Regarding 3rd Party lead Providers, Do Poor Automotive Market Conditions Effect Their Value Proposition to Car Dealers?

For those of you reading this who know me, you probably think I am generally negative on buying leads from 3rd party aggregators and lead producers... Nothing could be further from the truth! I have been using 3rd party supplied leads since 1995 and will continue to recommend a managed approach to lead acquisition that incorporates multiple 3rd party suppliers who meet my dealer management and targeting requirements.

Personally, I recommend that dealers look at all their marketing investments by category (not supplier) each month with a critical thinking and analysis approach to the question: "With a total marketing and advertising budget of $XXX,XXX.XX, are we optimizing the allocation mix for maximum impact on our objectives...". When I manage or consult with dealership Internet departments, there is always some level of purchased leads that become part of the overall budget. Why? Because it is a logical and rational decision based on a methodical analysis of historical ROI and it is part of having a comprehensive digital marketing strategy designed to ensure a minimum threshold of unit sales and optimized on a continuous basis to drive down Marketing and Advertising Cost PVR.

For example, it seems illogical to me that any dealer would buy leads from a supplier like AutoUSA or Dealix for years and years... Then a decision is made to "stop buying 3rd party leads" and a source of 5, 10, 15, 20, 30 or however many deals sold each month to leads from these suppliers is simply eliminated... What about the salespeople who have been selling cars to those leads? What arrangements have we made to keep them employed with our dealership by replacing those leads with same or better leads from somewhere else? Are we just going to hope that we figure out this digital marketing thing fast enough that the leads we just cancelled will be replaced with better home-grown leads?

I don't get it... Although I have done it, suffered the negative consequences, and then in hindsight saw how ignorant I was to shut off previously good long term partners... You know what makes a LOT MORE SENSE? First, if you are going to generate your own leads, prove that you can do it first. If you have already been increasing your self-generated leads to a point where you are comfortable cutting back on the marketing budget allocated to 3rd party leads, then consider the following scenario as an example to illuustrate a concept, an approach to this issue:

OLD 3rd Party Lead Buying Budget:
150 leads (<35 miles) each month from Dealix @ $20 = $3,000
50 leads (<35 miles) each month from AutoUSA @ $20 = $1,000
50 New Car leads each month from Autobytel @ $20 = $1,000
25 leads (metro market) each month from Jumpstart @ $20 = $500
100 leads (<35 miles) each month from iMotors @ $20 = $2,000
--------------------------------------------------------------
Total 3rd Party Lead Budget (OLD) = $7,500.00

NEW 3rd Party Lead Buying Budget:
50 Truck and SUV leads each month from Dealix @ $20 = $1,000
25 leads (20 miles) each month from AutoUSA @ $20 = $500
20 Used Car leads each month from Autobytel @ $20 = $400
25 leads (metro) each month from Jumpstart @ $20 = $500
50 leads (20 miles) each month from iMotors @ $20 = $1,000
--------------------------------------------------------------
Total 3rd Party Lead Budget (NEW) = $3,400.00

In the above scenario, we reduced the 3rd Party Lead Budget by OVER 50% and increased both the quality of the total lead mix, and better aligned the vehicles being sought by the customers submitting leads we are buying with what we need to sell. After all, if you are a Toyota dealer, buying Prius leads may have zero impact on your store's total Prius sales... So why would you buy them? Alternately, I know a lot of Toyota stores that should probably be buying Tundra and Sequoia leads right now!

I have seen far too many dealerships have their sales negatively impacted by managers making decisions about marketing strategies and tactics they know very little about. Too many people in the car business want to make sweeping policy statements that portray decisions about the subject of 3rd party leads as being black and white. In the real world, we must optimize a dozen shades of grey to maximize our marketing efficiencies, sell more vehicles, and reduce our advertising cost PVR. Independently produced and supplied 3rd party leads can be managed with exceptional effectiveness to reduce their total cost and drive increased sales and ROI. But, before I go to far into this subject, please note that I have never worked for a 3rd party lead provider, I do not get spiffs or bonuses from them, and while I was at Courtesy Chevrolet from 2005 to 2007 I squeezed over $100,000 in account credits out of my stable of lead providers by tracking everything meticulously and having an administrative assistant who got 10% commission on all credits that we received in writing. In fact, I may be one of the most feared and despised automotive marketing professionals within the 3rd party lead industry.

