Exactly one year ago, Dealer Marketing Magazine covered this very same topic on third-party Internet leads. At that time, we offered a Whos Who perspective so readers could get to know the various players in the arena and determine if they had something to offer your dealership.

Today, there is little doubt that third-party Internet lead providers offer a valuable service. In fact, they are responsible for providing as much as 68 percent of a dealerships total new-vehicle Internet leads¹. So the focus present day is not so much on what the provider does, but on what your dealership can do to ensure higher quality leads that ultimately convert to real customers.

In this issue, well share the views of several industry experts to determine why your shop may want to take a fresh look at third-party Internet leads. Plus, well offer some suggestions on how you can make these leads more profitable.

A review of the players

Many dealers are already familiar with some of the big names in online buying services. New players and new technologies continue to emerge, but for this article well focus on some of todays most prominent new and used vehicle lead providers. (Refer to the guide on page 26 for a more comprehensive listing of third-party Internet lead providers.)

On the new-vehicle side, youve got your lead aggregators such as Dealix, Autobytel, AutoUSA, and CarsDirect, who gather leads through scores of partnerships and search strategies-they cover virtually the entire World Wide Web to find automotive Internet users (AIU) who can be delivered to your doorstep.

Then youve got your online automotive classified Websites, including AutoTrader.com and cars.com. While these sites are best known for helping to list and sell your pre-owned vehicles, the tools theyre making available today are effective at helping dealers sell new cars, too (cars.com now delivers new car leads through their search engine-generated NewLeadsPlus program). The third major category includes information sites such as Kelley Blue Books Kbb.com, Edmunds.com, and MSN Autos, to name a few.

What goes on behind the scenes of the Internet lead-generating business can be a bit baffling. The fact is, very few of these providers work independently. In many cases they leverage each others expertise. For example, information sites like Kelley Blue Book often provide leads directly to dealers who sign up for their services primarily by linking Automotive Internet Users (AIUs) directly to a dealers website through an online display ad. But the information sites also partner with the aggregators to distribute customer leads to dealers who sign up for the aggregators services. Take for example lead aggregator Dealix, who partners with Edmunds, AOL Autos, Woman Motorist, Kelley Blue Book, Yahoo! Autos, MSN Autos, and hundreds more. Other aggregators partner with some of these very same sources.

What this means to you is that although it may get a little tricky picking and choosing the providers you want to do business with, youll likely end up with a wealth of qualified, often exclusive, new and/or used car leads that you probably would not have gotten without third-party help.

According to the J.D. Power and Associates 2005 Dealer Satisfaction with Online Buying Services Study^sm, auto dealers are increasingly satisfied with the online buying services who are providing them sales leads-this includes aggregators, online classifieds, and information sites.

However, we still see a large number of dealers who have decided to go it alone rather than rely on third-party Internet leads. They assert that their traditional advertising efforts-newspaper, TV, and radio-along with online leads from their OEMs, are doing a fine job at driving in-market customers to their websites and showrooms. While that may be true, these dealers are missing out on a proven method of attracting even more customers.

Load up on as many leads as you can handle

Certainly all third-party Internet leads are not going to result in sales for your dealership. The good news is that it works out often enough that the cost per sale of these leads is far lower than for traditional advertising, says Dennis Galbraith, senior director of digital marketing at J.D. Power and Associates. Recent data from J.D. Power show that the average dealer realizes a $220 cost per sale for new-car Internet leads from providers such as Dealix, Autobytel, and AutoUSA. The thing about that is that half of all dealers using those services experience a cost per sale of $140 or less, but 12 percent of the dealers using those services experience a cost per sale of $500 or more, which is getting into the area you would expect with traditional advertising. According to Galbraith, for the bulk of dealers as long as the close rates remain at least as good as they are now and the prices are relatively stable, then the cost per sale will be superior to traditional advertising opportunities.

