3rd Party Leads: Are They Getting Better Or Are Dealers Getting Better?

3rd Party Leads: Are They Getting Better, or are Dealers Getting Better?

Which side is getting better? What a loaded question! If you speak to 10 different individuals, you will get 10 different answers. This question isn’t about the credit of the customer. It is about catching the customer at the right moment in the purchase cycle to sell them one of your vehicles. Before you can answer that question, however, one must understand some of the dynamics of the 3rd party lead provider industry.

1. New vehicles leads
2. Used vehicle leads
3. Special finance leads

Although there is overlap within each lead group from the dealer’s perspective, the providers, for the most part, have designed their business models to provide leads for one of the three specific types.

Compare a lead versus a prospect. A lead is an indication of potential opportunity. A prospect is a potential customer or buyer. Do today’s dealers perceive any difference in the two?

“Technically speaking, a ‘lead’ is nothing but information, while a ‘prospect’ is an actual human being, but I think that's just semantics,” states Mark Vickery, Internet director for Jay Wolfe Automotive group. “To me, a prospect is anyone that you have an opportunity to sell a car, no matter how they came to you....Internet, phone, or walk-in.”

David Shear, Director of e-commerce for Bob Howard, agrees as well. “It doesn’t matter what you call it, a lead or a prospect, if it is an e-mail or a phone call (dedicated number for their Internet department) or visit to our Internet department; it is an opportunity to sell a vehicle.”

So where do all the 3rd party leads come from? Three major sources.

1. Lead generator: A vendor that designs and maintains a Web presence to actively gather customer information with the intent to resale. There are generally two types of lead generators.

A) The generator which customers readily find because they are already looking for a vehicle through online methods.

B) The generator which solicits customers in hope that they will be interested in purchasing a vehicle very soon. (Some providers do both.)

2. Lead Aggregators: A vendor who only collects automotive prospects, from multiple sources, then filters and scrubs them prior to selling them to the dealerships. The biggest aggregators are new vehicles lead providers.

3. Online listing services: Companies that provide an avenue for dealers to list their inventory online, where buyers can find them and reach the dealership. Dealers pay for the listing service; not for the leads (prospects) that are generated from the listings. They are not lead generators or lead aggregators in the sense that their purpose is not to provide leads but to assist the dealer to sell a specific vehicle. They are considered a lead provider since a significant spin off of that business is lead generation for other units in the dealer’s inventory.

How do Providers Improve Quality?

Providers improve for two main reasons: to stay ahead of the competition or the dealers demand it, which is really just another form of competition. This industry is definitely a competitive business and not for the faint of heart. So how are providers improving?

Competition Causes Improvement

Dealers utilizing Autotrader have probably noticed some changes to their listings this year. “Autotrader has instituted several new merchandising tools; one such tool showcases similar vehicles from the dealer’s inventory along with the vehicle that the buyer has chosen,” according to Chip Perry, president of AutoTrader. “We wanted to allow the dealer additional opportunities to showcase more vehicles from their inventory,”

eBay Motors draws more than 10 million unique visitors per month and accounts for roughly 40 percent of all automotive minutes spent online. “We will continue to drive awareness and traffic in 2005 with Internet advertising, national media campaigns, educational events and direct mail,” proclaimed Sean St Clair, national sales manager, eBay Motors. “In addition, we are constantly enhancing the eBay marketplace by rolling out new features and programs to help dealers. This year we introduced Best Offer, a new way for dealers to negotiate with their customers online, just as they would face-to-face on the lot.”

“We are continually improving our class-leading scrubbing and filtering technology to make sure we are delivering the highest quality leads in the industry to our dealers.”, said Dean Evans, vice president of marketing, Dealix Corporation. “We evaluate hundreds of our lead sources daily and work with our dealer customers on how to optimize and target where they want to source their leads from.”

