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Jared Hamilton
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Richard Lucy

Richard Lucy eMarketing Director

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Stop Overthinking ROI

After reading my good friend Bryan's blog yesterday, I noticed one of the comments from a person who had recently cancelled Autotrader because they didn't feel like it was worth what they were paying.  The comment reminded me years ago.


Five years ago I was, what I considered anyway, a maverick.  I had been working in automotive e-commerce for five years already and knew that I was way ahead of everyone else.  I had started as a sales consultant, then Internet sales, then Internet director passing leads out of a BDC, and finally, at that time, Internet director over a dedicated Internet team, desking and closing my team’s deals.  The Internet team was 4-5 guys doing between 50 and 70 on new car leads only.  No phone calls and no walk-ins.  The rest of the store took the walk-ins, online credit apps, and phone ups.  Total Internet volume in the store sat between 170 and 250.  The store was doing 450-550, grossing around $1.3 million per month.  I had the formula figured out.  I had on a suit of missile-proof armor.


And I had figured something else out.  That leads are where it was at.  Phone calls and e-mail leads are what I cared about and if you wanted to talk about anything else than you were talking to the wrong guy.  10:1 ratio.  It was taught to me by the owner of the first store at which I worked.  It's preached in the holy bible of car sales.  $10 gross for $1 of advertising.  When Autotrader would show up, I'd tell them that I could buy a lot more leads for the money and that if they were going to sell themselves as an advertising source they needed to talk to our ad agency.  I wanted nothing to do with my budget anyway (wink).  I did tell our ad agency that things were cruising and if they wanted to buy the program I was happy to have it as long as it didn't stop me from buying my precious leads.  That is when I started to see that my precious leads, leads, leads theory had a crack in the armor.


The first actual hole in the armor came when our ad guy came to me and said,"Hey Rich, you got this thing cruising....should we cut back on the newspaper?  Radio?  Tv?"  What do you think I said?  It was "Hell no, don't stop anything...we're doing 500 cars at 1.3 mil...are you crazy?  Don't change anything!"  But wait a second...if my leads, leads, leads theory is correct, then why can't I turn off the newspaper?  Why was I afraid of turning off the "conventional advertising?"


The gaping huge massive gap in my armor falling off and rusting came when something happened on the way to heaven.  I'm not JD Powers.  I don't have any massive statistical database to call ridiculous numbers from.  What I have is ten years of automotive digital marketing experience, worked 100% of the time in retail.  So please cut me a little slack here.  But basically, it's safe to say that in the last ten years, Internet usage is up about a billion percent...I know it's an exaggeration, but you get my point.  Internet usage in the the last ten years has absolutely gone up exponentially in numbers that are unfathomable.  My father, who will be 77 years old this year, runs his own website selling silver.  I don't need any statistic to tell me what the key demographic for Internet usage's everyone and that's a big number…..


So....the lingering question left in the wake of the massive gap in my armor is….If Internet usage is up an unfathomable percentage, then where are the unfathomable amounts of leads?  I know leads are up.  Of course they are.  But they are not up in relation to the percentage of people that have become “wired” in the past ten years.  Period.  I don't need any statistics or polling company to tell me they are or aren't.  I know they aren't.


The day the armor fell off and I got stabbed by a butter knife and it hurt was…..when we cancelled Autotrader.  Anyone at Autotrader that knows me will tell you that I have not been a fan.  I was the anti-Autotrader guy that shunned them off, as described, to the ad agency.  So believe me when I say that I am not pimping Autotrader or anyone else.  I'm just writing down what happened, plain and simple.  We looked at the budget, and then we looked at the leads...and although my armor was rusting, falling off, and offered no protection, my ego of being Mr. Internet prevented me from changing before it hurt a little.  We cancelled Autotrader.  Sounds simple enough.  I could spend the money better in other places.  Only sales went down.  They dropped.  I couldn't explain it.  I couldn't source the deals the previous months to Autotrader.  If I could have, we wouldn't have cancelled, because the ROI would have been there.  And after all, ROI is king,right?


