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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