There's endless talk about how the internet is changing the way manufacturers and dealers market their cars, making it possible for advertising to be more targeted, measurable and interactive than ever before.
This line of conversation is well-founded. According to J.D. Power and Associates, 68 percent of new vehicle purchases in the United States are preceded by shopping and research online, making the internet audience a mainstream demographic that you can only ignore at your peril.
The bad news? For most dealers, fully leveraging the internet is just too difficult to manage on their own. The ever-increasing cost of search keywords (and the growing level of sophistication required for search engine marketing on the whole), the challenge to capture some kind of localization and the difficulty of managing budgets to get results from user clicks is too complicated for most to do in-house.
Many smaller dealers believe that if you have a website, you have an online presence. But to take your "brochure-ware" site and convert those eyes into sales, you need help: Twenty-five percent of would-be buyers leave their names on a website or sites, but converting this easy traffic into sales requires both artistry and science.
As search keyword prices continue to rise, it is critical that dealers know how to identify their most successful lead-generation sources, and use their budget assets to directly target their critical base of potential consumers.
So, given all this, what should dealers be focusing on? Here are some top-line considerations:
Identify sources that provide exclusive leads.
Work with trusted brands and provide their members, customers or employees with a service-based approach. Think private-label websites and full-service call centers, which enable you to serve the needs of every consumer regardless of what brand he or she may be interested in buying. Objectivity is valuable to the customer -- and therefore the dealer -- so consider an approach that relies on the marketing strength of your partners. A lead should be yours alone.
Good strategy requires more than targeted keywords.
You can easily spend $8,000 a day for keywords and still get zero rate conversion. The connection to customers must go deeper than the keywords you choose to reach them with. That's where a link with member-based organizations pays off. Dealers should seek out solutions that are exclusive-- meaning one customer per dealership. Look for solutions where you pay for sales, not leads.
Lead generation is fairly straightforward: a dealer buys a lead. The value of a lead is based on closing ratio-- how many leads a dealer has to buy before closing a sale. Dealers traditionally are willing to spend $250 to $500 in marketing per sale, and the average price for a retail lead is $20. So a closing ratio of five to10 percent is okay. Some leads, however, clearly have more value-- those from direct lenders, credit unions and affinity groups traditionally are the most likely to turn into a sale, and therefore are far more valuable to a dealer. Exclusive leads, affinity group leads and pre-approved customers will save dealers time and money.
Budget online carefully, and quantify the results often.
Always look for ways to let technology do more of the work. Sales process automation, for example, helps the customer and reduces costs for the dealer. In the late '90s, technology's primary function was to deliver better data. Today, technology enables full vehicle configuration. Next-generation programs will offer up-front pricing and the ability to locate exact vehicles in inventory-- saving customers and dealers time and resources.
Ban brochure-centric thinking.
If you want to really use the internet as a sales channel, banish the belief that brochure-ware websites are of any value-- your site must be the portal to a hassle-free, efficient way of doing business, and simply providing another form of your brochure is just not going to cut it in the interactive universe. The internet is a channel for better communications, not an alternative to communication. Even online, the auto-buying process requires complex human processes-- people still go through many other online and offline steps before making a purchase, so online sales strategies must look beyond the brochure in order to be truly effective.
Use technology to turn those leads into sales.
Online customers expect instant results. Take, for example, turnaround time. When a would-be car buyer keys in details on the web requesting information, there is the expectation of an immediate response-- i.e., one that comes while he or she is still online. The window for this response is about four minutes. Yet typically, most dealers' response time is in double-digit hours. Already, you've lost that lead.
What most dealerships need is a technology enabler -- a company that works to provide technology and service solutions for auto shopping and buying -- to speed up and simplify the process of responding to leads and fulfilling consumer requests.
From a technology perspective, it is an exciting time to be a dealer. There are innovative solutions that will enable progressive dealers to provide a better customer experience and save money. Dealerships spend money on marketing, commissions and selling, general and administrative expenses. Turn-key marketing solutions help mitigate marketing and commission expenses, while sales process automation tools help facilitate transactions, thereby reducing operating expenses. The most valuable solutions -- which are being developed as we speak -- will drive customers into an automated solution from start to finish. The next 12 to 24 months will be very interesting in terms of these types of solutions for dealers.
The industry's key mission is really a mantra: Buying a car should be easier. To make that happen, the dealer community shouldn't be reluctant to ask for (and expect) start-to-finish help for consumers-- and a promise of one-customer / one-dealership leads to car sellers. Doing so demonstrates real concern for the user / customer experience and an intention to make the extra effort to improve the relationship between the dealer and that customer.
It's the old win/win, fired by technology.
Scott Painter is founder and CEO of Zag in Santa Monica, Calif. Read full bio.
Example beyond the data
First, the article draws several of its conclusions based solely on the sales data. Tsk, tsk. "But Sean X, data doesn't lie!" No, it tends not to, but it does not tell the whole story, or even remotely deal with the dynamics of intent that drive those purchases -- the purchase cycle. It is like looking at a myopic funnel of the process and extrapolating conclusions. And that is a dangerous road to walk.
