The store is doing a brisk business selling new and used vehicles over the Internet to customers as far away as Maryland, New York, Texas, Florida, and Michigan.
Overall marketing spend is down 3%, while Internet sales are up 61% for 2012, compared to 2011.
The store sold more than 2,000 vehicles over the Internet in 2012, with a 50/50 split between new and used vehicles.
GM Rob Bennett and Internet Director Charlie Brown recently discussed their strategy for success with Dealer magazine.
First, Rob, how did you get into the business of selling cars?
Rob: In 1988, when I was in college in Montana, my brother and Bryan Osterhout, who is now my current boss at Lithia, convinced me to quit school and move to Eugene to sell used cars with them at Selective Motors.
Over the years, I worked at various dealerships. Then in 1998, Bryan, who had been hired by Lithia Motors a year before, hired me again, this time as used car manager at this store. Subsequently, I worked for Lithia Motors in five different dealerships before coming back to Lithia Chrysler Jeep Dodge of Eugene as general manager in 2010.
Charlie, how about you?
Charlie: I had been with Lithia Motors for 10 years, and was a new vehicle sales manager here, when Rob arrived. Within a month, Rob promoted me to general sales manager.
How have the two of you driven up Internet sales 61% in the last year?
Rob: It’s a lot simpler than you might think. We keep our website updated daily. We have cut back and shifted our advertising spend. We are extremely aggressive with our pricing. And, we work to build trust rapidly with customers by giving them everything they want upfront.
Would you elaborate on each of those points?
Rob: The first thing we did when Charlie and I got together here in this store was manage our own website, www.lithiadodgeeugene.com. Dealer.com hosts our website and we’re very happy with that because Dealer.com’s software makes it easy for us to update and manage the site ourselves.
One of the key ways we manage our website is to make sure we have pictures on every car, new or used. We get those updated and loaded daily and we get them into inventory.
Charlie: We have a staff person that takes all of our pictures of our vehicles. We take approximately 21 pictures of every new and used vehicle on the lot. When you go to our website to look for a used car, all of our cars’ pictures start with the same type of view — front view – and each subsequent picture in the sequence of 21 pictures offers a similar view for every car – side view, rear view, etc. There’s continuity in everything. It sounds simple, but it’s amazing how well that simple process works for us and for consumers.
Rob: All of our rebates, discounts, and pricing are updated and monitored every single day. Charlie spends his first couple of hours every morning just going through the Internet and our website – making sure that everything the public sees is correct and up-to-date. Rebates or discounts, especially with used cars, continually change. As cars get older, their pricing should continually change. I think one of the pitfalls of a lot of stores is just not keeping their websites up-to-date daily. Charlie does a great job of keeping our Internet presence up-to-date.
Isn’t your competition doing the same thing?
Charlie: We’ll go to the websites of other dealerships in our area to see what they are doing. More often than not, they won’t have updated prices, updated rebates, and they won’t have pictures of the cars.
How do you drive traffic to your website?
Charlie: The Lithia marketing department handles our SEO and SEM and they are extremely effective in driving traffic to the site. We also use DMEautomotive, out of Florida, to produce our newsletters and they are helping contribute to our success in driving up Internet sales leads. DMEautomotive also does all of our direct email to customers. We have an extensive email list and they manage that for us very effectively, and that results in a substantial amount of sales leads.
How many Internet sales leads do you get per month?
Rob: We averaged 1,446 Internet leads per month in 2012 – that includes e-mail and phone leads. We basically doubled our Internet leads in 2011, over 2010, and in 2012 over 2011.
What changed over that time span?
Rob: Basically, just the way we spend our money. We’re spending a lot more money now on our third-party lead providers: AutoTrader.com, Cars.com, Craigslist, Kelley Blue Book, and Edmunds.com.
And, we continue to grow in our spending in other areas to attract people to our website, and once there, convert them into viable sales leads. In particular, HookLogic has helped increase the quantity of viable leads from our website through their incentive program, where a pop-up appears on our website offering visitors a $25 gift card for filling out some basic information online for us that then becomes the sales lead.
With this shift in emphasis to digital, what is your split now between traditional and digital advertising?
Rob: It’s changed substantially over the past two years. When I started here, only 20-25% of our budget was spent on digital; the rest was spent on TV and newspaper advertising. Now our digital spend has increased by 37%.
Our overall marketing spend for the store is down 3% because digital is less expensive, and so, we’re spending less to drive more sales and get more of a return on investment.
Charlie: We don’t even advertise in the newspaper anymore. You have to be generationally current. I’m going to go out on a limb here. I’m 34-years-old. A lot of our up and coming customers are in their mid-20s and 30s. If you are trying to market to a 30-year-old, hoping they subscribe to the newspaper and will look at your ad on Saturday, forget it. Nobody in my age group gets the newspaper, and everybody has a Smartphone and is very comfortable with technology.