Which lead providers are offering the best deals? Each presents a list of convincing reasons why they should earn your business. But whom you select your leads from may not matter as much as how many. Dealers, when they think holistically about this, shouldnt be asking should I buy Dealix or should I buy Autobytel or should I buy AutoUSA? The real question should be should I buy all of the leads that I can handle? Galbraith adds that if youve got the staff to handle them, then you should probably buy them- and then think about your traditional advertising.

Get the best lead for your buck (or your twenty bucks)

Dealers now pay anywhere from $5 to $30 per lead. Some leads are better bargains than others, but what good is bargain shopping if youre receiving a bunch of leads that are nearly impossible to work.

Dr. Lloyd Richardson, president of the Association of Automotive Internet Sales Professionals (AAISP), offers his number one consideration when looking for quality leads: Are those leads qualified? Is it a valid phone number, and a valid email address? Richardson says that the best lead providers will check before they forward them on -- others will not. But he also reminds us that validation has its limitations. [Providers] cant be responsible if an individual happens to be thirteen years old and is interested in an $85,000 roadster-theres no way they can screen that out-but they can obviously indicate whether or not its a valid email or phone number if they take that extra step.

Another way to secure worthwhile leads is to look for providers who deal with high quality auto shoppers. We refuse to use information from shoppers who are responding to email campaigns, and we never promote names that come to us from sites that encourage the submission of numerous additional requests after a first choice was already sent in, says Jay Andres, director of operations at AutoUSA, a leading aggregator with nearly 5,000 new car dealer customers. Ultimately, we believe that our success is limited only by how successful we can help our dealer partners become. Thats why were so insistent on providing first-rate, closable customers.

David Kain, founder and automotive Internet training specialist at Kain Automotive, Inc., shares his thoughts on securing quality leads from a reputable provider. I would look at leadership, how the company is structured and if they have a long-term position in the market. If you look historically at the leading players, these are companies that were born from a lot of dealer interaction. He says you should also look at how much flexibility you have in selecting your leads. If you look at the Dealix model, for example, I have the ability to pick up to four radiuses. That really helps me, particularly if Im trying to place Mercedes Benz vehicles into a demographic versus if Im a Suzuki or Kia dealer trying to place vehicles into a different demographic. He says that you should be able to pick leads based on geographic areas where your brand(s) are most in demand. He also points out the advantages of having tools that let you shut off hot commodities such as a Saturn Sky or Mustang GT-vehicles that you could presumably get a large volume of leads for, but dont have the inventory to support it. It costs me more, it provokes my salespeople who would be working those leads, and it might frustrate the customer who doesnt get the level of service they might get otherwise.

In Kains opinion the quality of leads has been improving steadily. The lead providers are feeling a responsibility to provide better quality leads because they feel that is core to the longer-term relationship. With that lasting relationship in mind, the majority of these new-car lead providers continue to invest in technology to improve filtering, dealer customization and validation of leads. They look for new and promising partnerships within the industry. The ones who really shine deliver valuable dealership training, management reports and regular service upgrades.

Online classified services are also busy making improvements to match up quality customers to their member dealers. According to the 2005 J.D. Power and Associates Dealer Satisfaction with Online Buying Services Study^sm, and the 2005 Used Autoshopper.com Study^sm, used vehicle service providers such as Autotrader.com, cars.com, and eBay Motors, are seeing closing ratios increase to 18 percent and above, which matches that of the manufacturer services. According to Galbraith, some of the changes that these sites are making (cars.com just launched its new and improved Website last month) will likely result in an increase of leads down the road. There is little reason to expect anything but continued growth in online classified services at the expense of print. He believes that dealers, going forward, will likely be even more satisfied with the level of traffic. The more dealers they sign up, the more listings they have- the more listings they have, the more shoppers theyll attract. Its like the better it gets, the better it gets.

