The 13th annual WardsAuto e-Dealer 100 indicates dealers are active participants in the growing digital marketplace where they engage customers, manage reputations and move the metal.
This year’s list, the industry’s first, shows Internet-driven sales of 148,657 new vehicles and 107,241 used for a total of 255,898in 2012. While that is a fraction of the 14.4 million U.S. light-vehicle sales last year, it’s a big increase from a total of 81,705 reported Internet-related vehicle sales in 2002, the second year of the WardsAuto e-Dealer 100.
For the ranking, an Internet-assisted sale is defined as one that stems from an online lead or handled by a dedicated Internet staff.
In reality, the vast majority of consumers use the Internet throughout their car shopping before they visit a dealership. Even at the dealership, some people use their mobile devices to comparison shop and such.
“Most dealers that have been in business for the last five or 10 years have really seen a significant shift in the way their consumers approach the car-buying process,” says Alec Gutierrez, senior market analyst at Kelley Blue Book in Irvine, CA.
“Pandora’s Box was opened long ago, and we’re just going to continue down that path until the transaction is going to become more centered online,” he says. “It’s not going away, especially since the millenials will become more predominant in terms of their share of the auto-buying public.”
“The market has changed in terms of how people consume media,” says Nicole Gignac, national sales director at L2T Media in Chicago. “Twenty-six percent of an average adult’s (age 18-49) time is spent with the Internet. However, the Internet only received about 16% of the average franchise dealer’s ad spend in 2012.”
Gignac says 80% of car buyers begin their search online and now visit an average of only 1.5 dealerships in the process, compared with 4.5 showrooms in past years. “The consumer is finding out everything they need to know about the vehicle online before they even go into a dealership,” she says.
Third-party sources such as KBB.com, Cars.com, Edmunds.com and AutoTrader.com let customers shop products, features and price, long before they set foot in a showroom. Consumers are using their social networks to inform their decisions. They don’t necessarily have to rely on the integrity and trustworthiness of a business.
Individual dealership websites have become much more interactive than in the early days, when they were little more than static digital sales brochures.
“The consideration process begins online and it’s enabled by people using their social networks such as Facebook and Twitter to help make better, faster and more satisfying decisions,” says Bill Parkes, executive vice president and chief digital officer at NFusion, a digital-centric marketing agency in Austin, TX.
“They look to their friends and peers to decide what to buy and from whom,” he says of online car shoppers. “If you can create a very positive experience for your customers, they can be advocates on your behalf.”
For Fitzgerald Auto Malls, which operates 17 franchises in Florida, Maryland and Pennsylvania, it’s all about being ISO 9001 certified. That is a measurable standard of excellence usually applicable in the auto industry to auto makers and suppliers. But Fitzgerald Auto Malls founder Jack Fitzgerald decided to seek the certification for his business group.
“It has allowed us to develop processes and a process-based management,” says Bill McClure, Fitzgerald’s director-digital sales and marketing. “It’s about continual improvement and being flexible and meeting the needs of the customer. For us, it’s a total customer focus.”
Fitzgerald operations appear four times on the WardsAuto e-Dealer 100, at No.8, No.25, No.30, No.43 and No.98.
Fitzgerald’s process directs every Internet lead to the store’s Internet distribution department in Gaithersburg, MD. Five full-time employees use tools developed by the company’s in-house information technology staff to forward the queries to a manager at the appropriate store, who then hands the leads off to product specialists.
“If a lead was assigned to our Chrysler-Jeep store in Clearwater, FL, and after 15 minutes it hasn’t been (acknowledged), a red flag comes up and we immediately call the manager and say you have to get on this ASAP,” McClure says. “If a customer walks in the front door, you wouldn’t ignore him. Guess what? The front door today is digital.”
He spends 40% of the Fitzgerald advertising budget on digital tools, including manufacturer websites and third-party lead generators. He says the Internet regularly generates 50% to 80% of new opportunities, but he keeps his financials close to the vest.
“Our cost per sale is part of our secret sauce,” McClure says. “Because we are ISO-certified and a posted-price dealer, we have to be lean and very efficient. If the average dealer is spending $400 per unit to advertise and market their inventory, I can guarantee that we are much less.”
Fitzgerald’s social media strategy relies heavily on Facebook. “We offer customers the opportunity to ‘like’ us on our Facebook page, and we tell them this is how you can communicate with us (with compliments or complaints),” McClure says.
Fitzgerald has 1,400 Facebook fans, but when they are “tagged” in photos – with their permission – their reach extends to 250,000 people. “There’s not a week that goes by that I don’t get an email from a sales manager who says a customer was referred by their friend who is our Facebook fan,” McClure says.
Planet Honda in Union, NJ, is No.15 on the WardsAuto e-Dealer 100 with 3,496 new and used units (out of 6,390 total dealership vehicle sales) and more than $6.5 million in gross sales attributable to the Internet.
“We made a very large investment in the last year in pay-per-click and display advertising,” says Bill Feinstein, Planet Honda’s president and dealer manager. “About 45%, or over $1 million, of our annual ad budget is Internet-based. I expect that number will go to 60% to 65% over the next 12 months.”
His store was one of the first local companies to advertise on Pandora Internet radio. “When they came to us it was an entirely new proposition; no one had done it before,” Feinstein says. “But we looked at their listenership and realized for us to get the same reach in terrestrial radio, we would have to buy the top three stations in New York at five or six times the cost.”
The bulk of Planet Honda’s leads are generated through its own website, search engine optimization and pay-per-click advertising on Google, Bing and Yahoo. The dealership benchmarks Internet cost-per-sale at under $300 per unit, with a “comfort zone” closer to $250.
