If it’s all about location, location, location in real estate, it’s all about leads, leads, leads for auto dealers. Not surprisingly, almost all are laser focused on keeping a high number of inbound leads flowing regularly. One obvious way to do that is through advertising that drives prospects to a dealership’s website.
According to the National Automobile Dealers Association (NADA) and its 2013 “State of the Industry Report”, new-vehicle dealers spent nearly $7.2 billion on advertising in 2012, up from $6.4 billion in 2011. Historically, newspapers have received the largest slice of advertising spend, but this is changing as newspaper readership declines and the Internet becomes the research tool of choice for many prospective auto buyers.
Regardless of which advertising channel being used, auto dealers are spending a lot of money to drive prospects to their websites and obtain leads. In fact, the average ad expense per new vehicle sold in 2012 was $621 or just over 1 percent of total sales (See graphic).
Unfortunately, return on investment could be significantly improved. Statistics show that approximately 79 percent of marketing leads never convert into sales. To uncover why the conversion rate is so low, let’s analyze what happens when a website marketing lead is distributed to a sales rep.
The lead conversion challenge
The first step for many reps, and always a major challenge, is to make contact with the prospect. But we all know how well that usually works. All too often, a sales rep is too busy to contact the lead at all or is more focused on immediate prospects walking the forecourt. That’s why statistics show 48 percent of sales people never follow up with a prospect and 33 percent of the time leads that have shown interest are not contacted by sales departments. Even if the rep does make an attempt to contact the lead, there are still significant hurdles. One in five emails never make it to the intended receipt and too many emails or voicemails can make the sales rep and dealership seem overly aggressive, which is off putting for most people. In addition, with a list of leads to work from, the sales rep has no idea which leads to prioritize so cannot focus his/her efforts on the “hottest” leads. As such, considerable effort is put into chasing undeliverable, unresponsive and duplicate leads, which wastes time, energy and creates negativity.
The biggest factor in successfully converting a lead into a sale is time – something that the typical sales rep does not have. Nurturing a lead requires on-going contact over time and the sales rep will likely move on to another lead after just a few attempts or exchanges. Research shows that 25 percent of sales people make a second contact then stop and only 12 percent of salespeople make more than three contacts. But here’s the kicker. Approximately 80 percent of sales are made on the fifth to twelfth contact. That’s a lot of money left on the table.
The biggest factor in successfully converting a lead into a sale is time – something that the typical sales rep does not have.
It is at this stage where the lead conversion process breaks down for dealerships and the return on advertising investment declines considerably. What’s needed is an efficient way for dealerships to do the time-consuming “dirty work” of chasing down leads: making that initial contact, persistently following up until contact is made or a response is received, validating contact information, uncovering what the prospect needs and qualifying their interest.
One solution to this is a new wave of technology solutions in the Artificial Intelligence (AI) space called lead interaction management software. This is technology that attempts to connect with leads and continues to engage, nurture and qualify the lead through natural, two-way email exchanges until conversion or the lead opts out. Presented as a customized online persona, these solutions can nurture leads from interest to intent and automatically send alerts to a sales rep when a prospect is ready to purchase.
It has been documented that these tools can deliver an average of 56 percent engagement rate, far higher than most dealership sales teams sending emails and leaving voice mails. As a result, dealerships using these platforms have increased the number of qualified leads assigned to sales reps. In addition to saving dealerships hundreds of man hours a year by not chasing dead leads, this technology helps sales reps become more effective because they can prioritize their leads and focus on selling to prospect that intend to purchase. This leads to improved conversion rates and higher ROI from advertising programs.
Today’s automobiles are brimming with the latest advances to increase efficiency, so there’s no reason not to apply new technologies to optimize the process of selling them, which as we all know, has essentially remained unchanged for decades.