J.D. Power and Associates' 2003 Dealer Satisfaction with Online Buying Services Study yielded great news for both auto dealers and the online automotive industry.  With lead volumes exploding and close rates to match, dealers showed increasing satisfaction with online buying services.  One of the most compelling findings to come out of the study, which probably comes as no surprise to our readers, is the growing importance of Internet sales professionals.

Clearly, more dealers are tapping into the enormous marketing potential presented by the Internet.  According to the J.D. Power and Associates Dealer Attitude Study, back in 1998, about 28% of car dealers were using Internet auto buying services. In 2001, that number grew to 65%, and then to 70% in 2002.  Because the Internet is playing a stronger role than ever before in the way consumers make their vehicle buying decisions, the number of Internet-generated sales leads has skyrocketed. 

“As more and more consumers develop advanced Internet skills and gain high-speed Internet access,” says Dennis Galbraith, senior director of automotive website research at J.D. Power and Associates, “the Internet will continue to grow in its impact on automotive shopping and the importance of online buying services will continue to increase.”

Internet Leads – the Sky’s the Limit

The Internet is playing a more important role than ever before in the way consumers make their vehicle buying decisions, thus the number of Internet-generated sales leads has grown dramatically.  With more consumers empowered with advanced Internet skills, an increasing percentage of car buyers - 64% in 2003, up from 60% in 2002 - use the Internet in their buying process.  The study shows that the importance of the Internet should not be measured by the industry dollars allocated to it, but by the consumer dollars impacted by it.

The study also indicates that most dealers are using Internet-generated leads from a variety of sources: their manufacturers, their own websites, and from third party providers.  Manufacturers have gotten in the game, supplying 75% more new vehicle leads to their dealers than last year. Leads from dealers’ own sites also increased by 25%. Finally, independent buying services/third parties supplied 25% more new vehicle leads and 31% more used vehicle leads to dealers.  Manufacturers' monthly fees are typically much lower than independent services.  Independents, on the other hand, provide the highest volume of leads and are more likely to be viewed by dealers as generating incremental sales.

Close Rates Are Up

The J.D. Power study indicates that the rise in lead volume would carry little weight without a subsequent increase in lead quality, or close rates.  In this area the study reported more good news -  new-vehicle closing ratios increased for every lead type.  New-vehicle leads from manufacturers rose by 19%, while close rates for leads from third party sites increased to 15% - from 13% in 2002. Finally, close rates for used vehicle leads from third party sites increased by 9% and those from dealers’ own sites increased by 5%.

While response methods, training, and dedicated Internet sales professionals all have an impact on lead close rates, the study found that the online buying service supplying the leads has the most impact on their potential to result in a sale.  The factors that contribute to lead quality include: the type of buyer attracted by the service; the stage in the purchase funnel in which the buyer is brought in; and the screening and verification requirements of the online buying service.

The Rise of the Internet Sales Professional

One of the greatest areas of validation that resulted from this study is the growing importance of the Internet sales professional as an integral part of any dealership that wants to optimize the Internet opportunity.  Currently, about 43% of dealers that use online buying services have one or more dedicated Internet specialists to handle Internet leads – up from 32% in 2002.  The study found that having an Internet specialist dedicated to leads from online buyers actually maximizes average gross vehicle profits for the dealership.

While Internet customers can be tough negotiators and yield a lower average gross profit than non-Internet customers, the study notes that it’s likely this group of customers, who come to their purchase decision armed with information, would be tough sells even if there was no Internet.   

“How dealers respond to online leads is critical,” says Mr. Galbraith. “Having a skilled dealership Internet specialist responding to leads from online buying services helps dealers maximize average gross vehicle profits. Responding with up-front discounted pricing also helps. Dealers who withhold price information until Internet shoppers are in the dealership may be driving business away and are typically not making up for it in profit margin. Fortunately, most dealers are adapting very well to the increasing impact of the Internet.”

While most of you already realize what a vital opportunity in auto retailing the Internet presents, it’s always rewarding to get more validation for a job well done.

For more information on the 2003 J.D. Power Dealer Satisfaction with Online Buying Services Study, go to: http://www.dealix.com/Corporate/Releases_Display.asp?pressID=296.

Dealix Corpoation was rated number one in Business Generation in the study, including Quality and Quantity of Leads. To learn more about why dealers rated Dealix number one, contact Steve Pace, our director of sales, at (866) 253-5078.