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Stop Stressing Credits, Focus On Selling Cars

I am seeing a disturbing trend happening in our industry. A lot of dealers are focusing way too much on getting credits from 3^rd party providers instead of focusing that energy on selling cars. Now, before you react. Please read the rest of this article.

Remember that I was an Internet Director (5+ years) before I started my company. Now for almost 10 years now I have been building Internet Sales departments and Business Development Centers. I say this just to show that I am not “pro vendor or anti-dealer”. I am a Car-Guy and all I care about is selling cars. And it seems that there is a trend with Dealers that are so focused on getting credits with leads. Some dealers spend so much time trying to track down credits it diminishes the amount of time following up with actual prospects. I am NOT suggesting that you should not be compensated for leads that are invalid or duplicates. I am just expressing my concern with Dealers that spend so much time focusing on trying to get credit for leads. Actually grinding their reps for more credit(s). I have clients that do it sometimes for sport. I said clients, so I know it’s a fact. Some dealers demand credits because they know that most lead source providers will concede rather than argue with a dealer or possibly lose a client over something as silly as a credit. There are dealers that sometimes not choose a particular lead source provider because of their “Lead Credit Policy”, or worse even cancel a 3^rd party lead source provider or aggregator because they didn’t get a credit or the amount of credit back they thought they were owed. 

This blows my mind because the average cost per lead in the United States is only $20 (give or take a couple of dollars).  The upside is off the charts. If a dealer buys 100 leads at $2,000 and sells 10 percent (10 units) with an average Front and Back, total gross of $2,000 per copy. That is $20,000 Gross. The Return On Investment (ROI) is SICK!! We are talking about a Net profit of $18,000 from 1 lead source provider. Especially when you compare it to traditional advertising. NADA says that the average cost per sale in advertising is $640+ per car. In the model I just mentioned, 10 units sold out of 100 leads at $2,000 per copy means that the 3^rd party lead source provider model is ONLY $200 per car sold. That is less than 1/3 of what the AVERAGE dealership in this country sells cars for.

Here is the problem; most dealers forget that leads are NOT magical beans or silver bullets. They forget that they have to work at these leads. And when I say “work”, I mean WORK and work them hard. Dealers need to have the following:

• A Follow Up Process – Dealers need to have a realistic follow up process for email, phone and social media (Yes, I said social media. Social Media is the #1 form of communication on this planet).  They need to not just say “we need to follow up via email, phone and social media”. There needs to be an EXACT formula mapped out. The formula needs to be realistic and logical and take into account that the average buying cycle is 45-90 days. NOT 37 days. Also, the follow up process needs to be tailored to the fact that the average Internet sales prospect is also engaging 5-8 other dealers or websites… 

• Content – Dealers need to have a powerful library of content. Email Templates, Phone Scripts, Word Tracks, Objections / Rebuttals, Value Package Proposition (Why buy from us message).

• People / HR – Dealers need to have the right amount of people in the department or the right amount of people in the dealership that are working the Internet Leads. A lot of dealers have too many leads and not enough people or the opposite… too many people and not enough leads. Both are bad problems (That can be fixed). But its not just not having the right amount of people. Dealers need to have the RIGHT people in the right positions. The right scheduling and pay plans are also imperative for success within an Internet Sales Department or BDC.

• Training – Dealers need to train their people with what to do, when to do it, how to do it and most importantly why they are doing it.

• TO protocol- There needs to be a 100% “TO” process in place with ALL Internet prospects. Just like most dealers and all successful dealerships believe in a 100% TO protocol for showroom prospects. So should the Internet department. Too many times dealerships “burn” through Internet Ups without any accountability.

• Culture – Dealerships that instill a culture that ALL leads are good leads. ALL 3^rd Party leads are AWESOME will be tremendously successful. It’s the dealers that allow Internet or BDC reps to “pre-qualify” leads or allow reps to say that a certain lead “sucks”… those dealerships will be inundated with “bad leads” that suck.  Dealers that teach their Internet / BDC teams that a lead is ONLY a “lead” it is an opportunity to sell an automobile. NOTHING MORE. It is a name, sometimes a phone number, sometimes an email address. BUT if you receive a lead without an email address or phone number instead of worrying about a credit (at first). FOCUS on trying to ascertain that contact information. For example dealers can:

•  Open up the original lead within the ILM /CRM and see if the lead didn’t parse
• Reverse look up via 411
• Reverse look up via www.anywho.com or www.whitepages.com
• Thorough reverse look up with www.spokeo.com
• Reverse look up via social media (cut and past prospect’s email address into Facebook, Twitter, Linkedin etc…

Bottom line is that 3^rd party providers have tremendous value. To realize that true value, dealers need to be prepared for these leads and have a proactive mindset that leads are gateways to opportunities to sell an automobile. Its not a guarantee, only an opportunity to do business. It is up to us how we maximize that opportunity.

If you have any questions about this article or if you would like me to review your Dealership’s Internet or BDC lead follow up process. Please email me at sean@dealersynergy.com or call me on my cell at 267-319-6776.

I look forward to seeing you at the upcoming www.internetsales20group.com that AutoUSA is a Platinum Sponsor in Los Angeles, November 12-14 

Picture the following scene. You're throwing a party. You have even sent out invitations. You have allowed your guests to each bring a +1 or even +2. Fastforward. It's the party. You're standing by the door, casually talking to a friend of yours. Every so often another one of your guests strolls in with one or two people you have never met before. And, you completely ignore them even after they've extended their respective hands to greet you. That party isn't going to last very long. 

