One theme I kept hearing at the NADA workshops was that the buying funnel is dead. Since the 1950’s, marketers have operated under the assumption that consumers buy stuff in a process that resembles a funnel. At first consumers are aware of many options and in time narrow this down until they settle on a final purchase decision. Pat Ryan Jr., Founder of FirstLook and MAX Systems has a perfect graphic of funnel.
The buying funnel is a nice way to think about the process because it’s simple and it makes marketing decisions easy. In order to increase purchases, all one has to do is focus on filling the top of the funnel – raising awareness. I think this is probably the reason that car dealers budget such a large percentage of their marketing spend on television, print, billboards and SEM.
The only problem with the buying funnel theory, as was pointed out over and over at NADA, is it’s not how people actually buy stuff! The beauty of the digital world is that everything is trackable and we have real data to analyze whether or not our theories are actually true.
As it turns out, the consumer comes to the car market with an average initial consideration set of 3.8 vehicles and this consideration set actually expands as they become aware of more options. If we think about it, this makes sense. If I’m a consumer who goes to market thinking that I want an Audi A6 or 5-series, other options become apparent as I become educated about the market. Perhaps I didn’t think of a Lexus or even the Hyundai Genesis at first. During this later phase, I’m like a boa constrictor to maximize my options before narrowing my decision down to a final purchase. Pat has another excellent graphic depicting this new process.
It is this active evaluation or consideration phase that is most critical. David Kaine of Kain Automotive referenced the Google & JD Power study that shows that customers are now browsing over 18 different sites before making a purchase decision while the average number of dealerships visited has dropped to 1.3 per buyer.
All of this data indicates that shoppers are doing almost all of their decision-making online and before they even contact the dealer. Google’s study shows in the graph below that most of vehicle shopping traffic takes place on 3rd party sites.
With this data a clearer picture emerges. Buyers are coming to market with a few half baked ideas about what they want and then as they become more educated they consider more makes, models, and VINs. During this process they’re comparing many cars against each other, looking at pictures and narrowing it down to a final decision – almost of this process takes place online and most of it on 3rd party sites.
We know that dealership marketing spend is still skewed heavily towards inefficient, old mediums and the internet is still underrepresented. Google is always happy to show us a slide that despite most of consumer’s shopping experience taking place on the internet, internet only receives a fraction of dealers’ marketing budget.
But within the internet marketing, SEM (aka Google Adwords) budgets are ballooning. Dealers are allocating more of their budget to SEM despite the fact that it cannibalizes their direct and organic traffic and it’s not a significant contributor to their overall traffic. Pat’s graphic below has the following breakdown that shows that SEM contributes only 10% of traffic to dealers’ site.
When thinking about spending in the context of the new buying process, it appears as if this spending is inefficient. Not only does SEM cannibalize direct and SEO traffic, SEM isn’t even targeting the consumer when they’re in their most important phase of consideration. By the time the consumer comes to the dealer’s website, they’ve already largely decided what they’re going to buy!
The data indicates if dealers want to spend marketing dollars to target the consumer during the consideration phase, they should be spending money on third party sites when the consumer is trying to decide between the A6 and the 5 series. This means getting as much exposure of their inventory as possible across the web, as cheaply as possible.
Sure, this may seem like a long winded advertisement and a way of saying that more dealers should be putting their inventory on Mojo Motors, but when speaker after speaker at NADA kept making the case to dealers to reconsider the buying process and what this means for marketing budgets I couldn’t ignore it. If dealers want to be spending their budgets to most influence shoppers at their point of consideration, 3rd party sites are the place to be.
Written by Turner Parlin