The Internet Lead Buying Cycle
Do you want to make gross and sell cars online? You have 13 days to do it. Last spring I had the privilege of attending a summit with the best automotive CRM and online retailing experts in the country. One of the first questions asked was, What is the true buying cycle of an Internet lead? This is a very controversial topic and can cause heated debate. There are several schools of thought on what the true buying cycle of an Internet purchase request is. In the car business, we work the Buy or Die technique. However, there is a time when a lead is really hot and the target of opportunity rests in the cross hairs for only a certain amount of time. I have always held the opinion that a lead is never dead, and I continue to market to the customer until they tell me to stop calling and emailing them. But hitting the lead fast and furious the second it comes into your inbox is a no-brainer. A lead that is not responded to immediately cannot be saved by even the best follow up procedures. Over a 15-month period, I conducted an exhaustive analysis of leads - from the top third party lead generators, from a multi-franchised dealer website, and from four OEM/factory sites. Statistics from my research show that the average person who buys a car after submitting a purchase request does so within 13 days of the submission. Having a fast response time and knowing that the average Internet lead is hot for 13 days will help you sell more cars. Buying Cycles Vary by Month While the overall average lead buying cycle is 13 days, there are variations depending on the time of year. One thing in my research that I found surprising is that the typical months considered to be the height of the buying season - June, July, and August - did not have shorter average buying cycles than I originally hypothesized. Looking at lead buying cycles from dealer websites, which historically have higher closing ratios, the average time it took for a customer to buy after submitting a lead was 10.9 days. December leads had the longest closing period of 22 days; and October had the shortest with 7.7 days. Further analysis could determine why there is such a huge disparity from month to month. October had the shortest buying cycle at 7.7 days - so this is your month! Here is the break down for buying cycle times in days, for each month: January - 11.2 February - 11.1 March - 14.5 April -10.9 May -13.4 June - 10.2 July - 8.5 August -14.3 September -11.7 October - 7.7 November - 13.8 December - 22 Never Forget - It’s Always a Matter of Return on Investment I have also found that leads from different lead sources and providers will yield different buying cycle times. Does this mean you should simply disqualify a lead source because it has a longer buying cycle on average? ABSOLUTELY NOT! Why? Because it’s your ROI that matters with a lead source, not necessarily the buying cycle time. Getting a good return on your investment from that lead source is what you should count on. Some colleagues and I developed a 5-to-1 ROI Analysis, which means that we want to earn five dollars back for every dollar we spend with a lead source. I take my total gross generated in sales from each lead source and divide that by what I spent for leads with that source that month. And, I break it down per store if there are multiple franchises. The 5-to-1 ROI Analysis For example, in one month at one dealership we spent $576 on Dealix leads. We earned $11,079 dollars in total gross for that month, achieving a gross ROI score of 19.2. Thus, we made back $19.20 for every $1 we spent on a Dealix lead. Furthermore, it is a more effective analysis to calculate the ROI than it is to calculate your closing ratio. It is important to do both; however, knowing what you put in the bank is more important than knowing a closing ratio. It is more effective to calculate ROI than it is to calculate your closing ratio. While it is important to do both, knowing what you actually put in the bank is the most important. Don’t Fall into Analysis Paralysis - Measure the Right Numbers Some dealers are infamous for crunching numbers. However, they can get into analysis paralysis or get overzealous in crunching all the wrong numbers. Moreover, dealers tend to under analyze their Internet department numbers. Consequently, they do not know if their Internet department is under performing or shooting the lights out. Internet sales should be scrutinized as closely as any department in the dealership or dealer group. In a monthly analysis, measure:
- Number of sales for new and used
- Front and back end gross
- Return on investment for all third party lead vendors
- Buying cycle times for all lead sources
- Monitor all ISMs’ emails with their customers through your lead management tool. (Get one if you do not have one.)
- Also, measure what email leads were sold by the sales floor to see what your penetration is with those leads.
- Furthermore, count those sales in your ROI analysis. If people who sent leads in are buying on the floor, most likely your ISM got them to come in. The majority of those sales are made because of the initial quotes made by the ISM.
- Numbers to Track in Your Internet Sales Report
Develop a comprehensive Internet sales report that covers all aspects of monthly Internet sales. This report must include, but should not be limited to:
- Departmental totals
- Sold comparisons
- Total gross comparisons
- All third party lead services and their gross totals
- Year to date ROI
- Buying cycle times
- A break down of store total sales, including year-over-year comparisons
- A break down of individual ISM’s numbers, including: sales; response times in minutes; CSI averages; gross analysis for front gross; back gross and total gross average; commission analysis; and a graphs comparison page
Hold monthly Internet sales meetings to cover team topics only. This meeting should cover team goals, incentives, bonuses, etc. On a daily basis, either speak with or Instant Message each team member. Review their sales numbers with them at that time. At the monthly meeting, review team performance, sales numbers and other metrics, lead management tool questions, deal problems, vehicle specials to be placed, and any other issues or problems. Always remember to keep the Internet lead in the cross hairs and fire away!