We recently conducted a survey in which we asked Internet department personnel to share some key metrics. In one question, we asked:

How much total gross does your Internet department generate for every $1,000 spent on Internet leads from all sources (SEM, independent and third-party leads, classified site subscriptions, etc.) ?

Of the 183 responses, the answers broke down:

3X or less: 33%

4X-6X: 18%

7X-10X or greater: 20%

Don’t Know: 29%

These answers reveal there is quite a large disparity between auto dealers’ return on investment (ROI) on Internet spending, as well as a surprisingly large percentage that don’t even know their ROI.  So I wanted to know: what should a dealership target for a reasonable Internet marketing ROI?

One of the experts we consulted for measuring this metric was David Kain, President of Kain Automotive. He suggested that 5X ROI was the absolute minimum that a dealership should strive for, and ideally Internet departments should be seeing 7X ROI on their Internet spend.

But how do you calculate your ROI? Basically, ROI is what you get for what you spend. Here is a simple formula:

(Gross Profit – Marketing Investment) / Marketing Investment = ROI

This formula represents three steps.

1. Marketing investment should be simple to figure out as it is the total cost of a campaign. For instance, if you spend $1,000 per month on a Pay-Per-Click campaign, $1,000 per month on independent leads and $1,000 per month on a subscription site, then your total marketing spend on Internet leads that month is $3,000. For the sake of simplicity, I’m going to suggest here that the cost of overhead, while included in some ROI measurements, should not be included when figuring out ROI for Internet leads, regardless of source. So in this formula, don’t worry about including labor costs (for staff), web site maintenance costs, etc.

2. Gross profit is the next metric you’ll need to figure (my first GM used to say, “Volume is vanity. Gross is sanity.”). If you can pull the actual grosses on all Internet deals, that’s great. If not, take the number of sales and multiply it by your dealership’s average front and back combined gross profits. So if $3,000 in marketing spend delivers 10 sales at an average of $3000 combined gross, then your total Internet-related gross profit will be $30,000.

3. Next, you need to subtract the initial marketing investment ($3,000) from your gross profit ($30,000) for a total of $27,000.

4. Divide that number by your initial marketing investment ($27,000/$3,000) and in this scenario you end up with 9X ROI, an excellent result.

Why is it important to know your ROI? Any time you spend money on anything, whether on Internet leads or a marketing campaign, it is an investment. Like any investment, it should be measured, monitored and compared to other investments so you know where you should be spending your money.

Also, knowing the ROI for all your lead sources gives you leverage. How many Internet marketing budgets were slashed in 2009 and 2010? Perhaps some cuts were deserved, but do you know which ones? Cutting back on a lead source that returns a high ROI is only going to hurt the bottom line.

Of course, our question focused on the overall Internet marketing spend, not on the ROI of various lead sources. But applying this formula to your separate lead sources is highly recommended and gives a better measurement of success than just closing percentage or other metrics. After all, ROI is what goes to the bottom line.

I’d love to hear some feedback: how do you calculate your dealership’s ROI on your Internet leads spend? What do you consider a good ROI? In my next blog, I’m going to give some tips on how to drive your team to improve ROI.

I remember my first off-site used car super sale and the sales meeting that preceded it. “Guys, forget about the sales process. Don’t worry about demo drives. When customers walk in, sit them down, ask a few questions and qualify them for a payment.” Those weren’t the exact words, but I’m pretty sure I took away the right message. With 1500 cars to choose from and hundreds of customers pouring into the stadium every hour, expediting the process and making it as easy as possible just made sense.

I’m going out to go out on a limb and say that you’ve heard, taught, or currently teach your salespeople that it’s wrong to pre-qualify your customers. And I’m guessing you also know and stress the importance of landing the customer on the right vehicle. It’s difficult to do both things well; when you don’t have a conversation about affordability, you often end up on the wrong vehicle and either lose your customer or start the process all over again. I cannot tell you how many interactions at the desk I’ve heard where the Sales Manager is grinding on the salesperson for putting the customer into a vehicle he or she cannot afford. Well, didn’t you train the salesperson not to pre-qualify customers?

Yes, sometimes “love will find a way.” We all have stories of the customer who wanted to be at $300 a month who left at $550 per month. But we’re kidding ourselves if we think that’s the majority. Good dealerships close about 25% of their total opportunities.  There are plenty of stories we forget to tell about those customers who left without buying – or even sitting down to consider – a vehicle we desperately wanted them to love. And that’s not even considering the phone and Internet customers who never make it in the door.

