Third Party Lead Generation
September 2009, Auto Dealer Today - WebXclusive
Myth v. Fact
The difference between a $1,000 gross profit and a $2,500 gross profit on a special finance deal is the amount of work that goes into the deal. It does take a tremendous amount of work. Everything from purchasing the proper inventory and matching the customer with the correct vehicle and finance company to asking for and getting down payments to make it work. None of that is easy, especially in today’s market.
The same thing can be said about the special finance lead market. The difference between a $10 lead and a $30 lead is the amount of work it takes to generate it. It takes more time, effort and resources, in personnel and capital, to generate quality leads in today’s market.
Recently, Auto Dealer Monthly sent 12 special finance lead providers a questionnaire about their businesses, in an effort to understand their business models and how they affect the product delivered to you. Six special finance lead providers representing a good cross section of the market were willing to discuss their business operations. Similar to dealers, some providers were much more open to candid discussions than others.
Participating in the discussion were Auto Credit Express, blueSky Marketing, CyberLead, DealerLink, InterActive Financial Marketing and Web2Carz
MYTH: Lead providers generate all of their own leads.
FACT: All providers with a dealer network supplement the leads they generate with purchased leads. Smart dealers who cannot generate enough leads from their own Web site rely on lead providers to supplement their flow of leads; similarly, lead providers cannot always generate enough leads through their own marketing efforts to meet demand. It doesn’t seem to matter if you have a couple of Web sites to generate leads or several hundred sites, providers still can’t always meet dealer demand.
When demand cannot be met, providers first turn to other lead providers in the market that they have deemed affiliate partners. “Affiliate partner” was a term used by many of those interviewed, with each provider naming no more than two or three trusted affiliate partners. Interestingly enough, they were not the same partners throughout. If there are no affiliates to purchase from, some providers refer the dealer to other lead sources. There is an entire wholesale market for the exchange of unused leads; however, none of the providers interviewed claimed to purchase from that market, many citing the data validation challenges.
Each provider did state that if they purchase leads from an affiliate, those leads are run through the same process as the leads they generate themselves. This helps maintain a level of consistency throughout all leads they deliver to a dealer.
MYTH: Lead providers generate all of their leads through SEO campaigns.
FACT: Pay-per-click (PPC) campaigns are an extremely important aspect of lead generation. Knowing that the amount of business generated this way would vary from month to month, a wide range of answers was expected. What wasn’t expected was that some providers felt this was too much information for dealers to know.
PPC marketing is typically a supplement to solid SEO efforts, not the primary means of generating leads. The percentage of leads generated from PPC campaigns varies from 10 to 50 percent among those providers willing to disclose it. Just like dealers, every lead provider wants as much traffic as possible driven to their site based on their search engine optimization (SEO) due to the lower cost associated with it. Notice that last part said “lower cost,” not “free.”
Keeping up with SEO trends requires skilled individuals. Just because you rate well in a search engine today doesn’t mean you will next week. Someone has to monitor and make adjustments accordingly. Most special finance leads are generated by offering financing solutions, not vehicles. Most providers have a few sites from which they generate the majority of their leads. The balance of their sites, which may number in the hundreds, are more suited for long-tail keyword searches, and although each individual site might not add huge volumes of leads to the market, collectively, they do.
MYTH: Lead providers sell leads more than once.
FACT: Reputable lead providers who claim exclusive leads have systems in place to verify if they have received a lead already; if they have, they reject it. The time frame and method may vary from provider to provider. DealerLink had the longest duplicate time check among these providers—cross checking leads received for the last 122 days. Any duplicates are immediately rejected. If a dealer is receiving leads from more than one lead source, it is very possible to receive a duplicate because no single lead provider can control how many times or places a customer applies.
MYTH: Lead providers sell every lead they receive, good or bad.
FACT: Selling every lead they receive would be the ultimate dream for many lead providers; however, in reality they are only able to place a percentage of the leads they receive each day. The number of rejects can be quite high at times - up to 70 percent. A few providers do see as few as 30 percent of their leads evaporate through the rejection process and they never get sold to anyone, dealer or affiliate.
Leads are rejected for two primary reasons. The first and usually quickest rejection comes from bad data issues. The lead is received and run through a series of validation processes, and if it fails to pass, the problem may be a bad phone number, name or Social Security number. It may also be rejected due to filters the provider has in place for minimum income (today, most are set at a minimum of $2,000), prior bankruptcy, or prior and/or multiple repossession.
The second reason for rejection is the provider has no dealer in that market. Leads that hit this pile may still have life, but require more work. Providers typically look to their affiliates to see if the lead can be wholesaled to another provider who has a dealer in that market. This process, however, can slow down the delivery of a lead.
Think about how important it is to follow up on a lead as soon as you receive it. If a provider who generates a lead is able to deliver it to a dealer in their network, that lead can usually be delivered within seconds to minutes, even with all the data verification and processes it undergoes. However, if a provider has to notify an affiliate, lead delivery can take some time; that affiliate must first determine if they have that lead already in their system. Then, if they don’t, they must have a dealer in the market to accept it. Minutes can then turn into to several hours, sometimes up to 24 hours, which decreasing your opportunity of reaching the lead in a timely manner.
MYTH: Lead providers never purchase leads from dealers.
Fact: There are a few providers in the market that do purchase leads from dealers who generate leads outside of their market area. Only one provider (Auto Credit Express) among these responding providers does this, and only from dealers for whom they manage PPC campaigns. There were several opinions as to why the model to purchase from dealers isn’t used more. First, dealers don’t always have the amount of security in place that some providers want. Second, lead provider Web sites generating leads rarely ever have inventory. They are designed to offer financing options, not inventory. Leads generated from a dealer site are usually very specific to a dealer, meaning the customer wants to do business with the dealership, or the leads are vehicle specific. Neither of these situations tends to make a customer receptive to a call from a different dealership.
MYTH: The only thing separating a $10 lead and a $30 lead is the geographic market.
FACT: Although lead prices are driven primarily by market demand, there are many other factors that influence the price of a lead. Marketing costs are a big factor. Marketing costs include the PPC campaigns, which vary widely by geographic area and by keyword, as well as the personnel required to implement and manage both PPC and SEO campaigns. There are fees paid to numerous databases and services to validate data. Additionally, there are security costs to ensure that customer data is safe. Safeguarding customer data helps minimize liability from potential identity theft for the provider and for the dealer. Some providers also employ call centers to verify application data. All of these costs affect the retail price of a lead.
The only way to have a true $10 lead is to generate it through co-registration or trigger leads that are not filtered or verified in any manner. Dealers subscribing to leads like this waste a lot of time and personnel resources. Co-registration leads are those generated through promotions for products or services rather than vehicles or financing, meaning the likelihood of those leads actually being in the market for a vehicle are very small. Similarly, trigger leads, which can be purchased from credit bureaus for very little money, are leads generated from past bureau activity; however, the conversion rate is very low. A low-quality lead takes an enormous amount of time to work, and in today’s market dealers need to be focused on working smarter, not harder.
Special Finance Insider Vol. 3, Issue 4