john holt, ceo automotive news world congress 2006
TRANSCRIPT
John Holt, CEOAutomotive News World Congress 2006
Today’s Takeaways: Observations from 10 + Years in this Business
> The Internet has arrived – at long last!
> Its short-term effect was exaggerated; its long-term impact has been under-estimated
> A comprehensive Internet strategy requires focus on both creating and converting opportunities
- We have opportunities to transform existing spends and create opportunities for unheard of value
- The average dealership is losing far more opportunities than it’s winning; conversion matters too
> Internet impact and ROIs justify our attention and commitment
CobaltCRM
CobaltCRM
Cobalt Strategy Create and Convert Opportunities
Create Opportunities
3rd Party Leads3rd Party Leads
Convert Opportunities
• Dealix Leads
Website Leads
(phone, email, walk-up)Website Leads
(phone, email, walk-up)
• OEM Portals
• Websites
• Search
Topics
> State of the World
- Overall Internet Usage / Ad Spending
- Automotive Industry Trends
> Insights from Recent Surveys and Research
- eBusiness Performance Data
> Implications / Actions
95.4
202.9
296.2287.9
State of the World: Internet Usage Keeps Growing
Growing Internet Usage (Millions)
Source: Nielsen NetRatings, ITU
2000 2005
► 68% of total population
► More than doubled in five years
Internet UsersInternet Users
Internet Users
$4
$8
$19
$12
Internet Ad Spending ($ Billions)
Internet Ad Spending (and Paid Search) is Growing, Primarily at Expense of Newspapers
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Ad Spend Budgetby Medium
Source: American Advertising Federations
1995 2005
Newspaper TVInternet
Radio OtherSource: Park Associates. Jupiter
2005 2010
Other Internet Paid Search
$0.4
$1.8
3.0 M
6.1 M
Automotive Internet Ad Spending Driving Car Sales
2003
Source: Jupiter, Borrell Assoc.
2007
Automotive Internet Ad Spending
($ Billions)
2003 2009
18%*18%*
33%*33%*
* Percent of total car sales. Source: Jupiter
Internet-Generated New Car Sales
(Millions)
Most Retailers Are Doing OK, But…
$27.0
$28.0
$29.0
$30.0
$31.0
$32.0
$33.0
$34.0
2000 2001 2002 2003 2004
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
Dealership Sales Net Profit before Tax
► High Sales Volumes
– 8th consecutive year of 16+ M vehicles sold
► Manageable Margin Pressure
– OEM incentives
– Low interest rates
– Profit diversification
Sales ($ M) Net Profit (%)
Source: NADA Average Dealership Profile
Success FactorsSuccess Factors
► Growing Pressure
– Identify advertising / marketing efficiencies and efficacy
► Internet’s Appeal
– Buyers are there
– Efficient, measurable means to attract in-market car buyers
ImplicationsImplications
Dealer Ad Spend per Vehicle Increasing Faster than Rate of Inflation
$250
$500
1995 2005
CAGR: 7%
Source: Park Associates. Jupiter
82%
50%
79%41%
29%
33%
Third-Party Leads Growing in ImportanceGreat ROI
2002
Source: Jupiter 8/05
2003
3rd Party Leads as % of Total Dealer Internet
Marketing Budget
2004 2005
Source: Jupiter 8/05
Percentage of Dealers Using 3rd Party Leads
2006E2004
The Huge and Coming Impact of SearchGreat ROI
► 67% of Auto Buyers Research Online*
► 70% Start at a Search Engine**
* JD Power 2004 Autoshopper.com 2004 study** Yahoo! Complete 2005 auto study
Dealership
Auto BuyersDealer Website
3rd Party Website
OEM Website
Insights from Cobalt Research
Research Overview: Approach
> Studied 12 months of leads to 1,329 dealerships
- Over 1.1 million leads matched to actual vehicle sales by R.L. Polk
- Analyzed close rates, sales cycle, brand defection, cross shopping
> Telephone survey – interviewed 4,000 customers that submitted leads to evaluate their perceptions of dealership lead handling
> Industry-wide eMystery Shop – over 4,000 dealers / 22 brands
- Responsiveness, response times, quality of response
> Conducted 20 onsite evaluations of high performers
- Determined common best practices that lead to higher conversions
Research Overview: Key Findings
1. The majority of leads turn into sales
2. Most customers have a very short purchase timeframe
3. Most dealerships are experiencing a significant amount of “lost opportunities”
4. Dealership responsiveness to leads is improving, but the quality of those responses is not
5. High performers utilize a remarkably common set of absolutely teachable best practices
Based on registration information supplied by R.L. Polk & Co.