So, our website is optimized for mobile. The shift into mobile is supposed to double and double and double every year. Dealer.com handles our mobile website as well as our main website. Our store also has their own mobile app, called “My Lithia” (available in the Android and Apple stores), and the mobile app is powered by DMEautomotive.
All these mobile users are going to be our best customers, because when you are in your 20s, you’ve got your starter car. Then when the family comes along, you’ve got your upgrade to the family car, and things are always changing in those years of your life and to get in touch with that consumer, you have to be on the Internet, not in the newspaper.
For our traditional advertising, we do mainly cable TV, and some local spots. In our TV ads, we talk about coming to our website, instead of coming to our dealership. We talk about how to navigate our website and use it for the most benefit. So we tie the two media – TV and digital – together.
Let’s talk about your sales process and your lean sales team.
Charlie: We use ADP for our CRM. We’re very satisfied with it. All of our leads from our third-party lead providers, from our own website and from our Chrysler website, are filtered through our CRM.
We currently have two Internet managers, who handle all the e-mail Internet sales leads. They don’t pass these leads on to any other salespeople. In total, we have 14 salespeople – that includes the two Internet sales managers. So we have 12 salespeople handling walk-ins and phone calls, many of which originate after the caller has done their research on the Internet.
Our average response time to an Internet lead is 15 to 20 minutes during business hours.
How long do you follow up on an Internet lead?
Rob: This is our biggest challenge – managing the overwhelming amount of traffic we receive and following up with the leads that are not immediate buyers. The first week, we follow up with customers intensely.
What is your close ratio?
Charlie: Our e-mail sales lead close ratio is over 11%. Our total Internet leads close ratio is certainly higher, when you include, as many stores do, the phone call leads or walk-ins that come in as a result of Internet research.
How does having a lean sales force contribute to increased sales?
Rob: We run with a highly experienced sales staff and finance managers that have been here for many years.I’ve been with Lithia for 13 years. Charlie has been with Lithia for 10 years. Many of our sales and finance managers have been with the company for eight years. If you asked our employees, they’d probably tell you they enjoy coming to work. We try to create an atmosphere that’s fun and that keeps them motivated. Motivated sales people sell more cars.
With the volume of sales that we run, we could very easily have 20 people on the sales floor, but I get more production with our highly experienced sales staff. I’ve always got my best people in front of our customers and they’ve got the opportunity to sell a lot of cars and make a good income. If your sales force is busy selling cars and making money, they are happy and your customers are happy too.
Let’s discuss your pricing model and how that has increased Internet sales.
Rob: We are very aggressive with our pricing. At the end of 2010, we were averaging 19 new vehicle sales from Internet leads per month; in 2012, we averaged almost 88 per month.
If you look at our pump outs – cars sold out of our current selling market or DMA — we averaged three a month in 2010; now we’re averaging around 25 a month. Pump outs are directly tied to the Internet. We are selling our cars over the Internet to some other dealership’s market. A lot of that is driven by our aggressive pricing and because of the way people out of the market see what we are doing on the Internet.
How far away are these customers?
Charlie: We are selling cars to customers in Maryland, New York, Texas, Florida, and Michigan. The power of the Internet is crazy. We sell a lot of conquest vehicles. If I was relying on my drive-by traffic, there’s a lot of used car inventory that I wouldn’t necessarily keep, because we are mainly a domestic Dodge store.
However, when you have the power of the Internet, it doesn’t really matter what kind of franchise you are. It’s about having the right product at the right price. Our used volume has done similar to our new volume – running about 50/50. A lot of that is getting the right product, aggressively priced, and creating those opportunities that are released through the Internet.
Does the customer from Maryland or New York fly here to Oregon to pick up their car?
Charlie: In most cases, the customer will see the car over the Internet, we’ll close the deal over the phone, and then we’ll arrange to have the car shipped. There are occasions where people fly in, but more often than not, we have the car shipped out to the customer.
What do you mean when you say you build trust by giving the customer everything they want?
Rob: When our leads come in, we have a different mindset for handling them, than when I started in the car business. For instance, you have a customer calling from California, 500 miles away and they have a trade-in. There’s a way to make that deal. But, the way I was taught when I started in this business was this: when the customer called in, you tried to be as vague as possible. You tried to get them into the showroom without giving them any sort of pricing information or trade values, or payments, or any information like that.
We operate very differently today. I work closely with our two Internet sales managers and I tell them to use their best judgment. Does the customer live down the street or far away? The online customer wants to know right upfront what’s the best price and the best deal, and oftentimes what the monthly payment is going to be.
The dealership that can provide that customer with that information on the phone or via email and deal with them in the way they want to be dealt with will end up making a car deal. You have to have that mindset. It’s very rare.
I don’t think we would do the volume that we do if we would ask everybody that was a six-hour drive to just bring their trade-in into the dealership in the hopes that we can get to their figure. You have to be comfortable working these deals with real numbers. This is not the traditional way of selling. That’s a big part of our success.
