Part 1: Buying Opportunity – The Changing Landscape Of Third Party Sites

Series Intro

This is the first installment of a eight part series on the choices dealers have in leveraging independent Internet sites to acquire sales opportunities – leads and low funnel consumer traffic.

The foundation of any dealer’s marketing strategy needs to be a quality dealership website that is effective in converting traffic to sales opportunity – leads, chats, calls and walk-ins. You have more control of your brand message on your site than any other source, and opportunities will close at a higher rate than any third party source (except the price guarantee channels). However, a significant minority of consumers develop their brand and dealer preferences on independent sites before they engage your website – and then connect with dealers as “leads.”

The series, grounded in the latest consumer research and interviews with major providers and dealers, aims to update retailers on their diverse and rapidly changing options to buy sales opportunities from third party Internet sites. We will provide practical guidance on whether you should buy third party sales opportunities today, which services best align with your business strategy, and how to get the most from your spend on these services.

Part 1: Independent Sites in the Shopping Process

The most recent consumer research by DrivingSales, Autotrader and Google report that 2 of 3 new car buyers, and 4 of 5 used car buyers, rely on independent research sites and marketplaces as a key resource in their buying process. Consumers turn to these resources as a more trustworthy and objective source of information in their buying decision than either manufacturer or dealer sites – trusting the best of these sites by almost a 2:1 margin relative to dealer sites, according to the DrivingSales study. By positioning themselves as unbiased information sources to the consumer they have become an influence on consumer brand, vehicle and dealer preferences that manufacturers and retailers ignore at their peril.

As part of DrivingSales’ 2015 Automotive Customer Experience Study, 1,300 new car consumers were asked about which sites they used in their research and their perceptions of those sites in terms of helpfulness in their shopping process and in the quality of information presented in terms of trustworthiness, reliability and accuracy. The pattern one observes in the results is that, with the positive exception of Consumer Reports, consumers have a consistent degree of skepticism on the trustworthiness of all automotive sites. In terms of which sites they found most useful, OEM sites and Consumer Reports scored highest, but the research portals in general (Consumer Reports, Edmunds and Kelly Blue Book) were most successful in addressing the full range of consumer shopping tasks. As this was a survey focused on new car shoppers this likely suppressed the “helpfulness” scores of the marketplace and used car focused sites such as AutoTrader, CarMax and Cars.com.

Dealer sites as a group are clearly seen as an important part of the shopping process, but lagged all other sites in the trustworthiness score. Comments elsewhere in the study indicate that a primary source of concern is a combination of transactional “pushiness” when they engage dealers and the lack of transparency by some dealers in addressing the consumer’s primary task – pricing and availability. CarMax’s strong score on trustworthiness is an interesting data point on what can be accomplished by a dealer with a clear brand promise focused on transparency and trust.

Independent car portals and online marketplaces are as old as the Internet, but the consumer experiences and business models have been evolving rapidly in recent years and new types of sites have emerged and rapidly gained a consumer following. The general theme behind much of this innovation is the desire of the independent sites to attract more shoppers by empowering them with more information, and more control over the transaction, on their properties before they get to the dealership – starting with inventory status and price discovery but extending to any part of the transaction that does not require a physical presence.

The drive of the independent sites to attract more consumers with more information and control has lowered the control of the dealership over the transaction, and the dealership’s ability to maximize their margins. If the dealership ignores these sites they miss out on sales opportunities, but the cost of participating can rankle as the dealer is funding the industry trend that is directly impacting their ability to control their bottom line. Bring up the topic of the fees for the marketplaces and price discovery services in a 20 Group meeting and see the sparks fly. In this power struggle the consumer determines the winner, voting with their decision of which brand to buy, which dealer to work with and how to engage that dealer.

Some of the largest public dealer groups have initiatives to reduce the power of the independent sites by meeting the needs of online consumers with proprietary portals and a level of transparency of the transaction and consumer experience within their store network that the independent portals cannot achieve. However, this is not a path available to the vast majority of dealers and groups.

Not all shoppers are alike. In brand selection loyalty, emotion and image combine with different degrees of functional needs in narrowing brand consideration. When engaging dealers some consumers are tightly focused on price and payment but long term studies have shown as many, if not more, have a more balanced perspective – willing to pay a “fair” margin to dealers with a superior lifetime customer experience and reputation. Consumers across this spectrum self-select which Internet sites best align with their interests and dealers perceive these differences as they engage sales opportunities sourced from the different sites.

Where Do Leads Come From?

DealerSocket, with a CRM platform in several thousand dealerships, ran an analysis of the sources of e-leads seen across the dealerships in their customer base over the first half of 2015.

What one notices first is the diversity of lead sources for new and used cars used by dealerships, and that more than 2/3 of e-leads are acquired from third party sources. This is a view across their network so there will be significant variations by dealer depending upon with providers they work with.

After the dealer’s own website the next largest contributor are the marketplace sites such as Autotrader, Cars.com and eBay Motors, contributing 19 percent of volume.

Price confidence services and buyers clubs such as TrueCar, Edmunds Price Promise, and Costco contributed 15 percent.

Lead generators such as Autobytel and Dealix, whether purchased direct or though an OEM lead program, contributed 14 percent.

Direct lead flow from the dealer’s OEM website contributes another 14 percent.

Research portals such as KBB and Edmunds directly generated only 6 percent, but likely had a strong influence on the brand preference expressed through many of the other channels above.

The remainder of the volume (4 percent) comes directly from Google, Yahoo and a constellation of specialty finance and other sites.

This analysis is of the source of leads entering the dealer’s CRM – this not the same as saying that the lead was ultimately caused by that source. For example, consumers have typically visited several research sites before deciding which car to have priced, and which dealer to contact, through a Costco or TrueCar.

To get one’s fair share of leads through the portals and marketplaces, as well as directly to their stores, dealer’s still need to market their brand and merchandize their inventory. DrivingSales’ research identified the single most important factor in dealership selection was trust, and the largest influence by far on trust was the recommendation of friends and family (in person and via social media), based upon their experience with your store. While independent sites play an important role in a dealer’s marketing mix, they need to be an element of the dealer’s overall business, marketing and audience strategy, not a substitute for it.

In summary, independent Internet sites are firmly entrenched in the consumer’s purchase journey. They have achieved this position by offering what consumer’s perceive as more comprehensive, objective and trustworthy content to inform their decisions on which car to buy, how much to pay and who to buy it from. As we learn later in this series, these sites are evolving rapidly to address consumer needs and to better monetize the traffic on their sites.

Part 2: The Evolution Of A Category – The Changing Landscape Of Third Party Sites

Research sources for this story included:

DrivingSales 2015 Customer Experience Study 4/15

Autotrader 2015 Auto Shopper Experience Study 4/15

The Digital Influence: How Online Research Puts Auto Shoppers in Control Cars.com 2014

Google ThinkAuto Constant Consideration 5/12