Used car retailing: Pick the right digital mix for your used car sales

Dealers have a huge amount of choice in how and where they market their used cars to consumers and success relies on dividing their resources wisely across a mix of channels.

While used car forecourts and auctions halls are here to stay, getting vehicles in front of customers is now predominantly a digital endeavour, with most customers starting their used car search online.

While it’s difficult to ignore Auto Trader for the sheer volume it represents (more than 11 million visitors a month and more than 380,000 vehicles), other players are entering the market.

Motors.co.uk is investing to grow its position as second-largest in the market, while brands such as AA Cars and RAC Cars have both entered the fray, as have eBay Motors, News International’s Driving.co.uk and the dealer-owned Trusted Dealers. As the biggest fish, Auto Trader attracts the most criticism from dealers for how it approaches pricing.

Sharon Randall, UK group sales director at Trader Media Group, responded to calls for more transparency: “Dealers told us that we needed to change, become easier to work with, provide better response and adopt a fairer approach to pricing.”

Auto Trader has already trialled a new way of building used car marketing packages with 300 dealers.

All businesses should review whether their used car marketing strategy provides the best results. Adam Bullion, Auto Trader head of B2B marketing, believes specialist online classified sites are fine for specialist cars, but for mainstream and popular brands and models dealers need to ensure their stock is seen by the largest number of consumers.

“Dealers need to determine which websites offer the maximum exposure for their stock and fully understand the benefits each online classified site offers,” he said.

Cost per enquiry vs cost per car

With all the choices available, how can dealers ensure they don’t spread themselves too thin?

Part of the answer can depend on what sort of deal a dealership or group has managed to make with used car classified sites – either cost per car listing or a cost per enquiry (CPE). CPE means dealers don’t pay for a used car stock listing until a customer has expressed an interest in a vehicle.

The alternative is coming to an arrangement for a price per vehicle, although prices can vary depending on the volume of stock and the size of a dealer’s business. Smaller dealers may not be able to negotiate a CPE deal.

Benfield Motor Group, which has 39 dealer sites across the North East, uploads its stock to multiple online classifieds websites and has a centralised team to monitor performance.

Mark King, Benfield group digital sales and marketing manager, said: “We’re a large regional group so we have negotiated a CPE deal across 12 classified sites.

“We have a central team which manages all of the incoming enquiries and we’re tracking those leads with our own processes rather than using 12 different lead-monitoring systems from each classified site, so we have a good handle on it.

“If you didn’t have a centralised team focused on where those leads are coming from, it is probably better to stick with a cost per car strategy due to the complexity of tracking all the leads.”

The power of Google

Customers head straight for the search engine to research their next car purchase. Whether it is via the manufacturer’s website, consumer reviews, Auto Trader or the dealer’s website, Google will almost certainly play a part in helping a customer to find the used car they are looking for.

Milcars Mazda won the AM Award for Best Used Car Performance in 2013 and has focused on improving its website to increase enquiries.

Chris Ward, Milcars managing director, said: “The internet is where the customer is at the moment and that’s here to stay, so it’s important that we embrace that as a channel too.

“We price very well on the internet, so customers are getting value when they’re looking around online. We’re very quick at dealing with enquiries and getting that process moving quickly.”

Dealers can use free tools on Google Analytics and invest with Google AdWords and pay-per-click (PPC) to target specific customers.

Investing in PPC advertising means dealers only pay when a customer clicks on an advert they have set to appear in Google search results. Darren Williams, Grants Seat managing director, said: “It’s much easier to get to grips with using tools from Google than you might expect.”

Using AdWords, dealers can refine the radius and location of customers they would like to target – for example, anyone searching for a used Leon FR 2.0 diesel within 50 miles of a specified post code.

Williams believes dealers should learn about Google and the way it can attract website visitors to specific stock, or employ someone internally that understands the business and the technical side.

Google is a highly complex system of algorithms, but Williams believes dealers using Analytics and AdWords are only limited by their own knowledge and willingness to learn how it works.

He has spent time learning how to use Google to his business’s advantage and is supported by his wife, Katie, who is the marketing manager for Grants Seat and well versed in search engine optimisation (SEO) and Google.

Improving a website’s SEO will make it easier for Google to index and will place it higher in the results when customers are searching for a used car online.

