How to Measure the ROI of Third Party Lead Providers
Third party lead providers like AutoTrader, Cars.com, CarGurus, CarSoup and others, vie for dealer’s attention and budget.
Sure, they will get you views, but what is the actual ROI of third party lead providers?
Fortunately, the ROI can be measured the same way as any digital marketing activity. Use three tools to measure ROI. Then, create a simple sales funnel and identify whether the money spent with a third party lead provider is worth it.
Tools to Measure ROI of Third Party Lead Providers
Third-party lead providers offer their own analytics and reports. When calculating ROI, however, use your own measurements.
This ensures that third-party lead providers are measured the same way as other digital efforts. It also prevents “astroturfing,” which is when a software provider makes their own stats look better than they actually are.
With third-party leader providers, this often happens when discussing walk-in leads. The third-party lead provider will often take undue credit by arguing that, since a vehicle is on their site, and the vehicle later sells, that they (the third party lead provider) were responsible for the sale.
This is akin to saying that any time someone buys deodorant, it is thanks to Speed Stick sitting on Walmart’s shelf.
A combination of Google analytics, a tracking phone number, and a CRM is perfect for an accurate, consistent look at ROI.
Google analytics will measure how many people come to your website from a third party lead provider and how many of them actually look at vehicles and request quotes.
A tracking phone number uncovers how many people see your inventory on a third party lead provider site and call instead of submitting an online form. Third-party lead providers often create a tracking phone number but you can use your own for better control.
Regardless of which system you use, don’t just count the number of calls, but look at the length. We typically see almost 50% of calls are less than 10 seconds long. It’s difficult to sell a car or even book a service appointment in that length of time. Consider calls longer than 15 or 20 seconds as an “actual” call that would qualify as a lead from the third party website.
Your CRM is key to calculate actual sales ROI. Your CRM will automatically tag leads, defined by visitors who submit a form, by their original source. If they are on AutoTrader and click a link to your website and submit a form, they will be tracked as an AutoTrader lead.
Additionally, third-party lead providers will send leads from their website into a dealer’s CRM. A third party website form is automatically tracked.
With your CRM, you can pull reports to see if third-party leads actually purchase. Sort your sales by lead source and calculate the number of sales. Then, compare your sales to the investment. That is a quick way to see the actual ROI.
Create an ROI Sales Funnel
Once you know how to measure, it’s time to cover what to measure. It’s best to think of the data as a sales funnel:
- How many people are prospects, meaning they show interest in your inventory by viewing your cars on your website or a third party lead provider site?
- How many people become leads by calling or submitting a form for more information?
- How many people actually purchase and become a sale?
- Finally, how does the money made compare to the money invested? That is the true ROI.
Prospects – Views
Views are the least useful metric when measuring ROI. We often refer to it as a “vanity metric” because it makes you feel good, but doesn’t actually lead to sales. Thousands of people may see your vehicle on the third party lead provider site, but that doesn’t mean they take action. They might not even click to the vehicle’s detail page.
On third-party lead providers, inventory views are similar to SpeedStick views in Walmart. Thousands of people may see deodorant on the shelf because it is in a popular store, but that doesn’t mean any sticks are sold.
Action needs to be taken for any ROI to be measured.
Prospects – Clicks to Site
A slightly more qualified prospect is a person who visits the website. They are not accidentally seeing your inventory on a third party site, but they know who you are and are in your virtual store.
Visiting the website, of course, does not equate with sales; however, we typically expect 1.5% of visitors to become a sale. Thus, if you can attract more prospects and keep your conversion rates, prospects are the start of the process.
Someone who clicks a link from a third party lead provider site is a prospect on your site. Use traffic sources in Google Analytics to see how many visitors from your third-party lead provider visit VDPs or submit forms. Then you learn not only the quantity of people visiting your site, but also their quality.
Leads – Calls and Forms
A lead is someone your sales team can actually contact for follow-up. Your store can capture leads through phone calls and online forms.
With phone calls, a number that is only used for third-party lead providers will ensure that you know how many of those calls are thanks to third-party lead providers. As someone calls in, entering the lead source as the third party lead provider will help accurately measure ROI.
As you look at the results after an entire month, make sure to look at the length of a call. If it is less than 15 or 20 seconds long, it is most likely not going to lead to a sale.
In addition to calls, form submissions provide contact information for your sales team. A form submission, whether on the third party lead provider website or your website, will track the original source. That means that your CRM will be able to sort and calculate the number of leads you are getting from your third-party lead provider.
To measure ROI, it’s best to start with sales instead of the number of leads. It’s quality over quantity and tracking how many third-party lead provider leads turn into sales provides insight into the quality of third party leads.
Sales are the key metric to tracking ROI – specifically sales attributed to third-party leads.
Your CRM will do the heavy lifting for you. Sort your sales each month by lead source and you will see how many sales came from your third-party lead providers.
Once you have the number of sales from these leads multiply it by the average margin your store receives from a sale. Compare that amount to your investment to determine if it is worth continuing.
Here’s a mathematical version of the equation:
(Number of leads) * (Margin per sale) = x
Is x greater than or less than the investment in third party lead providers?
The average time from the initial conversion to purchase is 28 days, so the leads from this month should convert by roughly the same time next month. Look at quarterly time periods for a more comprehensive view of how leads convert.
If you want to get fancy, you can take things a step further and calculate the cost per lead. This will help you determine which marketing options are best for your store.
Determining Investment in Third Party Lead Providers
Choose your marketing investments based on data.
Third-party lead providers may be a good option for your store, but too often stores go based on feeling instead of what is showing actual results.
There are options beyond third-party lead providers, specifically building your own leads through SEO-optimized content, emails and landing pages. The benefit of building your own lead database is you don’t have to pay every month to show up on Google. Instead, your content building efforts maintain and grow your visibility.
Consider a combination of third-party leads and building your own website to grow your leads. If you can keep an eye on your ROI, you can scale back third-party lead investments as your own efforts gain traction.
Want to learn what your ROI is? We’ll calculate it for you! Just request your Inbound Marketing Assessment (IMA). We’ll schedule a call and walk through the results with you.