Let me explain what I was referring to when I previously stated that dealers can manage their lead purchases from 3rd party providers. Any dealer signed up with Dealix can log into their Dealix dealer account administration tool and place check marks next to make, model, type, year and other variables that specify which leads on what vehicles you are willing to pay for... I've had months when I only checked the models I had too many of in stock, and my lead volume would go from 300 to 100 leads... And the bill reflected that reduction. So why would you shut off such a powerful tool, instead of using it to manage the resource, reduce your expenses and only get leads on the vehicles that you most need to sell?

Automotive Lead Exchange (ALE) lets dealers bid on leads by year, make, model, financing, geography and more... You cannot convince me that a Ford, Chevy or Dodge dealer in the current market conditions would NOT be able to capitalize on Truck and SUV leads within 20 miles of his dealership, and only from zip codes with average income levels over $100K a year.

Most members of ADM probably know my reputation for developing powerful and highly effective strategies and tactics that generate thousands of home-grown leads for dealers... But, you know what? If you really want to get good at generating your own leads while working at a dealership, then you need to study the way automotive lead providers generate leads. And what better way than to keep doing business with them, but scale the expense back by cherry picking the very best leads from them as you grow your own lead generating capabilities. If you take the time to visit the following microsite, you can go look at the Chevy section in InvoiceDealers.com and you will see who taught me how to design the site to compete with 3rd party lead providers, by becoming one!

http://www.Phoenix-Chevrolet-Dealers.com

When dealers and their managers tell me that they have stopped buying any 3rd party leads, I ask them 2 questions:

1. Which competitor now gets the leads from these suppliers for the customers that live within 5 miles of their dealership?

2. Correct me if I am wrong, but I see you have 150 new 2008 Pickup Trucks in stock, and it is almost October 2008... Have you decided that it is NOT a prudent and wise decision to buy leads originating from the area close to your dealership that have selected a New 2008 Pickup Truck?

Think... Construct a plan based on what you need or have available to sell, and then boil it all down to your best guestimate based on historical numbers. It simply does not make sense to fire a well run, high integrity 3rd party lead provider when you can manage which leads you are buying by vehicle, customer, location and other parameters that can be used to optimize your results.

What will you do with all the money you willl save?

Take the $4,100 you saved by optimizing 3rd party leads and reducing the fees, open up a Google Adwords account, and then create a Keyword targeted search advertising campaign. HOWEVER, only bid on keywords that your dealership's website is NOT organically ranked by Google within the top 5 free listing positions. That might use up around $1,500 to $2,000 a month if you are in a large market, far less in rural or less densely populated regions. Take the remaining $2,100 to $2,600 left from your 3rd party lead provider budget cuts and allocate $800 to a professionally produced monthly eNewsletter that goes out to your best 20,000 email addresses (I had over 200,000). Make sure you go with either Outsell or IMN because they are both whitelisted and they both do a great job. With the remaining $1300 to $1800 in your budget, create placement targeted Google Adwords campaigns using animated Flash based digital advertising (provided by your VMR at ADP Digital Marketing).