When you shop for anything these days, you probably hop online, do some research, review pricing, determine how the purchase will fit in to your budget, and then identify where you’re buying. Your customers are no different. They want to know what fits into their budget, and since more than 90% will end up financing their vehicles, the payment is critical in their consideration process. So how do you bridge the gap, online and offline?

1. Earn the right to have the conversation. Obviously, the greeting is not the time to say, “What payment are you looking for?” We still need to build rapport and make payment part of, not the focus of, the process.
2. Make it the customer’s choice. Having a conversation about finances can be complicated. Make it easy, and let the customer choose whether to engage in it or not. Simple questions like, “Is there a payment range we should be considering when we’re looking for the right vehicle for you?” can help guide the selection process.
3.  Give the customers the information they need to select the right vehicle, online or in store. Do you put payments on the vehicles in your showroom or on the front line? How about online? Since most customers don’t equate $20,000 with $380/month, it helps “connect the dots” and lowers the surprise factor during the negotiation, which should reduce time and improve CSI.

Most dealers give customers a static payment calculator and an option to fill out a credit application on their website. Historically, these tools have very low engagement and offer limited information of real benefit. There is a tool available now, however, that changes that. AutoUSA’s Payment Pro puts real payments on new and used inventory on the dealer’s site and pre-qualifies customers for those payments without affecting their credit score. Powered by Drive It Now’s patent-pending technology, the customer gets the information they need to help them select the right car, and the dealer gets a lead that includes the customer’s credit eligibility, vehicle of interest, and all of the payments the customer qualified for and selected.

If you read my blogs, you know I don’t push our products. Well, this one’s too exciting to keep to myself. Finally, this gives the customer what they want and ask for, and it gives the dealer what we need to facilitate a sale with good gross, front and back. Check it out and let me know what you think! http://www.Paymentprodemo.com

In this competitive market, we hear from many dealerships that they are struggling to engage their customers in two-way conversations. In particular with Internet leads, increasing the contact rate and getting the customers to respond can be a challenge since many customers receive emails and calls from several dealers in a short period of time. So what can you do to stand out and encourage a response?

Besides the best practices we all know about (respond quickly, give alternatives, etc.), one of the most effective ways to engage is to build value in your dealership. Put yourselves in your customers’ shoes and answer the question for them: Why should I buy from your dealership instead of another dealership?

Here are several ways to build value and give customers a reason to come in:

1. Align with the customer’s hot buttons. When a customer on the lot tells you that fuel economy is the most important feature in a vehicle to them, you probably tailor your vehicle presentation to the features and benefits that stress how economical and efficient the vehicle is. While you can’t always identify it from an Internet lead, you can usually gather enough information to make an educated guess at what might be important to that customer. Are they nearby? Try stressing convenience attributes of your dealership like your location, an easy in-and-out process, and your willingness to prepare a vehicle in advance to save them time.

2. Share what separates you from the competition. What is your unique differentiator? Is your dealership known for the best prices, price guarantees, the biggest selection, or your no-pressure sales environment? Maybe the President’s Award for exceptional customer service? Whatever your store can offer that your competitor can’t or won’t, make sure your customers are aware of it.

3. Show your connection to your community. People still buy from companies they like – and that they know will be around for the long term. Showing your involvement in your local community without bragging about it enhances your reputation, engenders trust and shows an intent to “stay around.” Whether it’s supporting the local Little League (“Proud Sponsors of Little Timmy’s T-Ballers”), local charities, or if you are having a blood drive or a holiday barbecue, don’t be afraid to share tastefully.

Every salesperson should know what differentiates your dealership from any other; and they should be able to use that information to build value and rapport with the customers. Do you know what your dealership’s unique differentiator is? Can you give your customers a good reason to buy from you instead of your competition? What do you do that builds value and encourages the customer to come in?

A long time ago, back when we used paper desk logs to track our showroom traffic, our salespeople were asked to complete a “source” box. We wanted to know how our customers heard about our dealership. Strangely, “Location” was the overwhelming favorite; according to our salespeople, very few customers came into the store because of our advertising. Of course, the phone calls and Internet (and fax, back then) leads we received told a different story. We just weren’t asking the question the right way - or at all, in some cases.

We know that knowing how your walk-ins find you is critical if you are tracking the return on investment (ROI) of your marketing dollars. If one advertising source is driving twenty walk-ins a week and another is driving only two walk-ins per week but costing you just as much, wouldn’t you want to know which one is which? While most dealers have a method in place to ask customers how they heard about their dealership, many times this important question is overlooked in the more immediate quest to sell a car.

