Third Party Lead Providers

Dealers have given necessary attention to Tesla’s attack on state franchising and licensing laws.  That is not the only threat to their business model that dealers face.  Under the radar, third party lead providers are building their businesses and developing capabilities that can be just as threatening to dealer independence and success.

This article is not an attack on third party lead providers. They have built businesses, and they are entitled to work for the success of their own ventures. However, dealers must recognize the threat to their independence and the control of their own customers if they become overly dependent on third party lead providers. Loss of control over their own customers is what threatens dealers’ businesses.

Many of the lead providers started with a web site providing information for potential buyers.  As they looked to monetize their web presence, they developed lead provision as an income generator.  These companies will not stand still, They will continue to add capabilities and seek to become fully in control of the vehicle sales process by developing leads, soliciting prices from dealers, arranging sales, and providing financing or leasing. Ask yourself the role of a dealer in that process.

The contest for control of customers has never been more in focus. For years, dealers have struggled with manufacturers who seek to make vehicle buyers identify as customers of the brand rather than of the dealer. Now, third party lead providers envision a vehicle sales world in which they control the customers, arrange the deals, and arrange for financing or leasing.  In that world, a dealer is a delivery outpost providing maintenance and warranty service.

This is not to suggest that third party lead providers have no role in the sales process. Many of the providers have arrangements with affinity groups – organizations that contract with the providers to advise on vehicle purchasing to their members. It will be difficult for any dealer or group of dealers to establish affinity relationships to replace those of the providers.

However, a dealer cannot become so dependent on third party lead providers that it loses control of its own customer base.  A dealer can do some things.

  • Analyze your dealership’s dependence on third party lead providers. Is your sale process so built on third party leads it has affected your marketing and advertising? Would the dollars paid for leads or sales be better spent on targeted marketing and advertising campaigns?
  • Are your sales managers and salespeople so dependent on the customers sent to your dealership and the “certificates” they may carry when they visit that it has affected their ability to sell? Over dependence can damage your dealership’s sales processes.
  • Are the third party lead providers activities so involved in the sales process they are selling to customers without a license? Dealers and salespeople are licensed by the Virginia Motor Vehicle Dealer Board; third party lead providers are not. Problems that lead providers may generate in their ads, representations and tactics will invariably fall on dealers. Regulatory action based on complaints of customers will be the dealer’s problem. The MVDB will make you responsible for sales activities, so don’t cede your control.
  • How are you paying third party lead providers? By Virginia law, you cannot pay an unlicensed company or person by sale or by lead. How is your provider asking to be paid?
  • Part of the recent success of third party lead providers is because of their web presence. Ask yourself:  how useful and consumer friendly is your web page? Does your web page provide information for which customers are looking, and is it helpful? Or are customers visiting lead provider pages because of the difficulty of navigating your web site? Explore whether your web presence can be improved so you can develop customers and bring them to your dealership on your own.
  • Does the third party lead provider have access to the database in your DMS?  If so, why?  Your customer information is a valuable asset of your business.  So why are you allowing third parties to access your database and remove information it wants?  The provider may agree to maintain the security of your information in accordance with the FTC Information Safeguards Rule.  But it does not have to misuse the nonpublic personal information of your buyers to put your information to valuable use.  It can simply include the information in compilations of data it may sell or use, for example, to report on what vehicle models sell for in your market.  Protect your valuable customer information.  Do not provide open access to your data.  If necessary, “push” selected data to the provider.

The role of third party lead providers in the auto space has been evolutionary, not revolutionary. Bit by bit, they have enhanced their processes and their capabilities. Bit by bit they are seeking to make car buyers their customers, not your customers. They will seek to have full sales and payment processes. Dealers must work to avoid becoming order fillers. It is time to push back. It is time to analyze your reliance on third party lead providers and to create a balance so you control your own business and your own customers.