Use Google's placement targeted "add placements" tool to select about 100 popular websites where your ads will appear whenever anybody between 25 and 64 YO with an income of over $50,000 a year that lives or works within your Google "Metro" geotargeting area. For example, if you are a Ford dealer, get space to place your ads on:

Ford-Trucks.com
Ford.Autoextra.com
FordEdgeForum.com
FordF150.net
FordForum.com
FordForums.com
FordFusionclub.com
FordMuscle.com
FordPower.net
FordTruckWorld.tenmagazines.com
Stangnet.com
BlueOvalNews.com
MustangForums.com
F150online.com
SVTperformance.com
Corral.net
MustangWorld.com
AllFordMustangs.com
Stangnet.com
Explorerforum.com
FullsizeBronco.com
FordMuscle.com
ModdedMustangs.com
ModularFords.com
Blueovalnews.com
Mustangclassifieds.com
Blueovalforums.com
CrownVic.net
TheRangerstation.com
FordForum.com
ChicagoSVT.com
FordForums.com
S197forum.com
Powerstroke.org
MustangDreams.com
MercuryCougar.net
8Mustang.com
FordEdgeForum.com
F150forum.com
Forums.Stangnet.com
Forums.Corral.net
Forums.Vintage-Mustang.com
Classifieds.Stangnet.com

If you are a Chevy dealer, use your adwords account to advertise your dealership to customer in your market who viisit national websites such as:

ChevroletForum.com
GM-Volt.com
GMinsidenews.com
Chevy-Volt.com
SilveradoSS.com
ChevyCobalt.info
Chevy-Malibu.com, etc.
Chevelles.com
Chevellestuff.com
Chevettes.com
Chevrolet.jbcarpages.com
Chevy-camaro.com
Chevy.off-road.com
Chevyhhr.net
Chevyhiperformance.com
Chevyreviews.com
Chevytrader.com
Chevytruckworld.tenmagazines.com

And, there are many dealers selling any make of vehicles that would do well with the right advertisements appearing in front of local customers when they visit popular national websites like:

Carfax.com
MotorTrend.com
Autotrader.com
Autobytel.com
InvoiceDealers.com
Cars.com
CarSmart.com
Cartalk.com
FamilyCar.com
AutoMallUSA.net
Auto123.com
AutomobileMag.com
NewCarTestDrive.com
Car-advisor.org
Car-dealerships-by-city.com
Car-forums.com
Car-stuff.com
Caradisiac.com
CarandDriver.com
CarBargainsWeekly.com
CarBuyersNotebook.com
CarBuyingDiscounts.com
CarBuyingTips.com
CarBuyTip.com
CarCasher.com
CarCentral.com
CarComplaints.com
Carcraft.com
CarDealerCheck.com
CarDealersNearYou.com
CarDealersUSA.com
CarDealerz.com
CarDetective.com
CarDomain.com
CarFinderService.com
CarFolio.com
CarForums.net
CarGurus.com
CarGurus.com » Car overview pages, Middle center
CarGurus.com » User review pages, Middle right
CarJunky.com
CarLeasingsecrets.com
CarLoaninc.com
CarNut.com
CarPhotoAlbums.com
CarPictures.carjunky.com
CarPictures.com
Carpoint.com
CarPredictor.com
CarReview.com
Cars-Directory.net
Cars-Guide.com
Cars-on-Line.com
Cars.about.com
Cars.mylounge.com
Cars.qoae.net
Cars.stargeek.com
CarsandStripes.com
CarsCarsCars.blogs.com
Carsdirect.com
Carseek.com
CarSellersUSA.com
CarsforSale.classifieds1000.com
CarsforSale.com
CarsforSale.com » Car Search Results, Middle right
CarShowNews.com
CarSite.com
Carsmexico.com
CarsOnline-Ads.com
CarsPlusplus.com
CarSpyshots.net
CarSurvey.org
CarSurvey.org » All Car Pages, Multiple locations
CarSurvey.org » All relevant pages, Multiple locations
CarSurvey.org » Car Reviews Only, Top left
CarSurvey.org » Comments pages, Top left
CarSurvey.org » General site pages, Top left
Cartype.com
Carworks.com
Carzunlimited.com
CarzUSA.com

I just copied a few sites out of one of my dealer's Google Adwords account to list some examples above. There are well over a thousand automotive related websites that you can use Google Adwords to place your ads upon, and target them so you only pay to show your ads to local visitors from your dealership's market area when they visit these nationally popular website.