“We work closely with our third-party vendors to make sure they stay within those ranges,” Feinstein says. “If they don’t deliver quality leads or closing percentages, then we have pretty interesting conversations with them.”
It’s not enough just to look at cost per sale, he says. When evaluating a third-party lead, he examines cost per lead and especially, net gross profit per sale.
“When I take out the fee, what’s left over for me?” Feinstein says. “You could spend only $200 per car with a lead provider, and that seems like a pretty good deal. But if your average gross profit on the vendor is $300, that’s not a particularly profitable arrangement.”
Feinstein tracks average gross profit per vendor as well, because all vendors are not created equal. Also affecting gross profits are vendors’ “rules of engagement” that include how many dealers are in the program, how close the retailers are to each other and how many leads are sent out to dealers.
“We’re very open with our vendors in terms of the numbers they need to hit to remain our partner,” Feinstein says.
While third-party vendors represent the heavy artillery that can deliver new sales leads, social-media sites like Twitter can help dealers engage with customers and manage their reputation. The Pew Research Center reported last year that 15% of online adults use Twitter to communicate.
“Every day I search Twitter to see what people are saying about Planet Honda,” Feinstein says. “Recently someone tweeted something that they were upset about, and it turns out that they had a right to be upset.”
A salesperson had failed to deliver on a promise, but within an hour Feinstein identified the customer to make things right. “An hour and twenty minutes later, the customer is tweeting how happy they are,” he says. “To me, that’s the level of dedication that you need to have if you want to be successful. It’s real-time marketing.”
A key element of Feinstein’s strategy is constant learning. “If you’re not reading, you’re not leading,” he says. “I read business books and magazines every week to see what’s working or not working for other people.”
By keeping up with the latest news and trends, a dealer could learn, for example, that if his website runs on Flash technology it may not display on iPhones and iPads.
The Al Serra Auto Plaza in Grand Blanc, MI, spends about $40,000 a month on Web advertising, which translates to 35% of its total advertising budget.
“We spend money on search-engine marketing with the endorsed programs for the manufacturers’ sites because we get some participation from them,” says Serra Internet manager Jeff Jones.
“We don’t spend as much as other dealers might because we choose to put more money into our 16 manufacturer and dealership websites,” he says. “These do a good job of helping us dominate the page and stay in the top scroll.”
Serra, which ranks No.84 on this year’s WardsAuto e-Dealer 100, began with a 10-person dedicated Internet sales team. Today, 50 salespeople handle every type of lead. New hires at Serra must be tech-savvy and not afraid to get out of the office.
“The best people are the ones that are able to be walking from one building to the next, looking at their smartphone and reaching out to a customer,” Jones says. “These guys have become very mobile. They have to be able to go out on the lot, take a picture of a car, send it to the customer, text them. The Internet department isn’t about sitting at your desk anymore.”
Jones uses Facebook and Twitter and Wordpress blogs to publicize everything from availability of the Jeep Wrangler “Oscar Mike” Freedom Edition to Serra’s sponsorship of the YMCA of Greater Flint’s annual 5K Santa Run.
He sees buzz-building potential in the use of YouTube to follow Serra’s A-Team around the region helping customers and non-customers alike understand complicated vehicle features.
JM Lexus in Margate, FL, near Ft. Lauderdale, bills itself as the world’s largest Lexus dealer and is No.23 on this year’s list. JM sold 4,714 new cars in 2012 with 1,683, or 35.7%, attributable to the Internet. More than 46% of the store’s 2,328 pre-owned sales came from Internet leads.
Internet Director Robert Glasser diversifies his ad spend among re-marketing tools, banner ads on third-party dealer ratings and automotive marketplace websites.
“I like ads that target competing brands,” Glasser says. “On Cars.com, if someone is searching for a Mercedes and they are in our area, they’re going to see a JM Lexus banner.”
While digital return on investment is hard to nail down, Glasser says he knows he is getting the desired result when a click-through ends up on the JM Lexus website.
“It’s way different than happening to turn to your dealership’s page in a newspaper,” he says. “The publications would like to count that as eyeballs seeing your ad, but in reality there’s no evidence that there was any interest.
“This is opposed to a call-to-action where somebody actually clicked through and we can be comfortable that we’re getting some result for our money.”
Glasser says JM Lexus’s Internet presence attracts prospects from out of the state and, sometimes, the country.
“We sold an SUV to a customer in Kazakhstan,” he recalls. “He was a shepherd on the side of a hill on his laptop. He typed in the word Lexus, and the next thing you know he’s looking at one of our pre-owned vehicles. Three days later, the funds are wired into our account. Two days after that, the freight forwarder is here to pick up the car.”
While the Internet is a proven sales tool, many dealers need to persuade employees to break their old habits, say Internet experts.
“Our sales managers were traditional, looking out on the lot for the next ‘up,’” says Fitzgerald’s McClure. “Their thinking was, ‘Run out on the lot and get a hold of that customer. I don’t want him waiting any longer. We can get to those Internet leads (later).’
“We convinced leadership to let us train a few sales associates who wanted to (work with Internet leads),” he says. “Within a year, those people became the highest-performing and highest-paid sales associates. Guess what happened? Everybody wanted a piece of the pie!”
At Serra, “we had a lot of salespeople that didn’t want to raise their hand to be a part of (Internet sales) because they thought it was too much work chasing unresponsive leads and customers that want information but never come in,” Jones says. “Our challenge is to make sure that everybody in the dealership recognizes these leads as good customers.”
Internet marketing and sales are hard for many dealers because the thinking involved is different from the past,” NFusion’s Parkes says. “But the genie is out of the bottle, and he’s not going back in.”