Providers Improve Due to Dealer Demand

Dealers are demanding accountability; first with themselves, then with providers. In the Internet department or any department utilizing 3rd party leads, the ability to track the lead/prospect/customer back to their original point of contact is extremely important.

It’s easy to track an e-mail lead back to its original source; however phone ups are much more difficult to do. Who is tracking that information? According to Perry 80 to 90 percent of the prospects, excluding walk-in traffic which can be measured in a dealership, are phone ups. Tracking that information is a powerful tool which will affect any evaluation of lead providers.

Without data dealers cannot measure the performance of any provider. With data, dealers can eliminate weak performing providers, or at the very least ask some important questions.

Most dealers use cost per sale instead of cost per lead to evaluate their lead providers performance, but really this is only half the picture. They must, at the same time, be evaluating their handling of those leads. Is every lead source handled the exact same way? If not, it is directly influencing closing ratios for better or worse.

Compare it to a clinical trial of a new drug. It is a very controlled study. All parameters must be the same for a drug manufacturer to be able to release that specific percentages of patients taking the drug did this or had specific results or symptoms. The same thing applies in the dealership. If every lead is handled in the exact same way, you have a somewhat controlled environment to evaluate performance of both your team and your providers.

What if a lead source is not performing at the desired level, is there anything to do but drop them? Before pulling the trigger understand the lead. Consider answering some of the following questions.

Ask how the provider is obtaining the leads you are receiving. Ask the provider if they are purchasing the leads from another source and reselling them. If so, is their source reselling the same lead to multiple providers? Most providers aren’t going divulge where they purchase the leads but they should be willing to answer those two questions.

Which type of lead generator are you utilizing? Sometimes just understanding how the lead was generated allows an adjustment to be made to the process to improve closing ratio on those specific leads.

Are your special finance leads exclusive to your dealership? If the same lead is being sent to more than one dealership, it might be an uphill battle for your dealership. Not all leads are exclusive. Make sure you understand what exclusive is. Some lead exclusivity means that the lead you receive is not sent to ANY dealer within your territory. Some lead exclusivity means that a lead will not be sent to a similar make dealer within a specific distance of your dealership. There is a difference and dealers should know what they are paying for.

Now turn your attention to the leads provided by vehicle listings on other sites. Are all of the features the listing service is offering being utilized? Making small changes like improving photo and description quality can make a big difference in the leads and prospects generated from listings.

Another way to improve quality is to partner with providers to help evaluate performance. Most reputable lead providers keep very accurate records on their dealers. Everything from the number of leads that a particular market can generate, to the number of leads specifically sent to the dealer, and with the dealers’ cooperation, even evaluating their performance in closing those leads. Some will even provide monthly reports and assist with training.

How do Dealers Improve?

Harping on the same topic that has been stated time and time again, you have to measure. Measure everything in your department: Cost per sale, response times, close ratios, gross per deal and how each translates to your providers.

Know what your response times are. Tim Parker, president of Dealerlink, said, “The dealers who achieve double digit conversion rates reach their customers (by phone) on average in less than an hour and a half over the course of a month. That includes leads which require multiple attempts to reach.” Automatically improve the bottom line by making sure leads are reached in a timely manner.

Hire the right people. “The days of taking a single floor sales person and turning them into the Internet department are gone,” said Mark Miller, SVP of dealer and industry relations, Carsdirect.com. “You must hire quality people who have the right skill sets to deliver your vehicles.” Everyone in the industry, both dealers and providers, agree on one thing - phone skills are the most important skill and are absolutely essential.

So, back to the original question. Are 3rd party leads getting better, or are dealers getting better? The answer—YES to both! Third party leads are getting better because lead providers are leveraging technology to gather, filter and deliver leads in a more efficient manner. Dealers, at the same time, are more serious about their Internet departments. They have become more educated, dedicate more resources to maximizing the leads, and are making providers more accountable, which supports the fact that they are getting better!

Vol 2, Issue 5