Auto Dealers Are Getting the Biz Online

MAY 31, 2007

Lisa Phillips, Senior Analyst

The local Internet scene is heating up for automotive dealers and sellers, according to a recent report from Borrell Associates. Local online advertising by automakers, dealers and individual sellers will escalate to $4.2 billion in 2011, up from $2.3 billion in 2006.

Data from the National Automotive Dealers Association (NADA) indicate that of the $7.8 billion spent on advertising by auto dealers in 2006, the Internet's share was 11.5%.

Common features on dealer sites in 2006 were price and inventory information, financial forms and information, and the ability for customers to schedule sales and service appointments. Yet although visits by car shoppers are on the rise, conversion rates are not. The NADA's "2006 Dealership Internet Survey" shows a monthly average of 319.9 unsolicited prospects visited dealer sites in 2006, compared with just 227.9 per month in 2005.

But of the qualified leads these dealerships received — 52.9 in 2006, up from 29.5 in 2005 — the conversion rate to sales dropped, from 26.4% in 2005 to 19.2% in 2006. Conversion rates among customers who arrived through third-party buying sites were far better — 29.6% in 2006.

What are they missing? Prompt follow-up with prospects does not appear to be the issue. Although Capgemini, in its 2006 "Cars Online 06/07" survey, demonstrated that 84% of US respondents expect their e-mail inquiry to a dealer or manufacturer to be answered in less than 24 hours, Chinese car shoppers were the most impatient, with 43% expecting an immediate response, while 91% of British respondents expect an answer within the same day.

Dealer responses to the NADA for its Internet survey indicate that 98.3% are responding to customer inquiries within 24 hours, with 82% boasting they are getting back to prospects in seven hours or less. Perhaps the responses themselves are turning away prospects. While the Internet has speeded up response time, that greater speed can reduce, rather than improve, the quality of communication.