’s not just customers new to car buying that are coming in this way,” Evans says.

Studies indicate up to 92% of consumers use the Internet in some way to shop for and buy cars.

Customers of certain brands – such as Audi, Acura, BMW and Volkswagen – skew heavily towards Internet use when they are in the market to buy a car.

Web-based systems and CRM software do a lot of the heavy lifting for dealerships pursuing a digital strategy.

“The technology will get the leads faster, sort the leads faster, allow you follow up faster and help you decide on which sites to post your inventory,” Evans says.

But there’s plenty for people to do, too, he adds. “The work left over is good old-fashioned relationship-building salesmanship.”

The work of dealership Internet sales staffers can be overwhelming, says Clayton Stanfield, a dealership trainer for eBay Motors.

He lists the many responsibilities, including: inbound calls, e-commerce leads, appointment reminders, appointments, no-show follow-ups, new-inventory follow-ups, and outbound campaigns.

“You hear a lot about sales guys not getting back with people, but these guys aren’t in the back room doing nothing,” Stanfield says. “They have a lot to do.”

Few people want to actually buy a car on the Internet, says Michael Jackson, CEO of AutoNation Inc., the nation’s largest dealership chain. “Only about 1% want the vehicle popping up in their driveway.”

That’s pretty much the way it is for John Eagle Dealerships, a 14-store, multi-state group, says Jim Flint, its corporate director-interactive sales and marketing.

“Our reality is customers research online, shop online and buy offline,” he says.

More than 82% of auto consumers are educated through the Internet, Jackson says. “We want to pick them up in defining what they want, including financing. It’s a complicated process.”

AutoNation is trying to make it simpler, “but it’s a big challenge,” says Kevin Westfall, the firm’s senior vice president-sales.

Chip Perry, CEO AutoTrader.com, agrees.

“The process is complicated, the car is expensive and at some point people want to interact with other people,” he says.

Brick-and-mortar dealerships “are here to stay” and won’t be replaced by virtual showrooms, Jackson says “We still need the store.”

Keeping up with the growing number of Internet leads is tough, Westfall says. “The volume of Internet leads has risen dramatically. We’ve spent a lot of money to handle them all. We handle millions of e-leads a year.”

They come from all sorts of consumers of varying ages.

The big issue is effectively handling the sheer volume. The ultimate goal is to “get them off line and on the phone, so you can answer their specific questions.”

Internet-related vehicle sales tend to carry lower profit margins, he says. If the same lead is sent to various dealerships, “people fight over them.”

Dealers still rely on third-party leads to supplement those from their own website, according to an Autobytel survey.

“A majority of dealers, 87%, still feel third-party leads are an important part of the mix,” says Mark Garms, Autobytel’s chief operating officer.

The Internet fundamentally has changed the way consumers shop for cars, says Forrest McConnell III, owner of McConnell Honda in Montgomery, AL. “It has changed the game.”

For one thing, consumers can shop for cars without leaving home, he says. “Before, if you were shopping for used cars, you’d have to go to all the car lots. Not anymore.”

Consumers who do their homework online “are much smarter when they walk through the dealership door,” McConnell says. “The Internet has been good for consumers, and not just car consumers.”

The Internet may speed up a lot of things, but it slows down car shopping.

That’s because consumers are spending more time online researching vehicles and checking out inventory selections before making a purchase decision.

“We’re seeing the shopping cycle expanded by as much as 20%,” says Mitch Golub, head of Cars.com, an online marketplace. “They are doing their homework.”

That can go on even after they have contacted a dealership. Accordingly, Cars.com is training dealership sales personnel that “you can’t give up on customers after the first contact,” Golub says. “People are using the Internet to become smarter shoppers, and will continue to do so.”

Internet sales experts like to use a funnel analogy to describe the online shopping and buying process.

Consumers in the shopping stage enter the funnel at the wide top and become more directed as they descend, coming out of the narrow bottom spout as buyers of a particular vehicle at a selected dealership.

“When they are in the upper funnel, they are doing their research and checking specifications,” says Golub. “We’re seeing more time spent in the upper funnel. At the top, about 80% are undecided as to what vehicle to buy. They may have a vehicle segment in mind, but not a particular vehicle.”

In the perfect shopping funnel, “you never want to send them back up, say, to an auto maker’s website when they should be headed directly to a dealer website,” says John Holt, head of Cobalt Group Inc., a digital automotive-marketing firm.

Although shoppers have become more cautious – likely on account of the economy – they also are more engaged, Golub says. “It’s a matter of answering their needs. You can do all the work in the world, but if a dealer is not addressing needs, there is something lacking.”

Many dealers have turned to firms such as Cars.com for Internet sales training. “We talk a lot about what works,” Golub says. “If dealers are successful, we’re successful. It’s a win-win.”

Cars.com has interesting origins, in that newspapers started it. Popular opinion is that when Internet marketing hoisted its sails, newspapers waved goodbye from ashore.

But several newspaper groups, including Times Mirror, the Tribune Co. and The Washington Post, launched Cars.com as a digital rendition of their automotive classified ads.

They picked Golub, a former city editor who was running the Tribune’s Internet initiative, to lead Cars.com. It began in 1998. It has since grown to a full service provider of inventory listings, reviews, specifications and lifestyle information.

“Every analyst and competitor said the newspaper guys would fail because they didn’t know this business,” Golub recalls. “We succeeded for a couple of reasons.

“One, we decided to act like entrepreneurs. Two, we drew from our newspaper heritage to have the highest ethics. Succeeding in this business is important to us, but so is the way we do business.”