John Holt, CEO
Automotive 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
Cobalt Strategy
Create and Convert Opportunities
• OEM Portals
• Websites
• Search
• Dealix Leads
Website Leads
(phone, email, walk-up)
Cobalt
CRM
3rd Party Leads
Create
Opportunities
Convert
Opportunities
Topics
> State of the World
- Overall Internet Usage / Ad Spending
- Automotive Industry Trends
> Insights from Recent Surveys and Research
- eBusiness Performance Data
> Implications / Actions
State of the World:
Internet Usage Keeps Growing
Growing Internet Usage
(Millions)
287.9
Internet Users
296.2
► 68%
of total
population
► More
than
doubled in five
years
202.9
95.4
2000
2005
Internet Users
Source: Nielsen NetRatings, ITU
Internet Ad Spending (and Paid Search) is
Growing, Primarily at Expense of Newspapers
Internet Ad Spending
($ Billions)
Ad Spend Budget
by Medium
$19
100%
90%
$8
$12
80%
70%
60%
$4
50%
40%
30%
20%
10%
0%
2005
Other Internet
2010
Paid Search
1995
Newspaper
Radio
2005
Internet
Other
Source: Park Associates. Jupiter
Source: American Advertising Federations
TV
Automotive Internet Ad Spending
Driving Car Sales
Automotive Internet
Ad Spending
($ Billions)
Internet-Generated
New Car Sales
(Millions)
$1.8
6.1 M
33%*
3.0 M
18%*
$0.4
2003
2007
Source: Jupiter, Borrell Assoc.
2003
2009
* Percent of total car sales. Source: Jupiter
Most Retailers Are Doing OK, But…
Sales ($ M)
Net Profit (%)
$34.0
Success Factors
2.5%
$33.0
2.0%
► High
Sales Volumes
– 8th consecutive year of
$32.0
$31.0
1.5%
$30.0
1.0%
$29.0
0.5%
$28.0
16+ M vehicles sold
► Manageable
Margin
Pressure
– OEM incentives
$27.0
0.0%
2000
2001
Dealership Sales
2002
2003
2004
Net Profit before Tax
Source: NADA Average Dealership Profile
– Low interest rates
– Profit diversification
Dealer Ad Spend per Vehicle Increasing Faster
than Rate of Inflation
Implications
CAGR: 7%
$500
► Growing
Pressure
– Identify advertising /
marketing efficiencies
and efficacy
$250
► Internet’s Appeal
– Buyers are there
– Efficient, measurable
1995
2005
Source: Park Associates. Jupiter
means to attract
in-market car buyers
Third-Party Leads Growing in Importance
Great ROI
3rd Party Leads as % of
Total Dealer Internet
Marketing Budget
Percentage of Dealers Using
3rd Party Leads
41%
79%
82%
33%
29%
50%
2002
2003
Source: Jupiter 8/05
2004
2004
2005
Source: Jupiter 8/05
2006E
The Huge and Coming Impact of Search
Great ROI
►
67% of Auto Buyers Research Online*
►
70% Start at a Search Engine**
OEM Website
Dealer Website
Auto Buyers
* JD Power 2004 Autoshopper.com 2004 study
** Yahoo! Complete 2005 auto study
3rd Party Website
Dealership
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
Leads Are Real
100%
Leads not converted
to a sale
75%
512,685
44%
100%
50%
Leads converted to
a sale
144,842
75%
56% of the leads resulted in a sale
100%
25%
644,957
56%
75%
50%
0%
All New Vehicle Leads
52,408
50%
199,656
25%
592,549
0%
248,051
25%
0%
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
Customers Have a Short Purchase Timeframe
Time to close a lead
300,000
273,886
68% of leads
closed to a sale
within 90 days
Number of Closed Leads
250,000
204,486
200,000
42%
150,000
32%
103,130
100,000
63,455
50,000
16%
10%
0
0-30
31-60
61-90
Days to Close
91+
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
Elapsed time between the date of lead submission and date of lead closure
Lost Opportunity is Significant
100%
Leads not converted
to a sale
75%
512,685
44%
8% closed at the original dealership
92% closed at other dealerships = “lost
opportunity”
100%
50%
8% Bought at
Intended Dealer
Leads converted to
a sale
100%
25%
644,957
56%
52,408
75%
Sold at “Other”
Dealer
50%
592,549
0%
All New Vehicle Leads
25%
144,842
75%
50%
199,656
25%
0%
248,051
92%
0%
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
Lost Opportunity is Significant
100%
Leads not converted
to a sale
75%
66% purchased the intended brand or
a used vehicle at another dealership
512,685
44%
100%
50%
8% Bought at
Intended Dealer
Leads converted to
a sale
100%
25%
644,957
56%
52,408
75%
Sold at “Other”
Dealer
50%
592,549
0%
All New Vehicle Leads
25%
92%
Intended Make (New)
144,842
75%
24%
Other Make (New)
50%
25%
0%
199,656
34%
Lost
Opportunity
Used (Any Make)
248,051
42%
All "Missed" Sales
0%
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
Dealership Responsiveness to Leads is
Improving
Industry eMystery Shop Metrics
2004*
2005*
60.0%
69.7%
9.5
6.5
Answered the Shoppers Questions
38.2%
25.9%
Used Brand or Product Highlights
NA
23.9%
Overall Responsiveness
Response Time Average (hrs)
Quality of Responses:
*Source Cobalt 2004/2005 Industry-wide eMystery Shop
But Response Quality Has Slipped
Industry eMystery Shop Metrics
2004*
2005*
60.0%
69.7%
9.5
6.5
Answered the Shoppers Questions
38.2%
25.9%
Used Brand or Product Highlights
NA
23.9%
Overall Responsiveness
Response Time Average (hrs)
Quality of Responses:
*Source Cobalt 2004/2005 Industry-wide eMystery Shop
Customers Cite Importance of a Quality Response
What is the primary reason you bought a vehicle from the (intended) dealership?
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)
0.7%
1.2%
4.3%
Inventory
9.6%
Proximity (Dealership) 14.2%
Dealership Response (good, quick) 21.4%
Price (price was competitive)
0%
5%
10%
15%
39.3%
20%
25%
30%
35%
40%
45%
Customers Cite Importance of a Poor Response
What is the primary reason you bought a vehicle from another dealership?
Trade-In (poor trade-in value offered)
0.2%
Other
Existing Relationship (none with this dealership)
1.1%
Proximity (dealership in distant proximity)
Inventory (inadequate)
1.5%
3.3%
3.7%
Price (too high)
Price (price was not competitive)
Dealership Response (poor, slow)
Other Brand (customer decided to buy a different brand new vehicle)
14.4%
Dealership Response (poor)
20.4%
Other Brand (customer decided to buy a different brand new vehicle)
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
55.4%
60.0%
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 You
John Holt, CEO
jwpholt@cobaltgroup.com