When your Twitter account receives new followers, whether it's two or ten, are you ignoring them? Or, are you reciprocating their virtual handshake? It should be custom for any dealership or business to at least thank their newest followers. They have, after all, taken the time to check out your page and click the "Follow" button. You should be grateful that someone cares what you have to say. This may seem like a silly topic to discuss, but it ties into the larger problem that most dealerships face when it comes to social media. The anti-human tweeters, I like to call them. J.D. Rucker recently touched on this (See here: Dealer Should Posts Fewer Links and More Interactions, Text, and Images) 

It's so simple, yet many fail to do it. When we were children, we were always taught to say "Thank you" upon receiving something from a friend, family member, neighbor, and so forth. On Twitter, it should be no different. It only takes a few seconds to tweet to "@ILOVEFORD123" and say "Thanks for following!! Looking forward to connecting." Depending upon the person, you may not even hear from them ever again. But, that's not the point. The point is that you're building an online community and the evolution of your virtual network starts with a simple handshake. 

We recently conducted a survey in which we asked Internet department personnel to share some key metrics. In one question, we asked:

How much total gross does your Internet department generate for every $1,000 spent on Internet leads from all sources (SEM, independent and third-party leads, classified site subscriptions, etc.) ?

Of the 183 responses, the answers broke down:

3X or less: 33%

4X-6X: 18%

7X-10X or greater: 20%

Don’t Know: 29%

These answers reveal there is quite a large disparity between auto dealers’ return on investment (ROI) on Internet spending, as well as a surprisingly large percentage that don’t even know their ROI.  So I wanted to know: what should a dealership target for a reasonable Internet marketing ROI?

 One of the experts we consulted for measuring this metric was David Kain, President of Kain Automotive. He suggested that 5X ROI was the absolute minimum that a dealership should strive for, and ideally Internet departments should be seeing 7X ROI on their Internet spend.

But how do you calculate your ROI? Basically, ROI is what you get for what you spend. Here is a simple formula:

(Gross Profit – Marketing Investment) / Marketing Investment = ROI

 This formula represents three steps.

 1)   Marketing investment should be simple to figure out as it is the total cost of a campaign. For instance, if you spend $1,000 per month on a Pay-Per-Click campaign, $1,000 per month on independent leads and $1,000 per month on a subscription site, then your total marketing spend on Internet leads that month is $3,000. For the sake of simplicity, I’m going to suggest here that the cost of overhead, while included in some ROI measurements, should not be included when figuring out ROI for Internet leads, regardless of source. So in this formula, don’t worry about including labor costs (for staff), web site maintenance costs, etc.

2)   Gross profit is the next metric you’ll need to figure (my first GM used to say, “Volume is vanity. Gross is sanity.”). If you can pull the actual grosses on all Internet deals, that’s great. If not, take the number of sales and multiply it by your dealership’s average front and back combined gross profits. So if $3,000 in marketing spend delivers 10 sales at an average of $3000 combined gross, then your total Internet-related gross profit will be $30,000.

3)   Next, you need to subtract the initial marketing investment ($3,000) from your gross profit ($30,000) for a total of $27,000.

4)   Divide that number by your initial marketing investment ($27,000/$3,000) and in this scenario you end up with 9X ROI, an excellent result.

Why is it important to know your ROI? Any time you spend money on anything, whether on Internet leads or a marketing campaign, it is an investment. Like any investment, it should be measured, monitored and compared to other investments so you know where you should be spending your money.

Also, knowing the ROI for all your lead sources gives you leverage. How many Internet marketing budgets were slashed in 2009 and 2010? Perhaps some cuts were deserved, but do you know which ones? Cutting back on a lead source that returns a high ROI is only going to hurt the bottom line.

Of course, our question focused on the overall Internet marketing spend, not on the ROI of various lead sources. But applying this formula to your separate lead sources is highly recommended and gives a better measurement of success than just closing percentage or other metrics. After all, ROI is what goes to the bottom line.

I’d love to hear some feedback: how do you calculate your dealership’s ROI on your Internet leads spend? What do you consider a good ROI? In my next blog, I’m going to give some tips on how to drive your team to improve ROI.

http://www.seanvbradley.com

Sean V. Bradley "On Top of The World" -  Automotive Sales is an AMAZING Career... If you make it one!

Usually when I construct posts here on AIS, I usually like to include several statistics regarding the topic. Not this time. While there are several studies (I'm sure) on the subject of reputation management and responding to criticism on social media, I would rather this be more of a logical post. Once more, I'd also like everyone's feedback as well. So, here goes....

In 2012, when a customer's displeased with your dealership, chances are he/she will head straight to the social media-sphere. They want to share their anger with others. We've all seen it before. They'll not only post it on your dealership's Google Place page, but they'll also wander over to your Facebook and Twitter pages to voice their opinion. How exactly do you respond to their criticism? 

Some like to respond by, essentially, not responding. They like to bury the customer's post. This simply means instead of addressing the concern, the dealership posts content on top of the complaint. Some may even go so far as to delete it the complaint, altogether. The customer catches on and then, you have to block the customer.

I believe if the customer is sharing a logical complaint: "Manager rubbed me wrong way" or "Service dept didn't address my concerns." Then, you should definitely engage. There's no use ignoring a situation that can be resolved with just a few sentences. "I'd love to take care of this for you. Would mind if we called you?" Chances are that the customer won't forget you and your dealership if you just hear them out and try to address their concerns.

I'm not naive, however. I realize some customers aren't so civil. Some turn out to be social media abusers. They'll go on your dealership's page and post profane comments over and over. Some (I know firsthand) create fake accounts just to post more profanity. I believe this is the only time it's acceptable to hit that block button. That person is only there to complain. They're not posting for help. They're posting to drag your name out in the mud. Block and move on. 

*After perusing this post, I'd recommend checking out Seth Godin's Blog Post on this matter: Engaging with Criticism

So, what do you think? Immediately delete the complaint or engage and learn?