Take a look at your sales log and see how many source boxes are filled out. If it’s less than 90% or “location” is the only answer, I’d recommend an immediate action plan to get those numbers up.

Here are a few tips for implementing a process that will accurately track the ROI from your showroom visitors:

1. Start with the buyers. Customers waiting for the finance process to start typically have a few minutes of down time. Ask that they fill out a short survey, including what advertising source brought them in. Have the F&I Manager collect the surveys in case the salesperson didn’t record it in the sales log.

2. Leverage your managers. If your store requires that there is a manager involved in every deal, make it the manager’s responsibility to source every customer, and make them accountable in some way. Since your managers likely have more of a direct role in advertising decisions than your salespeople, they’re more likely to make it a habit.

3. Analyze your digital ad sources for ROI. Your CRM can show you by lead source the contact, visit, appointment and sales rates, and many ad sources are able to give you view and click-through reports that show their effectiveness. Invest more in profitable sources and cut the duds.

4. Make it a priority. Train your sales associates to include “what advertising brought you in today?” or a similar question into their needs discovery. You can even run a monthly contest for salespeople. Every month, whoever has the highest percentage of source boxes filled out, wins a prize.

Not every customer will remember where they first heard about you, but most will. Capturing lead sources for your walk-ins will go a long way towards determining which lead sources – both digital and traditional advertising – are delivering customers to your showroom.

How do you source walk-in customers? What works and doesn’t work, and why?

I’ve always believed that Internet customers have the same objectives—and objections—as showroom customers: the only difference is the way they choose to contact the dealership. So it’s interesting to me when I hear from salespeople who have different expectations from their Internet leads than they do from their showroom guests.

Take the classic on-the-lot objection, “I’m not looking,” or “I’m just looking but not buying today.” When a customer visits a showroom and a salesperson hears that phrase, what is the proper response? Get angry? Refuse to help that customer? Pass them off to a co-worker? Of course not. It’s pretty well accepted that “I’m not looking” is code for “don’t pressure me,” and it’s the first objection we train our salespeople to deal with when they start their career.

In such a situation, it’s generally accepted that the salesperson should immediately set the customer at ease. Acknowledge that it’s OK for the customer to just look, and offer to be a resource for them. It doesn’t mean that the customer won’t buy on that visit or that you won’t ask for the sale when the time is right—but they’ve told you the time isn’t right yet. So you work the process, build value in yourself, the dealership and the vehicle of interest, and take them as far as you can during their visit. And if they leave after your best efforts?  Be friendly, offer to help with whatever they need going forward, then follow up, follow up, follow up.

Now, let’s say that a salesperson is sitting at their computer looking at a response from an email sent to an Internet lead. They read “I’m not in the market,” or “I’m just doing research right now, I’m not planning to buy for a while.” The salesperson rolls their eyes, complains that they shouldn’t have gotten the lead, and immediately closes the lead out. That’s the equivalent of a lot drop after the greeting.

Why would they treat that Internet lead any differently than a showroom customer? Here are a few reasons why the response should be the same:

1) Both showroom and Internet customers have to be brought down funnel. A salesperson has to earn the right to ask a customer for the sale.

2) Both showroom and Internet customers ARE in the market for a vehicle, despite their objections. Why would anyone take the time to visit a dealership or submit an online lead (which does take some time) if they’re not?

3) Both showroom and Internet customers have the same first-contact conversion rates. NADA estimates that the conversion rate for first-time, walk-in showroom customers is 12-15%. The average dealership’s close rate for Internet leads from all sources combined is 10-15%.

Wait a second, you’re thinking. Any decent salesperson can close 30-40% of showroom ups. Maybe even 50%. But that figure includes prospects from a variety of sources; appointments, referrals, repeat visits and first-time walk-ins, all combined. If a floor salesperson was assigned to first-time walk-ins only, they’d close 12-15%. We know that “the point” is the least-productive place to spend your day, and your planner’s where you make your money.

4) Appointments set with “be-backs” and Internet customers alike show about the half the time. Of those, most stores close upwards of 50%. Customers who set and show up for appointments are more likely to buy, regardless of whether they first contacted the dealer through the Internet or by walking onto their lot.

When faced with objections from Internet leads, some salespeople tend to give up more quickly than they would with a walk-in. But if they invest the same time and effort as they do with showroom customers, focusing on working the sales process and earning the right, they’ll get results. Make the customer comfortable, offer to be a resource, bring them down funnel, and Internet lead conversion rates will improve.

