John Holt, CEO Automotive News World Congress 2006

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John Holt, CEOAutomotive News World Congress 2006
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Todays 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 its winning conversion
  matters too
• Internet impact and ROIs justify our attention
  and commitment

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Cobalt Strategy Create and Convert Opportunities

• OEM Portals
• Websites
• Search

Website Leads (phone, email, walk-up)
Cobalt CRM
3rd Party Leads

• Dealix Leads

Convert Opportunities
Create Opportunities
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Topics

• State of the World
• Overall Internet Usage / Ad Spending
• Automotive Industry Trends
• Insights from Recent Surveys and Research
• eBusiness Performance Data
• Implications / Actions

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State of the World Internet Usage Keeps Growing
Growing Internet Usage (Millions)
Internet Users

• 68 of total population
• More than doubled in five years

2005
2000
Internet Users
Source Nielsen NetRatings, ITU
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Internet Ad Spending (and Paid Search) is
Growing, Primarily at Expense of Newspapers
Internet Ad Spending ( Billions)
Ad Spend Budgetby Medium
1995
2005
2005
2010
Source Park Associates. Jupiter
Source American Advertising Federations
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Automotive Internet Ad Spending Driving Car
Sales
Automotive Internet Ad Spending ( Billions)
Internet-Generated New Car Sales (Millions)
33
18
2003
2007
2003
2009
Source Jupiter, Borrell Assoc.
Percent of total car sales. Source Jupiter
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Most Retailers Are Doing OK, But
Success Factors
Sales ( M)
Net Profit ()

• High Sales Volumes
• 8th consecutive year of 16 M vehicles sold
• Manageable Margin Pressure
• OEM incentives
• Low interest rates
• Profit diversification

Source NADA Average Dealership Profile
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Dealer Ad Spend per Vehicle Increasing Faster
than Rate of Inflation
Implications
CAGR 7

• Growing Pressure
• Identify advertising / marketing efficiencies and
  efficacy
• Internets Appeal
• Buyers are there
• Efficient, measurable means to attract in-market
  car buyers

Source Park Associates. Jupiter
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Third-Party Leads Growing in ImportanceGreat ROI
Percentage of Dealers Using 3rd Party Leads
3rd Party Leads as of Total Dealer Internet
Marketing Budget
2002
2003
2004
2005
2006E
2004
Source Jupiter 8/05
Source Jupiter 8/05
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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
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Insights from Cobalt Research
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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

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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

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Leads Are Real
56 of the leads resulted in 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
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Customers Have a Short Purchase Timeframe
0-30
31-60
61-90
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
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Lost Opportunity is Significant
8 closed at the original dealership 92 closed
at other dealerships lost opportunity
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
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Lost Opportunity is Significant
66 purchased the intended brand or a used
vehicle at another dealership
Intended Make (New)
24
Other Make (New)
Lost Opportunity
34
Used (Any Make)
42
All "Missed" Sales
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
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Dealership Responsiveness to Leads is Improving
      Industry eMystery Shop Metrics   Industry eMystery Shop Metrics   Industry eMystery Shop Metrics        
                 
          2004 2005  
  Overall Responsiveness Overall Responsiveness Overall Responsiveness Overall Responsiveness 60.0   69.7  
  Response Time Average (hrs) Response Time Average (hrs) Response Time Average (hrs) Response Time Average (hrs) 9.5   6.5  
                 
  Quality of Responses Quality of Responses Quality of Responses Quality of Responses        
                 
  Answered the Shoppers Questions Answered the Shoppers Questions Answered the Shoppers Questions Answered the Shoppers Questions 38.2   25.9  
  Used Brand or Product Highlights Used Brand or Product Highlights Used Brand or Product Highlights Used Brand or Product Highlights NA   23.9  
                 
Source Cobalt 2004/2005 Industry-wide eMystery
Shop
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But Response Quality Has Slipped
      Industry eMystery Shop Metrics   Industry eMystery Shop Metrics   Industry eMystery Shop Metrics        
                 
          2004 2005  
  Overall Responsiveness Overall Responsiveness Overall Responsiveness Overall Responsiveness 60.0   69.7  
  Response Time Average (hrs) Response Time Average (hrs) Response Time Average (hrs) Response Time Average (hrs) 9.5   6.5  
                 
  Quality of Responses Quality of Responses Quality of Responses Quality of Responses        
                 
  Answered the Shoppers Questions Answered the Shoppers Questions Answered the Shoppers Questions Answered the Shoppers Questions 38.2   25.9  
  Used Brand or Product Highlights Used Brand or Product Highlights Used Brand or Product Highlights Used Brand or Product Highlights NA   23.9  
                 
Source Cobalt 2004/2005 Industry-wide eMystery
Shop
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Customers Cite Importance of a Quality Response
What is the primary reason you bought a vehicle
from the (intended) dealership?
Inventory
Proximity (Dealership)
Dealership Response (good, quick)
Price (price was competitive)
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Customers Cite Importance of a Poor Response
What is the primary reason you bought a vehicle
from another dealership?
Price (too high)
Dealership Response (poor)
Other Brand (customer decided to buy a different
brand new vehicle)
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Closing Remarks

• What should you remember? The Internet matters!
• Its where the buyers are
• Its 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
• Were damn lucky to work on something so
  transformative

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Thank YouJohn Holt, CEOjwpholt_at_cobaltgroup.com