Sales/leases have been adjusted for matching efficiency by a factor of 1.36, which represents a 73% historical match rate
144,842
248,051
199,656
0%
25%
50%
75%
100%
592,549
52,408
0%
25%
50%
75%
100%644,957
512,685
0%
25%
50%
75%
100%
56% of the leads resulted in a sale
All New Vehicle Leads
56%
44%
Leads not converted to a
sale
Leads converted to a sale
Leads Are Real
Customers Have a Short Purchase Timeframe
Time to close a lead
273,886
103,130
63,455
204,486
0
50,000
100,000
150,000
200,000
250,000
300,000
Days to Close
Nu
mb
er o
f C
lose
d L
ead
s
42%
16%10%
32%
0-30 31-60 61-90 91+
68% of leads closed to a sale within 90 days
Elapsed time between the date of lead submission and date of lead closure
Based on registration information supplied by R.L. Polk & Co.
Sales/leases have been adjusted for matching efficiency by a factor of 1.36, which represents a 73% historical match rate
Based on registration information supplied by R.L. Polk & Co.
Sales/leases have been adjusted for matching efficiency by a factor of 1.36, which represents a 73% historical match rate
144,842
248,051
199,656
0%
25%
50%
75%
100%
592,549
52,408
0%
25%
50%
75%
100%644,957
512,685
0%
25%
50%
75%
100%
All New Vehicle Leads
56%
44%
Leads not converted to a
sale
Leads converted to a sale
Lost Opportunity is Significant
8% closed at the original dealership
92% closed at other dealerships = “lost opportunity”
8% Bought at Intended Dealer
Sold at “Other” Dealer
92%
All Leads converted to a Sale
Based on registration information supplied by R.L. Polk & Co.
Sales/leases have been adjusted for matching efficiency by a factor of 1.36, which represents a 73% historical match rate
144,842
248,051
199,656
0%
25%
50%
75%
100%
592,549
52,408
0%
25%
50%
75%
100%644,957
512,685
0%
25%
50%
75%
100%
All New Vehicle Leads
56%
44%
Leads not converted to a
sale
Leads converted to a sale
8% Bought at Intended Dealer
Sold at “Other” Dealer
92%
66% purchased the intended brand or a used vehicle at another dealership
All Leads converted to a Sale
Used (Any Make)
Other Make (New)
Intended Make (New)
42%
34%
24%
Lost Opportunity
All "Missed" Sales
Lost Opportunity is Significant
*Source Cobalt 2004/2005 Industry-wide eMystery Shop
Industry eMystery Shop Metrics
2004* 2005*
Overall Responsiveness 60.0% 69.7%
Response Time Average (hrs) 9.5 6.5
Quality of Responses:
Answered the Shoppers Questions 38.2% 25.9%
Used Brand or Product Highlights NA 23.9%
Dealership Responsiveness to Leads is Improving
*Source Cobalt 2004/2005 Industry-wide eMystery Shop
Industry eMystery Shop Metrics
2004* 2005*
Overall Responsiveness 60.0% 69.7%
Response Time Average (hrs) 9.5 6.5
Quality of Responses:
Answered the Shoppers Questions 38.2% 25.9%
Used Brand or Product Highlights NA 23.9%
But Response Quality Has Slipped
Customers Cite Importance of a Quality Response
39.3%
21.4%
14.2%
9.6%
4.3%
1.2%
0.7%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
Trade-In (fair trade-in value offered)
Other
Existing Relationship (with dealership)
Inventory (had what looking for)
Proximity (dealership in close proximity)
Dealership Response (good, quick)
Price (price was competitive)
What is the primary reason you bought a vehicle from the (intended) dealership?
Price (price was competitive)
Dealership Response (good, quick)
Proximity (Dealership)
Inventory
55.4%
20.4%
14.4%
3.7%
3.3%
1.5%
1.1%
0.2%
0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0%
Trade-In (poor trade-in value offered)
Other
Existing Relationship (none with this dealership)
Proximity (dealership in distant proximity)
Inventory (inadequate)
Price (price was not competitive)
Dealership Response (poor, slow)
Other Brand (customer decided to buy a different brand new vehicle)
Customers Cite Importance of a Poor Response
What is the primary reason you bought a vehicle from another dealership?
Other Brand (customer decided to buy a different brand new vehicle)
Dealership Response (poor)
Price (too high)
Closing Remarks
> What should you remember? The Internet matters!
- It’s where the buyers are
- It’s time to transform historic media spends; doing things the same old way “out of habit” is irrational and wasteful
- The Internet requires focus on both creating and converting; doing it right means buying the right assets and making a commitment to people/process too
- The ROIs justify the effort
- We’re damn lucky to work on something so transformative
Thank YouJohn Holt, CEO