Three months after cancelling Autotrader and watching sales slide a bit, our Autotrader rep stopped by and showed me some numbers.  Undeniable numbers.  My sister store's numbers on impressions, vehicle views, etc. etc. etc. on Autotrader had nearly precisely doubled for the time that we were off.  And they were outselling us.


Which brings me back to the beginning...ROI.  Return on investment.  Those words that enlarge or kill Internet budgets, start “chicken or the egg” discussions, hold people accountable….you name it and ROI has done it.


Let me start about by saying that this does not apply to new car third party leads where you get zero advertising bang.  If you buy leads from Dealix, it’s pretty easy to track what you are getting for your money and deciding whether or not it makes sense.  (I’ve actually theorized that selling ZERO third party leads may not be the worst thing you can do, but that’s another discussion entirely).  For the purpose of this discussion, third party new car lead providers need not apply…hopefully you track and sell the leads they provide.


Which leads me to the first problem word….tracking.  In the beginning, the Internet vendors had a tough task.  How do you convince a dealer that has never spent money in the digital world to do so.  How do you pry the old-school Internet dealer’s cold dead hands off the newspaper and radio budget?  Simple.  By promising something that radio and newspaper and all conventional advertising cannot.  Tracking.  “That’s right, folks, by buying this package you will know exactly how many people searched your vehicle, clicked on it, went to your website, called you.  They will bring printouts in.  They will print maps.  And every time, you will know.  It’s called tracking.  We got it, they don’t.  Sign here.”


There’s only one problem with tracking.  It doesn’t always line up.  It doesn’t always work out.  And therein lies the issue.  ROI.  There often isn’t any.  At least not provable.   Ironic, don’t you think?  That the sources that created the myth around tracking are actually being cancelled and having those cancellations justified by their own tracking.  We have allowed ourselves, the best, brightest, smartest car people around (wink), the Internet Guy, to become ruled by statistics and numbers and reports.


I recently responded to a question someone posted on one of the discussion boards regarding Internet manager pay plans.  One of the responses was that the Internet department should be treated as a separate profit center.  Separate from what?  The other departments?  So our stores now have parts, service, sales, and Internet “profit centers?”  I know what products the sales, service, and parts departments are selling.  What does the Internet department sell?  If the ROI on your separate profit center “Internet” doesn’t seem right, are you going to shut off the Internet?


The only real numbers and reports that really matter at the end of the month are the units sold and the total gross profit measured against your total spend, right?  The days of separating Internet budgets from conventional budgets are over.  The days of tracking individual lead source ROI on a micromanaged basis should be over.  If you cancel a lead source every time it doesn’t perform monthly on a CRM generated ROI statement, I assure you that your lead sources will all be gone shortly.  You must have a complete marketing package and the Internet is the biggest part of it, and I don’t need an ROI report to show me that.  It is a fact.


Back in the heyday of newspaper, when newspaper ads were thousands for a single day full page ad, I challenge almost any dealership to show me any newspaper ad that consistently proved itself 10:1 on a day-to-day ratio.  But could they really prove it?  It didn’t matter.  All GM’s knew was that when they took the newspaper ad away, they sold less cars.  They didn’t need any tracking to show them that.  They just knew they had to be where the buyers were.  Can any report argue with that logic?


I’m sure that there were dealers at the time that cancelled the newspaper and three months later were back on when sales dropped.  There were other dealers that cancelled the paper and found out that it didn’t impact them much, if at all.  Neither store needed a ROI report to tell them what the impact was.  They could see it on the sold log every day.  When did we stop looking at the sold log and focus on these ridiculous reports.


