Originally appeared in the BHPH Report Nov 2018 magazine by Jim leman
Jasen Rice learned well his lessons as an inventory performance manager for vAuto. He left that organization in 2013 to start Lotpop, a company providing online and on-lot inventory analysis and management services for smaller dealerships.
Zach Klempf worked part-time at a dealership while attending Emory University. He “fell in love” with the business, but not with the siloed legacy technologies used by most dealers then. Upon graduation, intending to go into finance, Klempf returned to his first love and in 2014 created Selly Automotive, a technology company specializing in mobile-first CRM and lead management software for dealerships.
Both men have acquired essential used-car sales insight to share with independent dealers that if applied to their dealerships can help them sell more cars.
Rice believes the first place any dealer who wants to increase sales should start is to improve online and on-lot inventory presentation. While inventory mix is significant, and how vehicles show on the lot important, it is imperative that dealers put more focus on how they market and merchandise inventory online, said Rice, who started his career as a dealership Internet sales manager.
“Get the [online] inventory right, and drive traffic to the doors,” Rice said, speaking recently on a DealerRefresh.com “Refresh Friday” show.
“If the dealer doesn’t have the right inventory merchandised right, there’s no need for a lead management system,” he added.
When interviewed afterward by Auto Remarketing, Rice explained that inventory not presented well online, where most buyers shop first, is a waste of time, dollars — and sales, he said.
“Price cars correctly, on the Internet and on the lot,” he added. “Write complete and compelling descriptions for online listings. Wash cars inside and out before imaging them and loading them to your website or lead provider sites. Correct Check Engine and other codes before moving vehicles to the sales line.
Only then, he suggested, lead management efforts make sense.
A lead management system describes a multitude of functions related to helping dealers create, capture, distribute and analyze the value of sales leads. It can help the dealer calculate various lead source returns on investment based on leadto- sale conversion rates, cost per lead, and most important, cost per sale. Knowing this helps a dealer fine-tune marketing spend.
These experts noted that lead management efforts relying on manual lead tracking and fulfillment systems just do not work. In the busyness of the business, lead response and follow- up are too easily neglected — and forgotten.
That wastes money for dealers purchasing leads through third-party providers or paying for pay- per-click services to drive online car shoppers to their website inventory pages.
Even dealers using CRM (customer relationship management) systems lacking lead management functions may not see an improvement in how they capture, track, follow up and analyze leads, lead performance and provider value.
Klempf said 70 percent of independent dealers do not use lead management tools.
“We recently shadowed an agent on visits to several east coast dealers, and most of them did not have the technology to manage leads,” said Klempf.
Instead, spreadsheets, Gmail accounts and pencil-and-paper notes remain popular, but costly. From such “systems,” lead response is slow. Leads responded to after 20 minutes are unproductive.
A dealer who struggled to track leads manually is Alex Tovstanovsky, who with his father Igor owns and operates Prestige Motor Works in Naperville, Ill., outside Chicago. “We attempted to track leads manually, which didn’t work at all, before switching to Selly in 2015,” Tovstanovsky said.
The dealership retails 25 to 30 vehicles a month. From major third-party lead providers, the business receives from five to 20 leads a day. If a lead isn’t pursued by the sales department within 15 minutes of receipt, the lead management system bounces the opportunity to another sales associate.
“If a sales associate isn’t attentive enough to his or her desktop, phone app or email where leads are pushed, that individual is either not very good at sales or tied up, so the opportunity goes to someone who will follow up. I am cutthroat about this and use the task settings in my Selly system to make sure that leads and follow up are handled the way we specify in the time frame we specify,” Tovstanovsky said.
Klempf also noted that many independent dealers fail to leverage the lead potential of their own website inventory pages.
“Most independent dealers’ marketing investment goes to Autotrader, TrueCar, Cars.com and CarGurus, and the organic leads from their own website are forgotten about. A healthy balance of third-party lead providers and high-quality leads through a dealer website are a recipe for success,” Klempf said.
Prestige Motor Works, a NIADA 2017 Illinois Quality Dealer of the Year, relies on assertive organic SEO, which accounts for 30 percent of leads to the store’s website. The remaining leads are from visitors having first looked at Selly inventory on third-party sites who then migrate to the dealer’s website as the customer nears a decision.
Managing leads profitably is a challenge for an independent dealer, who is likely wearing multiple hats. A day spent selling, making inventory, acquisition and floor planning decisions, and administering rent and payroll has used up most hours of the day.
“The biggest challenge for independent dealers beyond inventory is interfacing with how the majority of car buyers shop today, which is online,” Klempf said.
Not following up leads within 20 minutes means wasted opportunity, as by that time shoppers have moved on or otherwise forgotten about you. For franchised dealerships, internet leads account for 20 percent of car sales. Data about independent dealership lead activity is apparently not available.
Klempf suggested dealers consider the following to improve digital marketing and lead management results:
1 Think of the dealer website not as another $99 a month expense, but as a digital showroom where the first impression of the dealership is sealed. Be sure the site leverages search engine optimization techniques and is mobile friendly, meaning it looks as great on a smartphone as it does on a laptop or desktop screen.
2 To improve website visitor engagement, include an “About the Staff” page with photos and bios. Add activity apps such as a trade evaluator or a credit application. If staff includes bilingual individuals, promote that boldly on the website, especially on inventory pages.
3 Use a CRM/lead management tool(s) for the auto-capture of leads if staff cannot respond quickly. The tools should enable auto-reminders, track leads, appointments and closings and generate reports to help management analyze lead source return on investment, and adjust marketing spend (see charts above).
4 Consider pay per click marketing for the dealership website to improve lead generation.
5 Use text-compliant messaging that sends out opt-In SMS text messages to customers and allow them to opt-out if they wish to receive no further contact.
6 Differentiate the dealership — Klempf cited dealers who promote “out-of-state” buyer programs, for which the dealer provides financial assistance; travel and lodging reimbursement, for example.
7 Create excitement with inventory merchandising to draw shoppers to the lot and into the store. One independent dealer selling used high-end imports built a man cave in its showroom, and another put a pool table on the floor.
8 Be data-driven, because any dealer who tracks leads, inventory and F&I product sales will understand those parts of the business better and have the correct information for tweaking key performance aspects of the dealership.
9 Leverage social media, such as Facebook Marketplace, for listing inventory, encouraging customer reviews, and for chatting with shoppers via Facebook Messenger. “LinkedIn is also an interesting social network to communicate with customers. Changes in member profiles, such as an announcement of a new job, should remind dealers who monitor this site that a new job often means time for a new car,” Klempf said.
“For me, the most important number our lead management system makes available is our cost per sale or ROI on a specific marketing or ad medium,” said Tovstanovsky, “so we know exactly how each lead source performs. It is these numbers that I use to negotiate rates with lead providers. I suggest other dealers also measure their vendors — try them for three months, evaluate what their cost per sale is, and then renegotiate your fees with them.”
High lead volume is not always productive where online inventory management is undisciplined. Lotpop’s Jasen Rice analyzed this observation, shown in these two examples.
Here, both charts show 100 leads to the respective dealer, but for the Left Chart dealer, because of its online inventory practice, 40 percent of those leads were for cars already sold, meaning in reality, the dealer had only 60 workable leads. At a 10-percent closing rate, the dealer sold six units for a 6-percent closing rate.
For the Right Chart dealer, 100 of its leads landed on 20 cars it had already sold. It too closed 10 percent of the remaining workable leads and sold eight units, an 8-percent closing rate.
The message here is dealers benefit when updating online listings frequently to remove sold vehicles so the dealer does not continue to pay for leads on units no longer available.