SPECIAL REPORT
the future of third party leads Why performance-based sites may spell the end for the cost-per-lead revenue model
Performance-based websites, which charge per transaction instead of per lead, are winning the confidence of consumers and retailers by giving both parties more of what they want. This is creating a marketing revolution that has automotive retailers moving their marketing budgets away from cost-per-lead advertising models and investing more in costper-transaction models that minimize risk while providing higher ROI. the value associated with cost-per-lead revenue models has declined rapidly for automotive dealerships in recent years. Because lead providers often sell the same lead to 10 or more dealerships, margins and closing ratios have decreased, while the effort associated with closing each lead has increased. to make matters worse, many consumers are refraining from submitting leads altogether. according to a recent study by autotrader.com, less than 25 percent of consumers now contact a dealership prior to walking in. this is especially significant given the fact that, according to JD Power & Associates, consumers only visit 1.4 dealerships prior to making a purchase. This has left both sides looking for a better way to get what they want from the car buying process. Consumers are demanding increasing levels of transparency and are seeking out ways to avoid the traditional negotiation practices associated with buying a vehicle. dealerships are demanding leads with higher closing rates that allow them to generate a reasonable profit on the vehicles they sell. To meet the needs of both these groups, a new generation of membership-based sites, like TrueCar.com and autoamigo.com, are rapidly gaining popularity because they are giving both sides more of what they want.
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SPECIAL REPORT
ä Continued FroM tHe CoVer Benefits to the consumer unlike traditional advertising sites, consumers choose to become members to receive the benefits of sites like TrueCar. com (nasdaQ: true) and privately held autoamigo.com offer. However, in exchange for their contact information, these sites give consumers a guaranteed price, increased transparency across all three major components of a car deal (price, finance / lease, and trade value) and introductions to certified dealerships that have agreed in writing to honor the perspective company’s terms and processes in the customer’s car buying experience.. “The customer is put at ease and is more confident because they trust autoamigo and univision and it makes it a lot easier for us to sell a lot more cars to a lot more people,” said alfonso Gutiero, Business Manager at sterling McCall nissan. “Who knew car buying could be so hassle free? We literally just walked into the dealership, gave them the certificate and got the car we wanted for the price we were quoted,” said anya islamova, trueCar customer. as the business model for performance-based automotive sites continues to evolve, consumers are being offered greater and greater levels of service. A perfect example of this is the way certified AutoAmigo retailers continue the “AutoAmigo Experience” all the way through the buying process. Prior to their arrival, customers are personally guided through the entire autoamigo process that will take place at the dealership by the autoamigo call center and an appointment is scheduled at the participating dealership. the member is then encouraged to download a patent-pending mobile app. this app assists the customer through the buying process by guiding them to the dealership, notifying their certified AutoAmigo representative when they arrive on the lot and allowing them to get real-time, guaranteed pricing by scanning any new or used vehicle on the dealership’s lot. Customers are greeted in a dedicated autoamigo section of the showroom where high quality point-of-sale materials reaffirm the company’s core messaging and lets them know in advance what they can expect during their visit. The transparency that’s given to consumers who use autoamigo and trueCar’s products yields higher close rates. Consumers enter the dealership knowing they will receive a fair and reasonable price upfront with no negotiations required. “When that customer reaches us through autoamigo we are confident it is a deal because they trust AutoAmigo and univision and they know they are going to get a great deal,” said Chris Roberts, President of Kendall Toyota, “We have already sold over 80 cars that we probably would have never seen. it complements our tV and radio on univision and adds incremental sales.” the consumer demand for this kind of process is high. trueCar’s success in the marketplace has proven that. the service is growing in popularity, helping users purchase
400,000 cars last year, a third of the 1.1 million vehicles it’s helped sell since launching nine years ago. a key differentiator between the two companies is that autoamigo provides additional training on the Hispanic Consumer, one of the fastest growing consumer groups in america. Combined, trueCar and autoamigo have approximately 7,400 certified dealerships nationwide and this number is growing every month. “trueCar and autoamigo are a win-win scenario in the fact that we sell more vehicles and the customers are happy and they refer their family and friends,” said Boris Martinez, AutoAmigo Program Manager at sterling McCall nissan.
benefits to automotive retailers dealerships are the big winners with these new performancebased models because they have zero marketing dollars at risk, they receive all of the added services that sites like trueCar and autoamigo provide for their customers for free and they only pay for a lead if a customer buys a vehicle. Best of all, the fees paid to these programs are approximately half of what a dealership typically pays on a cost-per-sale basis. according to nada, the average dealer spent over $600 per vehicle sold in 2013. TrueCar charges $300 for every new car sold and $400 for every delivered used car. AutoAmigo charges $350 across the board.