Convert your contacts to customers

Dealers, not the providers, ultimately determine how valuable each lead will be by the way they treat or handle that lead. The 2005 Industry and Dealership eBusiness Performance Study (http://www.dealix.com/pdf/2005DealerPerformanceStudy.pdf) initiated by The Cobalt Group, parent company of Dealix Corporation, examined specific business practices differentiating low and high dealer performers. According to the study, dealers are experiencing a significant amount of lost opportunities when it comes to third-party Internet leads. How can your dealership convert more of these missed opportunities to sales? Consider the following four critical factors:

1) Response time and lead personalization:

The immediacy of the first response is very critical, says Dr. Richardson. That has been proven over and over again. Whether its an auto response, or an email response specifically addressing what the prospect has asked. He also adds that the next critical step is a follow up call. If you havent done those two things within 24 hours, your chances of working with that prospect have probably diminished by 95 percent. He says that statistics presented by third-party lead providers show that many leads are not answered for days and as many as 40 percent dont get answered at all.

Richardson also encourages dealers to place more importance on personalizing the contact. I think of it as every prospect is a campaign of one and treat that individual differently than any other person in the world. He emphasizes that your response must address the specific questions and interests of the prospective customer. Many dealers try to do this wholesale, with standard templates-unfortunately, they treat everybody the same. He says that if youre finding that you cant provide that personal touch for each of your leads, you may be trying to handle more leads than you should.

2) Lead volumes:

Whats the right number of leads your Internet salespeople should be working? According to Richardson, the conventional wisdom says that no one individual should be taking on more than 80 new prospective leads in a given month. He notes however, that this number will vary by circumstances and by the individual. Some of those youre going to sell, some of them are not going to be valid. But a number of them will not buy in that month, so they get carried over into the next month. He says that leaves a rep trying to maintain relationships with around 150 prospects. Theres a diminishing return when you try to handle more leads than your staff can do well.

3) Brand defection prevention:

The 2005 Industry and Dealership eBusiness Performance Study points out that a large percentage of third-party leads that convert to sales are not closed at the dealership that received the lead initially. The report suggests that there are a number of reasons for this, with the most obvious being price. But a large percentage of AIUs who submit new vehicle leads for a particular make/model nowadays may opt for a used vehicle, or change their minds mid-stream and go with another make. Brand defection from the intended make of the lead is widespread.

The study goes into a few examples of how the top 20 Internet dealers in the country today are able to sell a larger percentage of the leads they receive, says Dealix vice president of marketing, Dean Evans, The dealer must realize that once the customer sends a lead on a product they sell, that most customers are shopping other brands. They make an effort to not just sell the dealership and all the features of the dealership-free service shuttle, fast Internet sales transactions, low price, etc.-but they need to also keep selling the vehicle. For example why the Fusion is better than the Accord.

4) Internet lead management systems:

Keeping all your email contacts and follow up calls organized can become tremendously time- consuming as the leads pour in. Thats why a good Internet lead management system is so imperative. Lead management tools are important, and in most cases today, essential tools for auto retailers, says Evans. With the amount of messages-phone or email-that have to be processed on a daily basis, you have to have ILM technology to keep an Internet department productive and competitive. For example, if a lead is purchased today and the customer does not call you back after the first phone message or email you left, future follow up tasks may slip through the cracks. The dealer must make sure a good ILM tool is there to allow you to cost effectively stay in front of that prospect many times, says Evans.

All in all, third-party Internet leads can be a win/win proposition for everyone involved. However, theyre just one more prospect-capturing tool in your overall marketing toolbox. OEM leads are important- your Website is vital- and traditional advertising will likely continue to play a routine role in getting your dealerships name out there.

o help you manage and execute your robust marketing plan, you can choose from a growing pool of specialized vendors with expertise in the latest technologies, including the companies presented on pages 26 to 29. But keep in mind, says Richardson, Things are moving so rapidly that dealers need to be very careful that they dont jump on bandwagons. On the other hand, he says, if your dealership is not taking advantage of valid, solid, legitimate breakthrough technologies, youre going to be left behind. Its a matter or using some pretty sound judgment, doing your due diligence and making sure that youve made a good decision based on management information, not on the latest fancy brochure.

¹ The 2005 Industry and Dealership eBusiness Performance Study, presented by The Cobalt Group, parent company of Dealix Corporation (http://www.dealix.com/pdf/2005DealerPerformanceStudy.pdf)