I call it the Southwest Airlines philosophy. Southwest Airlines is one of few airlines that has decided not to pay to be listed on or pay commissions for Expedia, Travelocity, Kayak, etc. Instead they choose to focus all of their time and money on making their website as best of experience as possible for customers and then driving all of their marketing to their own website. They also pass some of the cost savings on to the customers and then back to themselves through higher profits.
By spending thousands of dollars each month with all of these 3[SUP]rd[/SUP] party lead providers, we are further fueling the beast and becoming more reliant on 3[SUP]rd[/SUP] party leads. What does the 3[SUP]rd[/SUP] party lead provider then do with our money? They use the money to further promote themselves and capture aka steal even more leads away from us. The more money they spend on advertising, the more popular they become, and soon they can justify aka strong-arm the exorbitant rate increases that autotrader and the others demand.
Meanwhile, the conversion ratio of leads (# of leads / # of website visitors) on your own website is exponentially higher than that of a 3[SUP]rd[/SUP] party lead provider because you’re not competing against other dealerships for a customer’s attention. The closing ratio of leads (# of vehicles sold / # of leads) on your own website is significantly higher than that of a 3[SUP]rd[/SUP] party lead provider because the customer has bought into your dealership as a brand and wasn’t distracted by other dealerships or filled out leads for multiple dealerships at the 3[SUP]rd[/SUP] party site. So if all the key performance indicators on your own website are better, why not focus on driving more traffic to your website? On autotrader and cars we’re competing primarily on price, whereas on our own website we can offer them a far superior user experience and sell them on our dealership's unique selling propositions and why they’re making a smart choice choosing us. Then the transaction becomes much less about price and a commodity and more about us as a company and what we have to offer.
There have been quite a few dealers in recent years to cancel all autotrader, cars.com, etc advertising spending and instead invest a portion of back into their own internal marketing spend and then the rest of the savings can be translated into better prices for the customers and higher grosses for the car dealership which then creates a snowball effect of repeat and referral business. These dealers are still sticking to that decision, so it must have worked for them! And it’s not because they are old-school and not a fan of the internet, they are still investing heavily in their internet presence just not on 3[SUP]rd[/SUP] party lead providers. I believe Todd Caputo's Used Car King would be a good example of this.
However, I do concede being on these 3[SUP]rd[/SUP] party lead provider sites does allow a smaller dealer to compete with dealers all across the country and give them a chance at business they most likely never would have generated themselves. For a larger dealership group like AutoNation they are better able to shift their spending more on internal digital marketing and still maintain and hopefully increase their sales volume. It’s not necessarily an all or nothing thing either, in this article AutoNation is putting their toes in the water and slowly rolling back 3[SUP]rd[/SUP] party advertising not cancelling it all in one fell swoop because right now some of these 3[SUP]rd[/SUP] party lead providers are unfortunately a necessary evil until you can build up your own lead generating machine. I'm also not saying this strategy is right for everyone, these 3rd party sites are a necessary evil for many dealerships and markets to be able to compete effectively. It does seem like AutoNation may be bluffing a little bit as a negotiation tactic to lower their expenses.
Any dealer can choose to spend a ton of money on all of these 3[SUP]rd[/SUP] party lead providers and proclaim they’re doing a great job digital marketing-wise, however if you’re able to capture the same customers with your own marketing at a lower cost but a little more work…why not do it? That’s why every single piece of our advertising highly focuses on “View our entire inventory online at dealerwebsite.com today!” The next step for larger dealer groups is instead of splitting the traffic up several ways between the individual stores in similar geographic markets which does not conduce a good customer experience, dealer groups need to combine the inventory for all their stores on one group portal website to provide more of an “autotrader” experience. A larger volume of well merchandised inventory typically translates into more leads than several smaller separate inventory selections and gives the customer the experience they desire.
What’s even more exciting is we can compete online against autotrader.com, cars.com, and the like without even spending any money with them. Google, Facebook, and Youtube through Polk and Axciom data allow us to target “in-market” car shoppers and even drill it down to the make and model they’re shopping for. We just recently launched an in-house google display campaign targeting in-market lower end used car shoppers for multiple markets and have been experiencing great results.
I’m excited for the future and I think we as dealerrefreshers have a real opportunity to break further away from the pack and truly set us apart from our competitors, both in marketing and sales numbers. It’s easy to do what everyone else is doing, but if you want atypical results sometimes you have to be a little more innovative and forward thinking!