“Customers love it, and we are closing leads at over 40%.” - Jenny Gonzales Internet Director Kendall Toyota
the only downside with these performance-based sites is that not all dealerships will qualify to become certified retailers. In order to join the dealer network for a performance-based site like trueCar or autoamigo, dealers must meet certain criteria. this includes the ability to maintain a minimum number of high-demand vehicles, a commitment to participate in required training and a commitment to abide by the terms and conditions of the particular program. that being said, if a dealership makes the cut, they usually receive an extremely high level of support. This is a necessary part of the business model because these third-party sites only get paid when a car is sold. in the case of autoamigo, a call center follows up with every lead to help increase appointment rates and show rates, as well as to survey each customer that visits a certified dealership so that those who do not purchase on their initial visit eventually purchase from their program in the future.
autosuccess Average Dealer Spend Per Car Sold in 2013
$600 $400 (used) $300 (new)
NADA
according to a recent study by iHs automotive (Formerly r.L. POLK), customers are responding very well to this approach. average closing rates for autoamigo leads nationally are up to three times that of traditional leads with top performers claiming upwards of 40 percent. Program loyalty is also high. 62 percent of all memberswho bought a car from any source bought from the referred autoamigo dealer. “With autoamigo customers the appointment coordinators call you as soon as they schedule an appointment. it’s much better than a lead that you hope comes in. these customers come in and close,” said Jenny Gonzales, Internet Director at Kendall Toyota, “We follow the process, the customer loves it. We are closing our AutoAmigo leads at over 40 percent.”
about autoamigo autoamigo is a privately-owned Hispanic-focused car-buying company that focuses on eliminating language barriers and delivering a guaranteed low vehicle price to customers. autoamigo, in partnership with univision, gives Hispanic car shoppers a predictable and enjoyable way to buy dependable, high quality vehicles from america’s best dealerships for a guaranteed price. there are no membership fees to join this program and it is available to anyone in the united states. For more information, please visit www.autoamigodealers.com.
TrueCAR
$350
AutoAmigo
pricing information, and a network of trusted TrueCar Certified dealers who provide guaranteed savings certificates and seamlessly complete the car purchase. the reality is buying a car is painful and buyers fear they are going to overpay. TrueCar recently celebrated their IPO and has helped with over 1.2 million automobile transactions since its inception. trueCar’s mission is to prove that truth and transparency is a more profitable way of doing business -- starting with automotive. We enable users to obtain market-based pricing data on new and used cars, and to connect with our network of trueCar Certified dealers. in addition to this product offering, trueCar customizes and operates a platform for affinity group marketing partners like the USAA, Consumer Reports, financial institutions, and other large enterprises such as Boeing and Verizon. For more information, please visit www.trueCar.com.
To learn more about this report, email: successstories@autosuccessonline.com See video.
about truecar Founded in 2005, trueCar is the negotiation-free car buying platform. trueCar empowers car buyers by giving them transparent insight into what others actually paid, upfront
SPECIAL REPORT
SPECIAL REPORT
the future of third party leads Why performance-based sites may spell the end for the cost-per-lead revenue model Performance-Based Lead vs. Traditional Marketing
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Less people Lower Commissions
$350 PAY PER PERFORMANCE
Retention & Referrals
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Volume incentives Financing used Vehicles service
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Higher satisfaction Higher Loyalty Higher referral rates
at a Glance •
Performance-based websites, which charge per transaction instead of per lead, are winning the confidence of consumers and retailers by giving both parties more of what they want.
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The value associated with cost-per-lead revenue models has declined rapidly for automotive dealerships in recent years because margins and closing ratios have decreased, while the effort associated with closing each lead has increased.
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Consumers are volunteering higher levels of information up front in exchange for increased transparency and introductions to certified dealerships that have agreed in writing to honor the perspective company’s “consumer’s bill of rights”.
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Dealerships are the big winners with these new performance-based models because they have zero marketing dollars at risk, they receive added services for free and they only pay for a lead if a customer buys a vehicle.
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