Why I Just Recommended Third-Party Leads to My Client

Whether addressing a 20 Group or consulting in a dealership, I am constantly asked questions like this:

“So, Steve, what cool, new digital marketing sources are you seeing out there and what do you recommend?”

The answer to this question always contains two parts: First, I tell them about the cool, new stuff I’m seeing; and then I tell them what I recommend. Rarely does any solution answer both questions.

Is Your Goal to Be Cool or to Sell Cars?

If your goal is to always be the coolest, hippest digital marketer around, then you’re likely buying too much of the “latest and greatest” and letting your competition beat you with crusty old solutions and boring old processes. Your competition wants you to keep chasing the shiny objects; to keep dumping tens of thousands of dollars every month into basically worthless and unproven digital wastelands.

If your goal is to sell cars, then you’ll want to stay focused on those digital marketing sources that can prove their ROI to you – without the need for grand leaps of faith or the discussion of lots of “engagement.” (Not sure about your dealership, but my clients don’t sell engagement; they sell cars.)

The Ten Thousand Dollar Sewer

I just worked with a client who was spending about $10,000 per month on pay-per-click (PPC) advertising. When we tried to determine the ROI of this spend, we quickly discovered the following:

  • Their PPC vendor provided no real tracking of these visitors (just lots of pretty reports showing relatively worthless metrics like click-through rates and impressions).
  • Their PPC vendor hadn’t helped them set up goal tracking in Google Analytics, so they had no idea how many leads this spend was generating.
  • More than half of their clicks came from bidding on their own name. (This, despite the fact that they “owned” the first page results on Google when searching any version of their name.)
  • They were competing with their OEM for the top spot on many keywords, which led to some costs-per-click IN EXCESS OF $19.00. (Yes, this was the cost-per-click, not cost-per-lead.) If you assume a robust 5% conversion rate and a generous 20% close rate on website leads, these $19 keyword clicks were generating a $380 cost-per-lead and a $1,900 cost-per-sale.

Wasn’t Digital Marketing Supposed to Cost Less?

You are correct: Digital marketing was supposed to cost less than traditional marketing. Moreover, it also came with the promise to be more measurable than anything you were doing offline. However, my client’s PPC vendor provided just slightly better reporting than the local billboard company; and a marketing cost-per-sale (for some models) that was three times what NADA reports as the industry average.

Given this, I had no choice but to recommend my client find a new PPC provider… but, I wasn’t done. I also recommended that they immediately add some third-party leads to their marketing mix (using about a fourth of this wasted PPC budget).

But, I Want To Do It All Myself!

Your competitors love when you say this! The truth is that if you want to keep buying $19.00 clicks that result in $1,900 costs-per-sale, you could get close to grabbing the attention of nearly every buyer in the marketplace. But, even then, you’re still not going to grab them all.

Plus, why would you spend $380 to generate a website lead, when you can spend $250 to actually sell a car with third-party leads? (My clients average roughly a $250 cost-per-sale when they use a quality third-party lead provider like Autobytel, target their lead buying with products like iControl, and use a strict, but very simple lead follow-up process.)

For this particular client, I recommended Autobytel, because nearly 100% of their decline so far in 2017 is related to one Model; and with Autobytel’s iControl they can decide to purchase just leads for this particular Model and in the exact ZIP Codes where competitors are stealing share.

But Steve, We Already Buy Third-Party Leads from Our OEM!

No you don’t – not this quality of leads. If you’re an average dealer, you’re buying a mix of mostly garbage and a few jewels. Third-party leads have become a profit center for most OEMs. This means they can buy questionable leads cheaply and resell them to you at a premium.

As I discovered years ago when I was the eCommerce Director for one of the publicly-traded dealer groups: Not all third-party leads are equal. If your third-party lead provider isn’t generating the vast majority of the leads they sell to you on their own websites, then they’re forced to buy leads in the open market (where quality can be sketchy, but the prices sure seem right).

Okay, I’m Sold! How Much Budget Should I Give Third-Party Leads?

Like all digital marketing spends, you should allocate as much budget as you can afford to a source that continues to return a provable and acceptable ROI. For third-party leads, this may mean targeting an effective $300-$350 cost-per-sale or a cost-as-a-percent-of-total-gross of 20% or less. (That’s the cost of a service divided by the total gross generated by that service.)

Of course, if your team cannot close high quality third-party leads at a rate required to fit in these metrics, then you’re either buying too far away from your dealership or your team isn’t following a strict lead handling process. (More often than not, I discover it’s the latter.)

For my client’s estimated $2,500 monthly investment (that they will take from the ineffective PPC spend), they should immediately enjoy an incremental 9-10 units per month directly related to these third-party leads. Not bad, in my mind.

Given this, how do you think I should answer the “what do you recommend?” question the next time I hear it?

I thought so.

Good selling!