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AutoNation Says 'Peace Out' to Third-party lead providers

Daniel J. Mondello

Refresher
Oct 17, 2011
181
49
28
First Name
Dan
http://www.autonews.com/article/20140417/RETAIL07/140419827/autonation-stepping-away-from-third-party-leads

My organization is currently only working with one major third-party provider (Edmunds) and we are seeing the results and closing rates of these leads dwindle to near nothing levels. What third parties do you guys and girls out there still believe add value?

My faith in these providers is gone and even edmunds is in line for the guillotine (probably next month).

Just curious to hear what you Refreshers think still works.
 

ddavis

Sr. Refresher
Jun 28, 2011
1,493
491
113
First Name
Doug
Daniel, I didn't buy leads from any source including the third party leads from the manufacturer. They all are low percentage. I wanted my guys to work leads that would close at 20% or better not 3 to 6%. We were utilizing all of the phone lines, computer drops and desk space and couldn't afford to chase poor performing leads. I was locked in to ISMs working cradle to grave. It might be much different if you have clerks in a BDC but I haven't personally seen these operations closing at high percentage rates.

I don't give AutoNation much credit. None of their stores, in DFW, are market leaders. We had three AutoNation stores that were direct competitors and we sold more cars, over the internet, than those three combined. You wouldn't last a month in one of their dealerships. They stifle inventive people. They buy market leading stores and turn them into mediocrity.
 

reverson

Jr. Refresher
Mar 21, 2012
288
317
93
First Name
Ryan
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!
 
Reactions: 6 people
Mar 31, 2014
3
0
0
First Name
Sam
reverson,

I agree with you on several points, but not on all.

Just because a car shopper submits a lead through your website does not mean that you are not competing with other dealerships for your business. It is quite easy to submit leads to multiple dealership websites. Lots of shoppers will search google for "used toyota camry Dallas" and submit leads on all of the pages that pop up in the top 10. That might include your dealership, the dealership down the street, and also a few third parties.

Your point about 3rd parties helping smaller dealerships to compete with larger stores is totally right. If you price well and take good pictures, you can perform just as well as large dealerships on 3rd party sites, at least on a per unit basis.

It is important to remember that some 3rd party sites do more to take away from your store's brand equity. Sites like AutoTrader, Cars, CarGurus, etc have advertisements on VDPs, SRPs, and everywhere else. Lots of times, these ad spots are dedicated to retargeting ads. That means, if the shopper has already searched for "used camry dallas" and navigated around to a variety of pages before going to the 3rd party, it is likely that ads for competing dealerships will show up on the VDP. I have personally seen this on many third party sites.


- Sam
 
Last edited by a moderator:

Daniel J. Mondello

Refresher
Oct 17, 2011
181
49
28
First Name
Dan
I don't give AutoNation much credit. None of their stores, in DFW, are market leaders. We had three AutoNation stores that were direct competitors and we sold more cars, over the internet, than those three combined. You wouldn't last a month in one of their dealerships. They stifle inventive people. They buy market leading stores and turn them into mediocrity.
http://www.autonews.com/article/20140417/RETAIL07/140419814/autonation-says-q1-net-income-rose-15-to-95-1-million

Yeah Davis... You're right... what was I thinking...? They are so mediocre...

big-pile-of-money-300x245.jpg
 

Jeff Kershner

Founder
May 1, 2005
3,484
1,080
113
First Name
Jeff
http://www.autonews.com/article/20140417/RETAIL07/140419827/autonation-stepping-away-from-third-party-leads

My organization is currently only working with one major third-party provider (Edmunds) and we are seeing the results and closing rates of these leads dwindle to near nothing levels. What third parties do you guys and girls out there still believe add value?

My faith in these providers is gone and even edmunds is in line for the guillotine (probably next month).

Just curious to hear what you Refreshers think still works.
Dan, what has you making this decision?

What has caused you to "loose faith"?
 

Daniel J. Mondello

Refresher
Oct 17, 2011
181
49
28
First Name
Dan
Dan, what has you making this decision?

What has caused you to "loose faith"?
Jeff, the quality of the leads has plummeted but the price continues to rise.
I believe the best internet leads are homegrown on a well-built, highly-optimized dealership website, where I can stand out not just with pictures and low prices but with an improved overall shopping experience. Plus with the money saved not spending on Cars, Edmunds, or AutoTrader, we can focus more attention and dollars on digital advertising focused on our own brand, store, and value proposition.

Not too mention the fact that I hate competing for organic ranking with the 3rd-parties and like even less to fund them.

Why pay to get 200 True Car leads per month (2% of which may come in and buy) when I can work a nice PPC budget and connect shoppers directly to my inventory or vehicle incentives page(s)?

I believe the era of the third party is heading for extinction (rightfully so).
 

Jeff Kershner

Founder
May 1, 2005
3,484
1,080
113
First Name
Jeff
Dan, I see you're placing Classified Sites like AutoTrader.com and Cars.com into the same category as 3rd Party Lead Gen services/aggregators like Dealix and Autobytel. As Mike Jackson seems to be referring to in the article.

I personally separate the two out. They're different services all together - http://forum.dealerrefresh.com/f43/what-3rd-party-lead-exactly-lets-come-conclusion-3618.html

"I believe the era of the third party is heading for extinction (rightfully so)."
That's a bold prediction IF you're referring to Classified websites like AT and Cars (another reason I believe it's best to separate Classifieds from Lead Generating services.)

Whether it's Lead Gen or Classifieds, I don't see either-one heading for extinction anytime soon.

When referring to Lead Generating services like Autobytel and Dealix, for many dealers I believe is still a valid strategy and CAN be rewarding when worked properly (15-20% closing ratio).

Consider now the ability to (geo) conquest, target customers looking at a particular vehicle (OEM $$ program) while using intelligent data to determine the customer intent/ability to purchase the vehicle they submitted the lead on - resulting in a solid closing ratio with an ROI way into the green.

Why would a dealership not consider this?

 
Reactions: 1 person

Daniel J. Mondello

Refresher
Oct 17, 2011
181
49
28
First Name
Dan
I was keeping my definition of "third paty leads" consistent with how they're defined in the auto news article. I agree there are definite differences.
 

Daniel J. Mondello

Refresher
Oct 17, 2011
181
49
28
First Name
Dan
reverson,

I agree with you on several points, but not on all.

Just because a car shopper submits a lead through your website does not mean that you are not competing with other dealerships for your business. It is quite easy to submit leads to multiple dealership websites. Lots of shoppers will search google for "used toyota camry Dallas" and submit leads on all of the pages that pop up in the top 10.


- Sam
Really?