Plus, we have seen many examples where dealers create a high quality perception of their store within local groups of highly influential people that coworkers, relatives and friends turn to for automotive buying advice. When the office Ford freak sees your store's ads all over www.Ford-Trucks.com he starts telling people who ask him about where to get the best deal on a Ford truck to contact or visit your dealership. When a mother of 3 uses FamilyCar.com to look up the proper way to install child-care car seats and every time she goes there, she sees your dealership's animated but classy advertisement on the top of the home page, she starts to associate your dealership with all the qualities of FamilyCar.com that she appreciates so much.

Sometimes Google can make it challenging to find the best sites (they need to sell you space the dogs with excess inventory), but I have collected over 1,400 automotive website URL's that you can use Google Adwords to bid on website space and place animated Flash display ads (like the 2 San Francisco Ford Ads on ADM's home page), Click-To-Play Video Ads, Static image ads, text based ads and all kinds of eye catching creative displays to capture a car buyer's attention BEFORE they go to a 3rd party lead provider website and submit a lead!

In summary, 3rd party lead providers that provide dealers with the right management tools should be considered within your overall planning and budgeting in order to achieve the most effective automotive digital marketing results. Although buying and paying for leads carte blanche, without proper management of lead parameters is definitely a VERY BAD PRACTICE, many of the best lead providers now offer dealer self-serve administration tools that allow dealers to specify the leads they are willing to buy. Letting lead providers sell you leads on vehicles you can't get, submitted by people who live outside your market is simply a waste of money. But, when specifying leads on the specific model vehicles you need to sell the most, submitted by people who live and work close to your dealership, with an agreement to credit the dealership for duplicate and invalid leads, can be part of an effective digital marketing strategy.

As much as I am a proponent of dealer's developing their own online traffic, subsequent branding and allocation of advertising budgets towards digital advertising and away from other forms of advertising, I cringe whenever anyone suggests that dealers can generate their own "leads" at a lower cost than the cost of each lead purchased from independent lead suppliers. One of the biggest mistakes I see going on right now is when dealers take budget allocation away from purchasing leads instead of away from newspaper advertising and other media that car buyers no longer consume at the levels they did 10 years ago... I have personally managed several million dollars in search and online display advertising campaigns for the dealerships I was employed by, and now the dealerships that I serve as an automotive digital marketing consultant... I have RARELY seen any online advertising campaign that produces completed lead forms at a cost of less than $20 per lead. Now, I will also tell you that my personal experience is that self-generated leads typically result in a sale at 3 times the closing rate of purchased leads. Yet, despite the fact that a self-generated lead is worth at least 300% of a purchased lead from a 3rd party supplier, we still see dealers who mistakenly evaluate their online advertising camapaigns based on chasing a $20 lead bogey... This is simply the wrong way to evaluate online advertising, and every experienced professional in the digital advertising business that I get to speak with, and there's a lot of them, agrees with me that this is a major problem in our industry's transition from ad budgets heavily invested in newspaper, direct mail (dead tree shipments) and other declining ROI offline media into the newer, and rising ROI, online interactive medias...

IF we did not evaluate a newspaper ad with our dealership's URL listed in it by the amount of website leads that newspaper ad produced, then why would we evaluate our display advertising campaigns that features our dealership's ads on major websites visited by local car buyers, based strictly on how many leads the online ad generated? Do we advertise online for the sole purpose of generating Internet leads? Considering the consistent track record during the past 4 years that out of every 100 people that visit a dealership's showroom after visiting the dealership's website, only 19 of them contact the dealership by phone, web form (lead) or email prior to showing up at the store (J.D.Power AutoShopper Study)... Well, then evaluating online advertising by leads generated is at least 80% UNDERSTATED in measuring the actual value received by the dealership!