Article

Internet Leads Offer Lowest Ad Cost Per Sale

October 2008, Auto Dealer Today - WebXclusive

by Dan Henderson - Also by this author

Process is Crucial to their Success

Rumors abound about what our illustrious vice president was really doing when he “oops” shot Harry Whittington, the high profile lawyer, while hunting. Well, I’m certain of the fact it was an accident, but the point was he wasn’t looking at what he was shooting at, set aside the desire we might all have at one time or another to take aim at an attorney.

I was recently visiting one of my core clients, doing some training, and learned they had been using a product to increase their leads. When all was said and done, my client was spending close to $20,000 on something that wasn’t producing leads, let alone showroom traffic or sales. Now, most of you read that and say, “That’s ridiculous; anyone can see that isn’t successful.” All the dealer saw was the number of leads and thought he was spending money in the way that was most beneficial for him at the time.

It actually turned out that even if he was closing at the average closing ratio, which he wasn’t, he would have been spending close to $1,000 per car in advertising expense and paying well over $100 per lead generated. What’s worse is the leads created weren’t really leads at all. Most of them just came with phone numbers and no other vital information.

What I caution to dealers – especially in this time in the marketplace when every dealer principal is rightfully battening down the hatches – is not to recreate the wheel. All of us should and are looking for that “next best thing,” but make sure it makes sense. Make sure you aren’t pointing the gun in some random direction make sure you are pointing it directly where your customers are.

I advise all dealers to consider the following when looking at lead production.

1. Can you create a lead yourself cheaper than $30?

2. Does that lead have vital information (i.e., name, address, phone number, income, job time, residence information)?

3. Do you have control over that lead’s quality? There are differing opinions on how aggressive you should be in determining the quality and whether you accept leads based on that quality you desire. If I was director over a dealer group or dealership again, I would want everything you can send me; however, not everyone is of that same mentality. So, know what controls you have over minimum income or bureau scores of the customers.

There are so many different ways to produce a lead, but very few ways I have found that can do it for $30 or less. Third-party special finance Internet lead providers are still the best way to produce a lead with little hassle. You can do all the things listed above with them. If we could do the same with all media we would use it all.
Other types of media still do not have the same return on investment as the third-party lead generators. Let me show you just one example—direct mail. Let’s do the math on that. Let’s say you are a great negotiator and you get your mail for 60 cents per piece (best of luck with that); couple that with what every mail house will tell you is a “great” response rate of just 1 percent. If you purchase 10,000 pieces at that rate, you would have spent $6,000. If you get that “great” response rate, you will have 100 leads. If they close at the average close rate of special finance leads (around 10 percent), then you will have sold 10 cars, or spent $600 per retail unit sold.

Now do the math on Internet leads. If you buy 100 of them at the high end of the scale, you will pay roughly $30, depending on what market area you are in and the demand in that area. You will have spent $3,000 for the same amount of leads. At the same closing ratio, you have spent only $300 per retail unit sold. It is simple math, and if a direct mail company, or any company for that matter, shows you (and you believe) that they can back you into that number of $300 to $400 per retail unit sold, I think you should buy it. It all goes back to how much it costs you to produce a lead. In special finance, if you can close around 10 percent of your leads, you don’t want to spend more than $300 to $400 dollars for every 10 leads you produce ($30 to$40 for one lead).

I have been involved in the special finance departments of small stores and some of the largest in the country for over 10 years, and I can tell you I have tried just about everything there is. I can’t create a lead with little hassle for $30 that has all the variables I described above.

Once you have the leads, however, it is easy to give up on them. Dealers tell me all the time  Internet leads don’t work, but once a process is put in place, they can’t get enough of them. It is all about the process you use to handle the leads. You can buy all the leads you want from any source, but if you don’t have the people and the processes in place to handle them properly –you are bound to fail.

Proper process means proper phone scripts that deal with the “why” question of what the customer was trying to accomplish in the first place. Proper process means you have the people in place and properly trained to handle the questions with the correct answers; it means having the right inventory in place and understanding that every step of the written process must be adhered to every time without fail—no exceptions. If you have the processes down and can buy a lead for only $30, there is no limit to your success.


Special Finance Insider Vol. 2, Issue 5

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