Benfield says about 10% of its monthly spend is on Google pay-per-click (PPC), but King explains that the amount is very flexible and businesses need to react to models currently in stock.

 “I might not use that 10% and invest in other areas, because with Google you have to have very specific products which you are looking to sell and target. If we have done a bulk manufacturer deal we might use Google to help sell those cars,” he said.

Should a dealer outsource their SEO and online marketing work to an agency? Benfield uses a company called Carat to advise it on online strategies in addition to its own specialist internal team.

Using an agency will depend on a dealership’s budget, but whether external or internal it’s essential that the person dealing with it needs to understand automotive.

Williams said: “We have learnt how to use Google and SEO to our advantage through need and as a single-site Seat business we wouldn’t employ an agency.

“We can react very quickly to manufacturer campaigns and target specific keywords off the back of marketing and wording. Employing an agency would mean they might miss the detail and apply more of a general approach.”

Dealers should also make sure their investment is blended between SEO and Google PPC.

Williams said: “Improving your SEO can make a big impact in bringing customers to your website over a six- to 12-month period if you haven’t really looked at addressing that part of the business, but once it is sorted your website should be attracting more traffic because Google is ranking it as more useful.

“To a certain extent, continued investment in SEO could be a waste of money. That’s not to say it can be ignored, but it’s better to switch between looking at how your website is performing in search results and then investing in targeting advertising through Google PPC.”

The price is right

Even with a well built website, customers won’t click unless the price is right.

Research by Deltapoint’s i-Control used car stock tool showed that of 147,000 vehicles, nearly 40% of trade advertisements in the market were priced either 10% below or 10% above retail market values.

It also showed that 23,000 cars had been on sale for more than three months without being re-priced and 50% of those cars were priced at more than 105% of the current retail market price.

On average, cars at 100% of retail market price will sell in less than 40 days while those at 10% above will sell within 50 days and those at 10% below within nearly 60 days.

The research also looked at demand in different regions and found that 28% of vehicles on sale were the right cars but in the wrong place. Of those 119,000 vehicles, more than 20,000 were on sale for more than two months.

Tim Peake, group strategy director, Trader Media Group, said: “Internet transparency is being blamed by some dealers for undermining their used car operations, especially in relation to pricing. But the reality is that pricing your cars too cheaply or too expensively won’t optimise speed of sale.

“The old adage that ‘if a deal is too good to be true, it normally is’, rings true, in that consumers do not look for cars that are priced significantly below the market price. If they are too high they won’t get a good response either. This problem is compounded by the fact that many dealers are still not reviewing and adjusting prices regularly to reflect price movements in the used car market.”

Vik Barodia, director of product management and marketing at Glass’s, believes adjusting prices should be a core part of a dealer’s business.

 “It’s difficult because different dealers operate different policies,” he said. “If they have a 90-day stocking policy, some will say ‘for the first 30 days I want to be a certain percentage above market; for the next 30 I want to be market and for the last 30 to be below market to get rid of it.”

Reviewing the price should be a weekly exercise, focusing on ‘problem cars’ first.

Some dealers will track market trends, try to have an insight into the wider industry and keep on top of broader economic issues and measurements of consumer confidence.

Andrew Ballard, principle consultant at Experian Automotive, said it is important to consider the initial purchase amount and desirable margin, plus costs for refurbishment, warranty, MoT and service. Investigating similar vehicles on used car websites and with other local dealers can help retailers get a true feel for the market.

“Look at your key competition, including franchised, non-franchised, approved used car schemes, used car supermarkets and online providers,” he said.

The internet has made the marketplace nationwide, but regional trends are still important when it comes to pricing and protecting margins.

Experian figures for 2012 show that people in the North of England and Scotland prefer Vauxhalls, but Ford is the brand of choice in the South East, South West, East Anglia, West Midlands and Wales. “The only region to buck the trend was Greater London, opting for the BMW 3 Series,” said Ballard.

“This shows that regional variations and insights are valuable and shouldn’t be overlooked.”

By monitoring regional preferences, dealers can ensure they hold a suitable and profitable mix of stock based on a true reflection of the needs of their customers. Dealers should also keep a close eye on how similar vehicles are selling in the area, how they are being priced and how quickly they sell.