What's Your Lead Mix?

Internet leads come from many places, but the top three sources that dealers rely on the most are still third-party providers, a dealer's own web site and OEMs. Recently, however, the traditional mix of being heavily reliant on third-party providers has shifted, as many dealers have invested in updating their web sites and search engine marketing, and have started seeing more leads come out of these efforts.

To attract online shoppers, dealers have been getting savvier, raising their online profiles in order to capture potential leads no matter where they are coming from. “We are seeing dealers being more strategic with their lead mixes,” says David Kain with Kain Automotive, a training and consulting firm. “Instead of focusing purely on closing rates, they are looking at return on investment (ROI). If a dealer spends $1,000 on leads and closes 15% of those leads, they'd want to make at least $10-20K in order for that to be a good investment. Additionally, dealers are using things like mapping tools to help pinpoint market areas that perform well outside of their traditional boundaries.”

Dealers have two basic options when they're trying to grow their business, according to Dennis Colome, a training consultant with Izmo Cars. “Dealers should ask themselves if they want a greater market share or if they want higher profitability within their existing market and just take care of their local customers?” he says. “Once they develop a strategy, they can tailor their Internet lead mix to help them achieve their goals.”

Third-Party Lead Providers

Despite the recent focus that many dealers have been putting into their own web sites and search engine marketing programs, they still rely on third-party providers for more than half their leads. “We see figures ranging from 55-65%,” Kain says.

With good reason. Through partnerships and various marketing programs, third-party providers can bring dealers leads from the top visited sites on the Internet. Sites like Edmunds.com, Kelley Blue Book, Yahoo! Autos and MSN Autos continue to attract thousands of consumers.

Wayne Ussery, Director of Internet Marketing at the Jim Ellis Auto Group, says this is the main reason to use third parties. “The number of opportunities they provide is greater than we could generate on our own,” he says. “For a dealer to advertise on those sites is cost prohibitive, but the third-party providers can do it and then send us those leads.”

Steve Hindsley, general sales manager with Tipton Honda in Southern California, says that 60% of their leads come from third-party providers. However, he notes they are choosy about who they work with. “We don't keep non-performing providers and we don't sign long term contracts so if a company isn't performing we can get out of it. We examine them on a monthly basis.”

Another reason dealers like third-party providers is that companies can send them leads from outside their typical geographical and market areas.

Chuck Capps, the Internet and BDC Manager for the Washington-based Advantage Nissan, gets more than half his leads from third-party providers. “We are in a very unique position on a peninsula, so we don't get as many leads from other sources like OEMs and our web site as we'd like,” he says. “With third-party providers we can buy leads from other areas.”

When choosing third-party providers, dealers should go with proven performers and do their own research rather than relying on the figures that salespeople produce. Focus on lead quality and where lead aggregators get their leads.

“Numerous web sites exist out there that are designed to lure people to submit their information and don't take into account whether that person is a serious car buyer,” says Mark Taylor, the director-E-commerce for AutoNation Inc. “Unfortunately, these lower quality leads can make a dealer sour on third-party providers in general. It's important to know what web sites the providers are sourcing from.”

Lead providers, such as AutoUSA, Autobytel Inc., The Cobalt Group's Dealix Div. and Cars.com say they have established quality initiatives with aggressive goals. For example, AutoUSA gets most of its leads from Edmunds.com, Kelley Blue Book, Yahoo! and MSN. “We are constantly working on the improving the quality of our leads and the way we do this is to partner with reputable web sites as well as extensive lead scrubbing,” says Phil DuPree, President of AutoUSA.Dealers, though, need to evaluate the performance of their lead sources. Tools that can help, such as lead scoring, are becoming more prevalent today.

Web Sites (Including Search-Engine Marketing Programs)

As a result of dealers investing in web site upgrades, online inventory listings and search-engine marketing programs, the percentage of leads they receive from their own web sites has been steadily rising. Kain notes that dealers who have been aggressive in this area are currently receiving anywhere from 20-30% of their leads from their own web site.

Tipton Honda is currently getting approximately 25% of its leads from its own web site. Hindsley recently hired a company that specializes in automotive search engine optimization (SEO) and online marketing.

“We've seen our numbers to our web site increase a lot,” he says. “Surprisingly, we've seen a big jump in service appointments. I wasn't really intending that with the SEO but when I look at the count I see the number of service inquiries is double what the sales inquiries are. It's a nice bonus.” Hindsley is also pleased with the close rate from his web site leads, which are up around 17%.

Ussery is also seeing results from the investment made by the Jim Ellis Auto Group, which recently changed web site platforms, posted more detailed inventory online and invested in SEM (pay-per-click) and SEO. “With a web site, it's more about conversion rates,” Ussery says. “If you're not converting them it's just traffic, and it takes a lot of traffic to generate a few leads.”

In one month in one store, they had 99,000 impressions and 500 click-throughs. Of those 500 click-throughs they received 38 workable leads, and sold four cars. “Overall our conversion rates are about 4-5% and the average closing rate for those leads is 20%. We consider that to be good,” Ussery says.

Todd Swickard, President of Auto Dealer Traffic, stresses the importance of the relationship between finding the correct search terms and conversion rates. “Many dealers think if they build it, meaning their web site, the customers will come. But even if they get good rankings and their traffic increases, that doesn't mean everyone is a qualified buyer,” Swickard says. “A knowledgeable company will be able to create search campaigns that result in higher conversion rates, more leads and more sales.”

OEMs

Auto manufacturers continue to contribute a small but steady stream of leads to the dealer lead mix. Kain estimates the average for his dealer clients is around 10-15%. “Those are the leads that come directly from the OEM web site, not the affiliated sites like GMOneSource or Ford Direct,” Kain notes.

The Jim Ellis Auto Group currently gets 15% of its leads from OEMs. “The main advantage of OEM leads is the exclusivity of the leads. When a consumer enters in a zip code, they'll send it to us if we are the closest dealer to that zip code.” However, the exclusivity can also work against dealers, as there are many leads within their geographical territory that they won't receive.

Hindsley also receives 15% of the lead mix from OEMs. “The closing rate tends to be higher, for us it's 14% which is close to what we are getting from our own web site,” he says.

The recent launch of web sites by OEMs such as GMOneSource and FordDirect are now putting manufacturers in direct competition with third-party providers. “These web sites buy huge amounts of leads from outside sources and they charge the dealers for them,” says Kain. “The overall quality of leads tends to be good, but the drawback for dealers is the distribution element.”

Ultimately, the dealer has to decide what the right Internet lead mix is for his dealership.