A lot of dealers don’t want to give that information up over the phone. If a customer doesn’t hear what they want to hear initially, they’ll pick up the phone and call somebody else. They are going to buy from someone who gives them the information they are trying to get.
Each customer used to visit four to five stores before they bought a car. Now they visit 1.4 stores before they buy a car. People don’t have to go to the dealership anymore.
Are you making less of a margin to get a bigger volume?
Rob: Yes, margins are down, but our gross is up. Revenues and gross are way up. You still have to manage your assets and make money, but you’d be surprised. Handling the customer the way they want to be handled really provides you with an opportunity to work the rest of the car deal and negotiate trade-ins and financing and all that.
Charlie: Once you give the customer what they want to hear, their guard almost comes down, so to speak. As you listen to your customer’s needs and provide them the right information, the relationship starts and it’s an easier negotiation and good practice for both sides. We still maintain a good margin. It’s not as good as it was prior to this, but we’re selling four times as many cars.
Customers have evolved over the last few years with the ability to get online to do their research without having to come into the store. In some cases, people still like to negotiate, but if they can eliminate that in person initial investigating part of the car deal, they are much happier.
With being able to talk to these people over the phone or via the Internet, and giving them the information they want upfront, it’s amazing how you can build trust so much quicker than with the traditional way of selling.
If they get off the phone and call a competitor, in most cases they don’t get what they want to hear and they come back to you because you gave them the information upfront.
Because of our new culture and reputation, we went from being one of the lowest volume dealers in Oregon to being the number one Chrysler Jeep Dodge dealer in the state, and we are 100 units ahead of the next closest dealer in the state.
It’s all about understanding the customer and providing them with what they want to hear and treating them with respect and doing things that maybe 10 years ago we wouldn’t have done.
One more thing, the majority of folks in my age group are very uncomfortable with face-to-face negotiations. 28-year-olds do not want to have an uncomfortable encounter with a sales person that hammers them down. They want to do their research independently. They want to get a fair deal and have everything pretty much worked out before they even come into the dealership. That’s how the majority of my generation prefers to buy a car. For those dealerships that can provide an experience that’s comfortable, there’s a lot of business out there.
How about reputation management?
Rob: We use DealerRater’s 360Certified for monitoring the store’s social reputation, and we have a team of people in the Marketing Department that help all of the stores with posting and monitoring.
When a negative post appears online, I work with our team to respond in a quick and professional way. We did have a third-party managing that for us for about six months, but I didn’t see the value in what we were spending, based on what was happening and so we went with the corporate system.
What is your typical day like, Rob?
Rob: I’m at the store every day managing each department. I spend most of my time on the sales side, managing the used car sales people and I do all the new car ordering. I manage the sales department through Charlie, and the parts and service departments through our departmental managers.
How about your day, Charlie?
Charlie: I spend usually my first 30 minutes at the store on our website going through each vehicle, new and used, to insure that proper pricing is displayed and that it includes our discounts, as well as current manufacturer incentives. I re-price our used cars constantly, as they age in our inventory. If something is 60-days-old, I price the car online to sell.
The second part of my day, I see what type of inventory has landed — new vehicles, and used vehicles that have come through our inspection and detail department, and I create a list every day.
On average, we have seven new cars land, and there’s always new cars coming in on dealer trades, and our used car department pumps out four to five cars out of detail a day. So we have about 12 cars a day that are turning, that need photos, as well as pricing and I make sure all this information about them is correct for the website. This is extremely important. These really simple things we do get us big results.
When a consumer 200 miles away begins to search for a vehicle online, and you happen to have just the car that customer is looking for, it’s important that they see on your website: real time pricing, accurate information on how the vehicle is equipped, good pictures, especially if it’s a used vehicle, and an easy way to contact you. To capture a customer out there in cyberspace, you have to provide them quickly with the information they are looking for.
Do you have any plans for expanding your facilities?
Rob: We just added a new Fiat showroom and began selling Fiat about two months ago.
How is Fiat doing?
We’re still getting our feet wet here. We’ve sold 10 cars each of those two months. We’re still learning and are very excited about the brand.
How do you keep current with technology?
Rob: I read a lot of magazines, like Dealer magazine, and other web blog articles on the new best things. As part of Lithia Motors Group, we have the opportunity to try a lot of these new products and work directly with these vendors.
What is your vision of the industry five years from now?
Charlie: I think in five or 10 years customers will prefer to complete an entire transaction online: Finding the vehicle, getting the price, filling out an online credit application, and having the vehicle delivered to their doorstep – almost an Amazon.com model.
What will the dealership’s role be?
Rob: We’ll be the fulfillment center. You have to have your brick and mortar. Especially for used vehicles, some people will still want to come to the lot to touch and see the vehicle. But with new vehicles, I think consumers will simply point and click to the car they want to buy and then proceed to the checkout, and have the vehicle show up at their house.