What that article misses, is the "phenomenom of choice." I will provide several examples:
A well known 24-hour grocery store found that even though it incurred 20 percent of its expenses from 10 p.m. to 6 a.m., it only made 6 percent of its sales during that period. It decided to change its hours from 24 hours per day to closed from 10 p.m. to 6 a.m. Their logic was that they would save 20 percent of overhead for only a 6 percent profit cut. But sales actually dropped 30 percent for a net loss of 10 percent. Why? The phenomenon of choice. By changing from the ultimate convenience, 24/7, the perception in the consumers' minds was that the store was less convenient. "Were they open 'till 9 or 10? I don't know. I'm going to the other place."
Just looking at sales data captures the end of the process, the result. It does not deal with the dynamics of what generated it. Logic based on data, often has illogical outcomes.
Campbell's Soup often has half an aisle in the supermarket dedicated to its red and white cans. However, Cream of Mushroom and Tomato account for a significant slice of the total profits of that aisle. Should Campbell's just make fewer soups, use less shelf space, and get rid of the dogs? Of course not. They understand that when the consumer sees a swath of red and white cans, Campbell's is soup. They peruse and then choose their Cream of Mushroom, Broccoli Cheese and Tomato soups. The phenomenon of choice.
The long tail often wags the short tail. Be careful to study what the impact will be with consumers on the perception of your brand, and not just sales data.
Herman Miller advertised its Resolve furniture line, even though it accounted for a small fraction of its sales at the time. Consumers drawn in by the design aesthetic of that line of products often made more practical choices when it came right down to it. But it was that line that brought them in the door. Without it they were going to be out of the buyers' consideration set. And that is the difference. If you're just looking at the "sales" data, you're not measuring the dynamics of consumer intent. And that is the major flaw in the HBR article criticizing the long tail.
What gets people in the door is often not what they eventually buy. Product differentiation is often key in consumer choice. Sexy products sell the less attractive and less expensive ones.
Even though 90 percent of the movies you rent at Netflix are blockbusters, the phenomenon of choice is why you are a member. If they only carried the top 100 titles would you join? No, because you want the choice, even if you're not going to use it. If they scaled back just to the blockbusters, the consumers would abandon the service. What the article does correctly point out is that resource allocation of the long tail is key.
The phenomenon of choice drives membership. Be careful when eliminating choice if you are a membership based service.
So what should you do if you are a manufacturer or brand?
When considering the long tail, manufacturers and brands should ask the following questions:
- What are the resources required to make niche products or carry them in your catalog?
- Will those niche products bring consumers in the door, even though they'll buy more conventional offerings from you?
- Do those long tail products provide a marketable point-of-differentiation in your competitive set that can be leveraged in advertising?
- What's the loss in not making them? Not the hard numbers, but equating consumer shift in mindset because of their elimination.
The "hard" numbers in sales data sets are often a driving force behind many decisions in business. They are a known quantity. Myopic managers often use hard data as their decision making tool because even if the result is negative they can point to hard justifications for the decisions. It is the result of corporate structures that do not reward success but do punish failure -- a review structure where as long as no one has anything negative to say the person gets promoted. Elevation through mediocrity. That mentality is the hallmark of marketers coming from a consulting background who do not understand the fuzzier "gut" decisions made by seasoned marketing professionals.
However, that gut decision is not really a gut decision at all, it is usually based on consumer research, psychographic studies, survey data, focus groups, observation and a deeper understanding of the dynamics of consumer intent. The problem is that most of the time, decisions based on that data do not have the concrete numbers to fall back on. It's fuzzy. That so-called marketers' instinct, the ability to consistently call it right on those decisions, comes from something else -- knowledge and experience. Marketers who operate in that manner often get the comments "How did you know?" when a program is a success. It can't be taught in schools; it has to be learned in the real world. But what makes them that good is often intangible.
What can you do if you are stuck in such an organization? Well, if your company is run by CFO types, not much. You're kind of, what's the word I'm looking for? Oh yeah, "screwed." Hard data is their friend. A way to approach that mentality is with as much data as you can muster. For example, you might run Netpromoter score data if you have an online presence. That data, although based on consumer opinions, can often be tied directly to sales fluctuations. Also, econometric modeling has come a long way. There are several companies who can help provide all the inputs that affect the sales data, instead of just myopically concentrating on the sales output.
Marketers who operate with instinct, and a more thorough understanding of the dynamics of consumer intent, understand that it is the future trends that are important. Those who base decisions only on concrete data are only looking at the past, hoping for a repeat performance. And the market is often not dynamic.
In the end, don't believe what the experts who write the books say, don't believe what a competitor's data says, don't even believe anything I write here. Your company is unique. It has challenges that are based on its people, its manufacturing process and its corporate structure. But what if a competitor in your space is getting better traction, making more money and growing even though you think their process is flawed -- they're just lucky, right? No, they're thinking the same thing about you. Only difference is, they're right.
Sean X Cummings is a marketing specialist.