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Direct Mail vs. Internet leads The Real Cost

Without a doubt, direct mail is your best bet if you’re looking for a targeted way to find new customers and sell additional units each month. But with the rise of online car shopping and “need-more” Internet leads, it seems many dealers have forgotten how profitable direct mail can be. That is, except for the ones making money hand-over-fist doing direct mail. Why didn’t they tell you about that? Some common misconceptions are driving this industry-wide gravitation to the Internet. Those misconceptions are regarding your cost per lead (CPL), cost per sale (CPS) and how they relate to your bottom line.

Look at Internet leads. Many companies sell them for around $25 per lead. Buy 100 leads, and your CPL is simple. It’s $25…all day, everyday. What could be better? Consistent pricing and lead flow with very little risk. But what are you really getting for your $2,500?

With most Internet lead providers, you have no clue about the quality of the leads being delivered. FYI, these leads can come from anywhere...A large percentage are shoppers and a bunch more just wanted a "Free I-Pod!" but ultimately have no idea why you’re calling them. Figure on average you closed 8 percent of those 100 leads you bought. That’s $312.50 CPS. Not bad. But you spent valuable time working 92 dead-end leads to sell those eight cars. What’s that extra time worth to you?

On the flip side there’s direct mail. For the sake of this article and what generally performs best, let’s use credit score mailers. Companies like BlueSky that maintain connectivity to credit bureau data to build lists and target pre-approved customers are your best choice. You know the data is clean and updated, and you can fine-tune your lists real-time with a host of credit and demographic attributes. It’s live data.

Say you spent that same $2,500 on direct mail. You got 2,500 pieces in the mail, averaged a 1 percent response and ended up with 25 leads. “Wait…25 leads? Are you insane? That’s four times what I spent for my Internet leads!” You’re right. It is expensive. And here’s the kicker…You may not get 25 leads. You might get more than that. You could get less. Analytics and experience allow us to predict your return with a high degree of accuracy, but regardless of what anyone tells you, there’s still no sure thing in direct response.

But let’s talk about the leads you did get. These are qualified customers. They know what they applied for, and are expecting to buy cars. On average, dealers close a much higher percentage of these leads, over 30 percent, in fact. Now of these 25 leads you sold eight cars. Your CPS is the same, $312.50, which is the only number that matters here. Plus, you only had to manage 25 leads to do it. Bottom line, you sold an equal number of cars at the same CPS - with a quarter of the effort.

That’s why the most successful dealerships rely on direct mail to maintain their huge sales volumes. With Internet alone, the sheer manpower involved in working all the leads would make it next-to-impossible to reach these numbers. And in most cases, there are simply not enough leads available in a given market to fulfill the demand. Most successful dealers use a multi-channel approach. They balance quality and quantity with a blend of direct mail and Internet leads throughout the month.

Alas, there is no “secret-formula” that works for everyone, (as much as I’d like to tell you we’ve got one). There is however, one key ingredient that the most successful dealers share alike: knowledgeable, dedicated people working all the leads.

The car business is a people business. You must have the right people contacting all of your leads, setting appointments and getting as many customers through the door as possible. You need the right people greeting, providing excellent service, following-up and generating referral business because of it. The best dealers do it. So should you. That’s the difference.

So next time you hear about the new Web-based ultra-technical thing that will “revolutionize the auto industry,” remember, it’s still a people business. And when it comes to your lead generation, don’t forget direct mail. It’s tried and true and has come a long way technologically in its own right. Most importantly, it still makes dollars, and it makes sense.

Vol 2, Issue 10

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