Home / Lead Quality and Why It Matters More Now Than Ever.
Lead Quality and Why It Matters More Now Than Ever.
Jun 24, 2020
Like so many industries, Covid-19 hit ours hard during the first half of 2020, taking its toll on dealer close rates, sales, and of course, profits. A worldwide pandemic causing an uncertain economy and record-breaking unemployment will do that. But the question is, what can dealerships do to recover faster as things start to open back up?
It starts with your leads. Not how many you get each day, but whether they’re good or bad, and how quickly your sales team can tell the difference. You may think it’s easy to do. But with all the robo calls, shoppers who are excessively optimistic about their finances, people who provide false information and a host of other types of bad leads, it’s not.
LESS TIME CHASING WEAK LEADS MEANS MORE TIME WORKING THE STRONG ONES
Chasing a few bad leads here and there doesn’t seem like a big deal – until you do the math. Let’s say you have two salespeople working on 200 bad leads a month, at 10 minutes per lead making calls, sending emails and texts. Add it up, and you’ve just wasted 16 hours of their time per person, every month.
On top of that, if you’ve had to furlough some employees due to Covid-19 cutbacks, and you’re trying to accomplish more with less, then your team certainly shouldn’t be wasting time chasing down bad leads when they could be closing good ones.
HOW MUCH IS ALL THIS WASTED TIME REALLY COSTING YOU?
Suppose you have 226 new cars in inventory and sell an average of 76 new cars per month with an average of $1,750 gross profit per vehicle retailed – which is the average gross profit per vehicle with Autotrader and Kelley Blue Book. Factor in holding costs of $40 per day and just 10 of these units going unsold would cost you $29,500 a month in lost gross plus holding costs (see Diagram A). Making things even worse, you are still paying for low-quality leads that were never going to close anyway.
It’s not just time and money that’s lost. Chasing dead end leads day in and day out can be demoralizing to your team and contribute to employee turnover. And with the average dealership sales staff turnover at a staggering 80% per year, adding more turnover is a surefire way to eat into your profits.
MORE LEADS DOESN’T MEAN MORE SALES
To gain a better understanding of how lead quality affects close rates, Cox Automotive analyzed four of the top third-party automotive listing sites for lead quality using aggregated and anonymized data from VinSolutions (which did not include personally identifiable information). These sites covered 6,536 dealers, both franchise and independent. The analysis found car dealerships received a total of 3,758,377 leads from these four sites from January through May 2020.
Don’t be fooled into thinking that buying cheaper leads by the barrel is better than getting quality leads you can close. Case in point, CarGurus and Cars.com. While they generate more leads than Autotrader, Autotrader’s close rate is 61% higher than CarGurus and 72% higher than Cars.com.
As a result, Autotrader led the industry with 19,000 total vehicle sales in May, which was 14% more than the closest competitor. More proof that even with fewer leads delivered, the quality of the Autotrader leads allows dealers to close more sales than any other listings provider.
Even when the data is adjusted to exclude walk-in traffic to compare the results across sites using only “systematically” created leads (true internet leads), versus those manually input into the CRM to hedge against human error in attributing lead sources, Autotrader’s close rate of 5.7% is 70% above CarGurus and almost 2X Cars.com’s rate (4.0% and 2.9% respectively).
When you compare the power of Autotrader and Kelley Blue Book’s combined close rate of 7.7% to the others, it becomes clear that volume doesn’t correlate to lead quality. Thus, focusing on quality leads significantly increases the chances of converting them into sales. And of course, the resources spent acquiring those leads pay off when they close.
Smart dealers know not all site traffic is created equal, and visit count alone isn’t a meaningful KPI to measure website performance. Years ago, visit count carried more weight, but now the focus is on quality VDP views, photo engagement, time on site and other more meaningful behaviors. Dealers learned to peel back the layers to find true insights with website performance. So why do they still measure ROI on a cost-per-lead basis with their CRM?
Not all leads are created equal, either. At the very least you should be measuring the cost of responding/engaging per lead and implementing some quality filters to gain better insights into performance.
LEADS TO RECOVERY
sales are important, profits are imperative. Autotrader and Kelley Blue Book
lead the industry with an average gross profit per vehicle of $1,750.
But the real difference in the quality of your leads shows up in the difference in gross profit per lead. Autotrader’s average gross profit per lead is $91; our closet competitor’s is $58. That’s 56% higher per lead, and it’s how you can gauge the ROI on your digital marketing spending with third-party listings sites.
BRINGING IT ALL HOME
In our current reality, 2/3 of shoppers are willing to conduct their purchasing transaction 100% online. So, having access to digital/virtual tools and resources is critical now more than ever, as consumers have been limited to online interactions. Which is why dealers offering Autotrader’s Dealer Home Services and Digital Retailing are well-positioned right now, and for the future.
Autotrader’s Dealer Home Services include Video Walkaround, Test Drive at Home, Home Delivery and Money Back Guarantee. These virtual tools allow you to sell cars without consumers ever having to come to your lot. And currently, dealerships taking advantage of Dealer Home Services though Autotrader are generating 19% more leads and a 22% higher close rate.
Through digital retailing, shoppers can start the buying process online. Within seconds, they’ll see estimated rates from banks or financial institutions. If they enter their credit range, monthly payments are instantly personalized to their situation, which can help them decide if they want to pay $625 a month to finance or $375 to lease. And if they provide information about their trade-in, they can get a Kelley Blue Book® Trade-In Value to see how it factors into their deal.
After investing time in the process and providing their contact information, these customers are usually ready to move forward. That’s why leads that come through digital retailing on Autotrader are most likely high-quality leads with a greater chance of closing. Which makes perfect sense, since 7 in 10 consumers say they’re more likely to buy from a dealership if they can start the process online.
DON’T UNDERESTIMATE THE VALUE OF PROPER MERCHANDISING
To maximize the performance of your high-quality leads, you need to support your listing with high-quality merchandising. Providing prospective customers with more information about your listings can yield more positive results, and the proof is in the data. Dealers that include a price on their listings on Autotrader get 90% more vehicle detail page (VDP) views per listing.
That’s not all: dealers get 91% more VDP views for listings merchandised with multiple custom photos versus stock photos.
The truth of the matter is lead quality matters. Because you are not just selling cars. You are selling the experience of buying them from your dealership. The better the experience, the better chances of developing repeat customers and referrals, which will help your dealership make it through difficult stretches and thrive even more during prosperous times.
Automotive has the most comprehensive view of the automotive industry and is
able to offer unmatched data and insights into consumer behavior, automotive
trends, and operational best practices. The analysis provided here used VinSolutions CRM data to evaluate lead volumes and close rates
across primary third-party classified sites.
analysis also excluded bad or duplicative leads and known VinSolutions test
accounts to ensure the data was accurate. It was assumed that some competitors
are generating multiple lead records from a single lead submission. No extra
steps were taken in this analysis to verify, isolate, or separate out
duplicates in these instances from the competitors.
Total gross profit includes the sum of both front and back gross, but no specific details of these are provided in the data.