Internet directors cannot exist solely as “the lead guy” anymore.  They must evolve into dealership marketing directors and see the big picture.  They must become an integral part of the entire store’s advertising package.  At the end of the month, if costs are too high and sales gross isn’t there, you must look at the entire picture and figure out what the problem is.  And why stop at sales gross profit?  What about the whole picture?  What about the parts and service departments?  Are they not affected by every marketing decision made in regards to your Internet message?  When you cancel Autotrader and you lose thousands of eyes looking at your logo every day, does it affect how many owners bring their cars into your service department?  I don’t have the answer to those questions for every store, but each store’s Internet Marketing Director  should.  And that person should be able to react quickly and decisively to market trends and actual sales, not a CRM generated ROI report.


Five years ago, a savvy customer found out the Internet was a great way to buy a car.  It was the way to great prices and availability without getting hassled.  The customer’s perception was you didn’t have to deal with salespeople.  It was fast and easy and cool.  Well times have changed.  The reason, in my experience, why leads aren’t up in relation to Internet usage is because people are being taught not to share their information.  People don’t want to get hassled by phone or e-mail.  I believe the trend is changing and that the new wave of savvy customers now believe that the way to buy a car without getting hassled is to walk in.  They do their research online and then they walk in.  I don’t need a JD Power report to tell me that.  I see it every day.


Drive-by is our store’s number one source.  It’s everyone’s number one source.  So, as the old school GM once said, “I guess I can cancel all my advertising, because none of it matters.”  And everyone chuckled, but the advertising never got cancelled.  Why?  Because it’s a funny line and everyone can chuckle, but no one in their right mind would dare pull all their advertising while cars are selling.


So what are those people seeing that are bringing the “drive by’s” into your store.  Your sign?  Your radio ad?  Your TV Spot?  Your website?  Your Autotrader ad?  The answer is yes.  Or no.  But no ROI report is going to tell you.  You may have advertising sources that underperform.  You may have an underperforming website.  You may advertising sources that you can cut.  But I highly (highly, highly) doubt that Autotrader is one of them.


As unfortunate as it is (another discussion again), third party sites such as Autotrader and are where the buyers are (that aren’t on my site anyway).  I learned the hard way some months ago (by cancelling Autotrader) that no ROI report can replace what I know (or should have known) about selling cars.  I have to be where the buyers are, regardless of reports, or ego, or anything else.


Is ROI important?  Absolutely.  Should each advertising source be looked at on a regular basis to determine whether or not it belongs in your store’s complete marketing package?  No question about it.  But just because an ROI report doesn’t say that a source is valuable doesn’t make it so.  And no single source (other than new car lead providers as I mentioned above) should ever be singled out by itself without judging its impact on the entire package.  At the end of the day a human being that has the skills, knowledge and talent must determine what complete advertising package (including the Internet) will bring the results.  Not a computer.


Don’t let the computer rob you of necessary pieces to your marketing puzzle just because the ROI report makes it seem like it’s the correct decision.  And if you do, as I have, don’t let your computer and ego get in the way of correcting the issue if you make a mistake.  Act quickly and decisively based on the sold log, not the ROI report.

Edward Shaffer
Richard - Is there a metric that you use to value, and thereby justify, the spend on any given third party advertising site? So ROI is a piece of the puzzle, and perhaps not the most crucial one, but what comprises the rest of the pieces - and how do I measure those?
Stan Foutz
nice post! A little long winded though? Don't you think?
Stephen Brown
Well written, and I would love to hear the expansion of this theory! (I’ve actually theorized that selling ZERO third party leads may not be the worst thing you can do, but that’s another discussion entirely)
Richard Lucy
Great question. It's going to depend on each store's individual statement to decide what the right target should be, but I think the goal is still 10:1. But I think you have to look at this in regards to the entire ad budget, not just the Internet budget and especially not source by source. Too many Internet directors lose budget and/or lead sources because of the perception that the money is not well spent. That may or may not be the case. Also, because of the pressure of source by source ROI, Internet directors are so worried about showing they are doing a good job through reports that they ask themselves "Autotrader or Cars" and pick one when the answer should possibly be "Yes."
Richard Lucy

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