All leads are not created equal

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Canadian dealers would be wise to learn the lessons from their U.S. counterparts

few years ago, I had the privilege of traveling to Cape Town, South Africa through an organization that supports Canadian athletes in their quest for Olympic gold.

While there, I was humbled to visit Robben Island and see the cell where Nelson Mandela was held captive for 18 of his 27 years in prison. It was an overwhelming experience to see how a man, who, subjected to sub-human conditions and who could have held such hate in his heart, instead emerged on the other side a more focused and educated man.

During his time in prison, Mandela earned a law degree, read incessantly and studied both Afrikaans and Islam. In his words “Education is the most powerful weapon which you can use to change the world.”

I’ve been in the auto industry going on almost 30 years now. (I’ve got the worry lines to prove it!) And thinking back, I’m kind of blown away that how, over many of those years, not many of the fundamentals have changed.

Vehicles have been sold and purchased pretty much the same way over these many decades. Everyone advertised the same way and most likely changed their marketing tactics based on the numbers board in the sales office at the end of each month.

Sometime around the mid to late eighties, we got the fax. This machine revolutionized the way we managed administrative business and though we were more efficient with sending documents, the way we sold our vehicles did not really change in any way.

Jump ahead a decade. By the mid-nineties, this thing called the “world wide web” was starting to creep its way into our workplace. While originally the internet was predominantly used for mailing lists and email, it wasn’t long before you could shop online or even post a blog (the term “weblog” was coined in 1997).

In business, you were well ahead of the game if used Yahoo or better yet, your business had a web page.

But again, in the auto world, the way we bought and sold vehicles remained relatively unchanged. In 1997, a little known company out of Menlo Park, California registered a domain and Google.com was born.

By the mid-2000s, Google had started selling ads using a thing called “keywords” and somewhere in a Boston college dorm room, a twenty something kid named Mark Zuckerberg launched The Facebook.

By the end of the following year, Google had close to 60 million pages of data, and was leaving their competitors like Yahoo!, AOL and MSN in the dust. Y2K hit…and missed.

By the mid-2000s, Google had started selling ads using a thing called “keywords” and somewhere in a Boston college dorm room, a twenty something kid named Mark Zuckerberg launched The Facebook.

In just 60 short months — a term shorter than your average loan today — our world as we had known it had become infinitely smaller. But it didn’t stop there.

By the end of the first millennial decade, everything moved to the palm of our hand. We entered the mobile revolution, and tablets and phones equipped with the Internet gave us access to incredible amounts of data and changed how we interact, share, discuss, converse, shop and sell.

Even the automobile itself has caught up to the way the world works. The connected car is the ultimate in driving experiences. In 1996, OnStar offered us the first glimpse into a connected car service and showed us what being connected to anything outside the vehicle while driving felt like. In the mid 2000s, we were introduced to vehicle health reports and GPS direction services.

Even over just the past ten years, our technologies have become more sophisticated and our vehicles have now followed suit.

But even with advanced technologies, dealers are faced with challenges unlike any other time in the history of the automobile. How do you sell to a new, more sophisticated and educated consumer?

How do you sell to a consumer who has little or no desire to come to your dealership or even test drive the vehicle? How do you market your vehicles to the masses using all the social technology platforms? How do you communicate with the online customer to ensure they buy from you and not your competitor down the street? How do you know if you are doing it right?

More importantly, how do you fix it if you think you’re doing it all wrong?

And therein lies the question — why are we so strongly opposed to adopting and implementing new strategies while the rest of the world keeps changing around us?

Back in 2010 when I joined SCI, I was a complete newbie to the world of digital marketing. I literally had to learn an entire different side of the business.

We learned that leads close higher when a dealer sends an initial “quality” response. We’ve also learned that close rates decrease (yes decrease) when pricing isn’t provided by the dealer when requested by the consumer.

First thing I discovered is that technology and digital marketing are completely separate businesses, and I knew that only by absorbing everything I needed to know about digital leads would I be able to make the right decisions for the business. I’ve always said you don’t know what you don’t know until you realize what you don’t know. And I now know what I know only by admitting what I didn’t know back then.

When you do something over and over again, it’s only natural that you learn a thing or two. After processing over 140 million digital leads since 2006, even I’ve learned that there are data stories behind every lead and every lead gives us insight into the marketplace.

We learned that leads close higher when a dealer sends an initial “quality” response.

We’ve also learned that close rates decrease (yes decrease) when pricing isn’t provided by the dealer when requested by the consumer.

One of the key insights, based on our North American research regarding third party digital leads, is that they are not all created equally.

There are quality lead providers and others, well…not so much.

Not unlike a sales team, they need to be managed and tracked for performance. I would encourage Canadian dealers to continue to learn and really understand the digital lead business to ensure they remain in control of their customer’s experience and don’t inadvertently give it away.

We all know digital leads originate from three main sources: dealer websites, OEM websites and third party lead providers (TPLs).

Third party lead providers were established in the dot.com boom, back when bricks and mortar were supposedly going away and all physical facilities were unrequired overhead. When the bubble burst in early 2000s, many of these U.S.-based start-ups struggled; in fact some went out of business.

Those who survived couldn’t access more capital, so instead focused their efforts south of the border and didn’t expand north.

That decision is, in essence, what created the oligopoly-esque third party lead business here in Canada and, while the third party business in the U.S. has far more providers, it’s most likely what has saved the Canadian marketplace from some of the issues that plague our American counterparts.

We know that some of the U.S. third party lead providers sell digital leads three and four times over, making money hand over fist at the expense of the unsuspecting dealer.

When it comes down to it, dealers are risking their customer’s experience, and, ultimately, their brand, by handing the first impression of it over to some third party lead provider.

In fact, our research shows that over 63% of digital leads in the U.S. are sold to two or more dealerships by those providers. Think about that — dealers believe they are paying top dollar for quality leads when in fact those leads are also being sent to other dealers with the same belief.

While this is not common practice here in Canada, there needs to be an understanding of the potential pitfalls of the business. They say you never get a second chance to make a first impression.

Ask most dealers and they will tell you that controlling the customer experience — more importantly, their customer’s experience — is a key component to the success of their business. In today’s digital age, there are far too many opportunities for customers, especially those online, to be influenced by external forces — vehicle reviews, dealer reviews, likes, first impressions and no-hassle buying sites.

In the U.S., the routine practice of selling a single lead to multiple dealerships has had a significant negative impact on the customer experience.
That potential customer is now being contacted not just by you (although you may have listed the vehicle), but by several other dealerships that have vehicles similar to yours, who, like you are just trying to gain market share.

Doesn’t exactly scream great customer experience, does it?

When it comes down to it, dealers are risking their customer’s experience, and, ultimately, their brand, by handing the first impression of it over to some third party lead provider.

Now let me be completely clear. There are some really good third party sites in our industry. A small number may actually provide you leads that close at a higher rate than your OEM’s website.

That said, I would recommend that you ensure the provider you are using is right for you and your store or dealer group.

I started this article talking to the importance of education and its significance in ensuring we are poised for success, both in life and in business. We know there are lessons to be learned with the way the third party lead business is handled and understanding these lessons are key to ensuring that you as dealer make the right decisions for your business.

Over the next few editions, I will be exploring the digital lead business more in depth, providing you with insights on areas you need to be aware of. We need to learn from the U.S. business and hopefully avoid some of the challenges they have had over the past 10 years or so. As they say “Learning from your mistakes makes you smart. Learning from other’s people’s mistakes makes you a genius.”

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Canadian auto dealer