The automotive industry is buzzing about TrueCar© and their business model. Critics say that the customer sales data and transaction prices, pulled from their DMS by TrueCar.com, are being used against dealers. Advocates claim that TrueCar arms consumers with data and pricing that will get them the best deal.
Dealers who have decided to continue using TrueCar© that I interviewed remarked "Close your eyes Brian, it's just a numbers game!". Should I be surprised at this response when OEM goals are focused on volume and not dealership profits?
Other current users who are selling cars through the program remarked, "I want to get off the drug (TrueCar©/ZAG©) but I'm afraid."
I have also heard a similar comment referring to TV, Radio, and Newspaper investments that dealers have used for years.
This fear based comment is what sparked this article.
This post is not designed to continue the heated discussion about TrueCar© on a different thread. I wanted to challenge dealers that there are alternatives to generating leads if they decide not to participate with third party agents.
There is a bigger problem at play that is supporting the existence of TrueCar© that needs to be addressed.
Before You Kick The Dog
A majority of dealership marketing budgets are allocated to radio, TV, and newspaper, in some combination, despite research that shows that most car buyers will visit the dealership website and 18 other Internet sites before calling submitting a lead, or coming into the showroom. (Zero Moment of Truth)
This behavior is the real story behind the TrueCar© dilemma. If dealers had a strong digital marketing strategy that they owned, they would be less reliant on any third party solution. They would be generating more first party leads and not reliant on leads distributed to multiple dealers in their market.
Should I Cancel Autotrader?
No, I have not lost focus on the main story! I want to connect a predictable behavior at 20 Group meetings across the US with this story. It is inevitable when I give a workshop of digital marketing strategy that I am asked:
"If I do the things you are recommending, can I cancel Autotrader and Cars.com?"
After years of not having a great answer to this question, I believe I now have an educated response. Autotrader and Cars.com are not the big problem in car dealer budgets. In fact, they are probably the LAST thing a typical dealer should consider eliminating.
For thousands of dealers AutoTrader and Cars.com represent the majority of the digital marketing strategy. If you include a few dollars for Google Adwords spending, many dealers think they have maximized their online strategy. This is the crux of the problem. This is not a winning strategy.
Dealers love to hate Autotrader and Cars.com but fail to see that their own addiction to drugs (traditional media) is the bigger problem. They say that Autotrader.com does not generate enough leads, making it expensive. After looking at hundreds of budgets during our Automotive ZMOT Study that was started in September, dealers should be more mad at their own investments in Radio, TV, and Print.
Before dealers kick their third party digital vendors, they should take a hard look at the actions, or lack of action, that have created their dependency. This is why this applies to TrueCar© regardless if you don't like their business model.
Traditional Advertising Costs To Generate a Visitor
Let's first start with one building block: Most of your customers who purchase a car will visit your website BEFORE they purchase a car.
Not all, I said most.
If you can agree on this point, we can look at Google Analytics and your call tracking logs as a proxy for marketing investments.
The second point of agreement we need to have is how to approximate the impact of traditional advertising. Let's look at one example below.
I recently visited a dealer that invested heavily in radio and TV to comunicate their unique brand message and also to promote their website address. They did not advertise price or payments. Their unique selling proposition always included their website address and of course their dealership name.
If we were very generous in regards to their $50,000 a month traditional Radio and TV investment, we could take all the visitor traffic on Google Analytics that included a search on the Dealership Name as well as Direct Traffic.
Direct traffic is when the consumer typed in the website address directly. We could also count how many calls were generated by a tracking number assigned to traditional media.
The dealership was running a Google Adwords campaign at $2,500 a month which easily gives a cost per visitor. The dealership also was investing in Search Engine Optimization (SEO), DealerRater.com, Cars.com, Autotrader.com, and 3rd Party Leads.
- - The cost per visitor for their Adwords was: $1.50
- - The cost per visitor from their Traditional Media was: $18.65
Despite these numbers, the dealership budget was 63% Traditional Advertising. The Dealer was also spending 25% of their budget on Third Party Classifieds and Leads. 88% of their budget was managed by generic advertising partners with little control on making their dealership unique in the Zero Moment of Truth.
- - Looking at these numbers, wouldn't you think that the dealership would increase their Google Adwords spending to generate more first party leads at a lower cost?
- - Would you think the dealer would have invested in an IRM or Video Marketing Strategy?
- - Would you think that the dealer would look at their Cost per VDP view on Autotrader.com and Cars.com and compare how these investments merchandise their inventory compared to radio, TV, and print?
The Dealership Digital Strategy
This dealer really didn't have a digital strategy that differentiate themselves from other local dealers. What they had was a traditional marketing strategy with a sprinkle of EASY digital expenses that they were "uncomfortable" with generating a good ROI.
No one took the time to look at the cost to get interested shoppers to their website.
It's too easy to avoid arguing with the dealer principal who may be addicted to traditional media drugs, right?
So, if this is the rule rather than the exception, it's easy to see why dealers use third party lead generations websites, including TrueCar© to hit their sales goals. They don't feel that they have an alternative. Selling cars now is all that matters to dealers on the 30 day gerbil wheel.
I go back to the one dealer comment "It's all about volume!".
If dealerships took more leadership in their online strategy, the third party partners remaining would be people who added value and not out of fear or obligation. Dealers would be empowered to cut anyone who did not support their brand or delivered ROI.
That's the story behind the TrueCar© story. If dealers had the balls to change their marketing investments to connect with where consumers shop, they would have more first party leads and be more in control of their business. They would be able to opt-out of TrueCar if they felt the company was a competitor because they had strong alternative digital strategies.
Dealers who hate the TrueCar© model and stay with the program may do so because they feel that they have no alternatives. The truth is that they have alternatives.
It takes courage to get off drugs (traditional media over spending) and focus on the investments that have the best ROI today.
For this dealer, Cars.com and Autotrader.com had a better ROI than the radio and TV investments this dealer was making. Is that a surprise? Stop kicking the wrong dog.
Do You Need A Digital Strategy?
One place to start is to attend the 2012 Digital Marketing Strategies Conference (DMSC) on February 1-3rd just prior to NADA.
You can register online before tickets are sold out by visiting http://www.digitalmarketingstrategies.org.
Brian Pasch, CEO
PCG Digital Marketing
Text PCGedu to 75674 get information on our upcoming conferences
* ZAG© and TrueCar© copyright True Car Inc.