What tips do you have for the “I’m just looking” or “I’m not in the market” objection? Do you think the same tactics that work in the showroom are successful with Internet leads?

AutoUSA Internet Solutions is conducting a survey and is inviting auto dealer Internet marketing personnel to participate. We plan to share the information in a special presentation this October during the 13^th Digital Dealer Conference & Exposition. But we can’t do it without you! Share your metrics and you will be able to see how you compare with industry averages, and what processes need to be in place to make your Internet sales department a success. All information will remain anonymous. Contact information will only be used to notify you in the event that you win the gift card.

Participants who complete the survey will be entered in a drawing to win a $400 American Express gift card!  Just click on this link to get started with the survey and we thank you for your participation! http://www.surveymonkey.com/s/QN3HZRG

With prices of late model used vehicles at a near all-time high, according to this latest article by Automotive News, one of the greatest challenges for used car managers is acquiring enough inventory to meet the current demand.

I’ve talked to used car managers who are traveling further distances, attending more auctions and paying more than they ever have before. Unfortunately, used car managers don’t have a lot of control in terms of what comes available at auctions and what the market demands they pay for good inventory.

What they do have control over, however, are the processes within the dealership that determine how leads for used cars are handled. Implementing the following best practices in the Internet Sales department may help alleviate some of the pain felt due to current lack of inventory:

1. Encourage Flexibility. As the Automotive News article states, when the price of a used car reaches 60% of a new car, often times the consumer will opt for a new car instead. So when an Internet leads comes in for a used vehicle and you don’t have the inventory to match it, highlight new vehicles in the same style and price—or even more important, payment—range, as the used vehicle requested. Expanding the selection of vehicles and providing side-by-side price comparisons may change the customer’s mind.

2. Actively Solicit Trade-ins. Tag every email correspondence to customers with an offer to buy their trade-in vehicle—whether they buy from you or not—to drive traffic into your showroom and help boost your inventory. If you use a trade-in tool on your website, such as Kelley Blue Book’s Lead Driver, aggressively pursue the vehicles that match your inventory needs, offering hope that what you will pay often exceeds the online estimates.

3. Don’t Give Up. Instead of closing out leads that you couldn’t help due to lack of inventory, start a “want list” of vehicles requested and provide it to the used car manager weekly.

4. Hold Firm on Prices. Used vehicles are turning quickly and hard to replace right now, which reduces the amount of potential substitute vehicles in the market and makes the ones you have even more valuable.

What other best practices do you recommend to address the used vehicle inventory shortage? 

What would happen if four customers walked into your dealership but only three salespeople were available to help? Would the fourth customer be ignored and told to come back another time? Or would a manager, or someone else, step in to help? One thing’s for sure: if nobody stepped in to help, you would lose a potential sale. And if this happened repeatedly, well, I wouldn’t want to be in that sales meeting.

Of course, you’re probably thinking that the likelihood of this happening in your dealership is slim. Yet it does happen in most dealerships every day. The only difference is the customers are currently Internet leads in your CRM and not in your showroom.

Not the same, you insist? Think again.

The results of Pied Piper’s recent 2012 Prospect Satisfaction Index (PSI) study indicates that nearly 25%, or 1 in 4 customers, who submit Internet leads are not contacted by the dealership within 24 hours. Another 16% of inquiries received only a simple automated response, followed up by a personal e-mail from a salesperson.

The best-performing brands in the Pied Piper study were Lexus, Infiniti and Acura. According to Pied Piper CEO Fran O’Hagan, these brands performed the best because they have processes in place to ensure that Internet leads are handled properly.

I’m betting that, if I asked you if your dealership had a documented Internet sales process, you would say “Yes, absolutely.” Yet the study proves that these processes are not always being followed. Sales Managers can see when a salesperson drops a customer on the lot without a T.O., or skips from the Meet and Greet to the Write Up without stopping to build rapport or land the customer in the right vehicle. It’s a little harder—but not much—to see what steps are and are not being followed in your Internet process.

If you want to improve your sales performance, improve your Internet lead response with the following steps:

1) Ensure your written processes are being followed. Hold salespeople and managers accountable for the e-mails, phone calls and follow up required to turn Internet leads into showroom visits. Regular meetings with the manager are the best way to accomplish this.

