By: Pat Ryan, Jr.
From Digital Dealer Magazine February 2008
Every week seems to bring an interesting new study on how consumers are using the Internet in their car buying process. While all of these studies point to the importance of an evolving e-strategy for dealerships, it is not always easy for dealers to glean actionable takeaways from these studies. With all the data flying around, this presents a great opportunity to make sense of it all. Let’s start with the most dramatic headline.
The 2007 Dealer eBusiness Performance study sponsored by Yahoo revealed that 88 percent of consumers use the Internet for research prior to visiting a dealership. At the same time, dealers we hear from typically report 15 to 20 percent of their business coming from their Internet departments.
What happened to the 68 percent of buyers that used the Internet to research vehicles yet were invisible to the Internet department? Simply put, they may have shopped your “virtual frontline” but did so anonymously; some later came to visit your dealership while others bought from your competitor.
Why do the majority of buyers using the Internet choose to stay invisible to your Internet department? Because the majority of Internet shoppers are reluctant to share their personal information online with dealers or third-party web sites and therefore never become a “lead.” The result: the majority of visitors to your “virtual frontline” are invisible and untouchable for your Internet team.
How does this impact my business?
Dealers routinely work hard to engage every guest who walks their lot and shops through the traditional buying process. In the online world, if your vehicle is not competitively priced with similar vehicles in your market, a consumer will leave your virtual frontline for another dealer’s with one click, never returning and never speaking with anyone on your team. Buyers will also “vote” with their mouse by clicking away from vehicles that do not have enough pictures, have poor quality pictures, or lack compelling descriptions.
What makes dealerships vulnerable to these kinds of missteps?
Dealerships traditionally priced pre-owned inventory on a “cost-plus” basis-pricing the vehicle to ensure they have enough room to negotiate with a customer and still sell a vehicle for a strong gross profit. Since pre-owned vehicles are more varied in value because of age, condition, mileage etc., consumers were unlikely to find a similar vehicle to yours across the street, giving dealers the upper hand. However, in the Internet age, customers can see your pricing next to nearly all of the similar vehicles in your market, making cost-plus pricing a barrier to driving traffic from the Internet.
In addition to the consumer being empowered by the Internet, dealers who are inconsistent in putting enough pictures or robust vehicle descriptions online will find themselves clicked past by consumers as well. It’s no longer enough to just be online. Dealers need to excel online by being as diligent in merchandising your online inventory as you are in the presentation of your dealership’s showroom.
How can I maximize my pre-owned traffic from the Internet?
1. Market pricing – Replace “cost-plus” pricing with market pricing by competitive shopping every vehicle versus the competition. This ensures that your pricing will appear fair for its value in online search results. Treat competitive vehicles online the same way you would if they were on the frontline across the street. Price based on the “key strengths” of your vehicles but be realistic given the competition.
2. Consistently execute the online advertising fundamentals – Mystery shop your own dealership to ensure all of your vehicles are online with robust descriptions and pictures. You’d never put a vehicle on the frontline without detailing it. Make sure you detail your online vehicles to the same standard.
3. Mystery shop the competition – Experience your dealership’s “virtual frontline” versus the competition as the consumer will experience it. Go to an online advertising site such as autotrader.com or cars.com and see how your vehicles compare. If you are using market pricing and executing online advertising fundamentals consistently your vehicles should show well, but you may find that your vehicles differentiation is not clear to a potential buyer. For example, you may find that your vehicle is the lowest mileage vehicle in the market. In that case it may be okay to be the highest priced vehicle; you simply need to ensure that your online listings are highlighting the value. Know each vehicle’s online market and ensure that your listings are highlighting the unique value of each vehicle.
With those three simple steps any dealer can ensure that they are maximizing the potential of the online advertising they are purchasing. The key is to execute consistently, the same way you do every day in merchandising the showroom and frontline at your dealership.