(Photo by Roadsidepictures)
I have just returned from Leadscon, which focused on online lead generation and was sold out. The online lead gen business was worth nearly $2B in 2008 and the key verticals were mortgage, auto and edu with emerging verticals include home improvement, car repairs etc. (i.e. anything that puts off a new capital purchase for as long as possible). The biggest issues seemed to be trust and transparency between lead buyers and sellers. I'll write more about my learnings from Leadscon in the next post.
The experience got me thinking about how the automotive industry is dealing with lead generation, especially with the severe downturn in auto sales. After all, in this industry, 'leads' have historically walked into dealerships, driven mostly by self-motivation but also by large scale advertising on TV by auto OEMs as well as smaller-scale advertisments in local newspapers and other media outlets by dealerships.
The last decade has seen the Web impact car buying in a big way, putting pressure on dealership margins, as well as enabling a whole new channel for lead generation. Companies like Edmunds and CarsDirect have emerged as lead gen leaders.
I'll put two contrasting scenarios in front of you, as food for thought. More in subsequent posts:
Legacy scenario: Confessions of a Car Salesman - article on Edmunds.com. The writer went undercover to work at a car dealership and exposes the inner workings and psychology of the dealerships. Here's an excerpt from how the author was trained to negotiate with a buyer:
Michael returned to his scenario. "OK, so when you give these numbers to the customer you say, 'Here's a pretty good deal for you.' But Mr. Customer says, 'Oh man! Michael, I told you I can only put down $3,000.' So you cross out the $6,000 you wrote and put down $5,750. You say to the customer, 'Is that more what you had in mind?' And you nod as you say this. Try to get them agreeing with you."
This reminded Michael of something and he laughed. "Here's another thing. Never give the customer even numbers. Then it looks like you just made them up. So don't say their monthly payment is going to be $400. Say it will be $427. Or, if you want to have some fun, say it will be $427.33."
While Michael was training me, he didn't ever say, "Here's how to cheat the customer," or, "This is how we inflate the prices." In fact, he stressed that I was supposed to treat customers with respect to build a strong C.S.I. (Customer Satisfaction Index). But manipulation and overpricing was inherent in everything he said. The reason for this was simple — without overpricing we couldn't make a living. What we were selling was profit. Or, as Michael put it, "This is money for you — money for your family."
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Future scenario: Zag.com got financed last month to the tune of $37.4 million. Zag is an 'online auto-buying service that saves consumers money when buying cars.' The keys to its business model include group buying and distribution through affinity groups (such as AAA, Parenting.com and, yes, the NRA). Imagine hundreds of buyers grouping together to buy hundreds of cars at one shot (no pun intended)... the bargaining power is immense. But the key is that dealers are incented to participate through a fixed price model as well as lead generation over the Web. How much better is this than going to a car dealership? Find out more by clicking on one of the links below:
USAA - www.usaa.com/auto
AAA MidAtlantic - http://aaamidatlantic.zag.com
Other AAA clubs - www.aaa.com/autobuying
Upromise - http://upromise.zag.com
Administaff - http://driveyourdream-adm.zag.com
National Rifle Association - http://nra.zag.com
American Express - www.amexnetwork.com/autos
Overstock Cars - http://cars.overstock.com
CapitalOne - www.capitaloneautobuying.com
Parenting - http://parenting.zag.com
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