2) T.O. every lead, just as you would a showroom customer. Don’t let salespeople close out Internet leads in the CRM. Require that a manager review each lead and then close it out for the salesperson. Have the manager send out an e-mail to every lead that is closed out asking about their experience and asking them why they didn’t buy. You might be very surprised at how many customers will say they were never contacted.

3) Consider a technology like an automated virtual assistant that can engage and re-engage a large volume of Internet leads. The assistant passes hot leads to the salespeople so they can focus on phone calls and setting appointments with in-market customers.

How do you ensure that processes, both in the showroom and in the Internet department, are being followed?

When you’re planning your dealership’s online marketing strategy, is location a factor? Maybe you’re located near a river, mountain or near the border of a state with no sales tax. Maybe you know there are desirable customers who come from a zip code near you, but those customers have to drive by another same-brand dealership in order to get to your store. Or maybe your OEM program doesn’t give you the flexibility to target certain areas that you’d like to target — but you know your biggest competitor is getting those leads.

The good news is, location doesn’t have to be a problem. If you know where your customers are but you’re not getting the amount of leads you’d like from those locations, there are a few things that you can do:

1) Work with your independent lead provider to come up with a custom, geo-targeted territory that will produce leads from the areas in which your customers live. Drawing a radius around your dealership is not always the best marketing strategy; especially if there’s a geographical obstacle like a river or mountain near you. This is also a major advantage that an independent provider can give you over your OEM; with independent lead providers, you are not restricted in the areas that you can target!

2) In every single e-mail template or phone call, give customers a reason to visit you. Tell your brand story. Does your service department have a great reputation and good user reviews? Tell that story. Are your sales people friendly and honest? Tell that story. Is your dealership involved in your community and does it support local charities or the Little League team? Tell that story. Customers will drive out of their way to shop somewhere if they feel good about the people, the store, the reputation, or the product.

3) Consider an incentive marketing program. Have you ever received a gift card for a restaurant or retail outlet? Chances are you’ve redeemed it, even if you had to drive across town to a place you normally don’t frequent. Gift cards provide real incentive for customers, and they will drive right past a same-brand dealership in order to redeem them at your store. Yet the nominal amounts are not incentive enough to attract people who aren’t in the market for a vehicle. Incentive marketing programs like ShowPro are producing great results for many dealers, and may be worth trying. Here’s how it works: http://youtu.be/_fMVwduSe5Q

If you’re attending Digital Dealer, stop by Booth #801 for a demo!

Is location a challenge for your store? What other best practices or tips do you have for attracting customers?

A friend of mine lives in Arizona and was recently telling me about the state’s Stupid Motorist Law. I thought it was pretty amusing and it made me wonder what other funny driving laws are on the books. These are just a few that I found and thought they would make for good comic relief:

Arizona: Every year during monsoon season dozens of drivers decide to drive their vehicle across a flooded roadway or wash. Of course, many don’t make it as cars can get washed away in as little as 6 inches of water. The Stupid Motorist Law holds drivers liable for their own stupid decisions; fining them up to $2,000 per incident to cover costs associated with emergency rescues. This law was enacted in1995 and inevitably somebody gets cited every year.

Colorado: It is illegal to ride a horse under the influence (I assume they mean the rider and not the horse). This law is rarely enforced but apparently in 2009 a man in a cowboy hat was cited under the law. The biggest dilemma for the police was what to do with the horse; you can’t impound it like you can a car. Finally a local stable owner volunteered to haul the horse back home.

Anchorage, Alaska: It is illegal to strap your dog or any other live animal to the roof of your vehicle (I can understand strapping a dead animal to the roof of your car, but a live one?)

California: No vehicle without a driver may exceed 60 miles per hour (now that would be something to see!)

Montana: It is illegal to leave a sheep unattended in the cab of your truck or car (I guess this means that if you really want your sheep to ride along in your passenger seat, you’ll have to move him to the bed of the truck or take him with you if you plan to leave the vehicle for any length of time.)

Glendale, California: It is illegal to jump in or out of a moving vehicle.

Long Beach, California: Cars are the only item allowed in the garage (This law must have been enacted before Hoarders came along).

San Francisco, California: It is illegal to wipe one’s car with used underwear (but new is OK?)

West Virginia: It is legal to take road-kill home for supper as long as the fatality is reported within 12 hours. This law was passed in 1998 as a cost savings measure, but sparked controversy when animal lovers suggested that some West Virginians would try to run down animals on purpose. Other West Virginians embraced the law and hold road-kill cook-offs that attract thousands of attendees every year.

Are some other funny driving laws that you’ve heard of in your state? What are new laws that you would suggest?