The Internet is a new, exciting, well-publicized concept and tens of thousands of dealers are jumping on the bandwagon with web sites, banner ads, hot links and Internet buying services. But I ask the question, is the Internet an advertising tool or a communications tool?
Based on the other advertising options available, the Internet is not a cost-effective advertising alternative in terms of banner ads. The Internet is best used as a device for research, sharing files, email, a place to host a web site, and e-commerce. All of these uses are wonderful for communicating, but they do not make for effective advertising in the traditional sense.
A web site is really an interactive, electronic brochure. But since the consumer has to actively and consciously look for it, a web site is not really advertising. Advertising is something that is pro-active, and comes to the consumer's attention whether they want it or not. A banner ad does in fact appear whether or not the consumer requests it, so in this sense it is an ad, but in reality, all tests and results indicate that banner ads are not effective because the consumer simply is not clicking on them at a high enough rate to warrant the expense. Another issue for consideration is that if there are a million web sites on the Internet, which ones do you place your banner ads on (and you thought that cable TV was a fragmented medium)?
From a cost-per-rating-point basis, advertising on the Web via banner ads has proven to be the most expensive by far. For example, the average cost per point of using broadcast media is $3-20. Compare this to a cost per point of $40-60 using Internet banner ads. And all you can say in a banner ad is your company name and a sentence, which is not much of an ad.
I would argue that for most dealers, the Internet is not an advertising tool because you are not advertising with it. What you are really doing is creating an electronic brochure with your web site, or subscribing to a vehicle locating/buying service. The buying services are advertising on the Internet, but not for your dealership. They are advertising their own service.
As far as your web site is concerned, the consumer still has to actively search for and locate your web site. So what do you have to do? You have to advertise your web site address with your regular media advertising. Thus a web site does not replace media advertising. Even if you have a web site, you must continue to conduct regular media advertising to promote your web site address so people can find it if they want to. And unless you give them a good reason to visit your site, they won't bother.
The other reason there is so much hype about the Internet is because there is a lot of money to be made by those companies who can create and host web sites, sell banner ads, computers, modems, servers, software, Internet access, etc. This is where the real money is to be made regarding the Internet.
How can this be? How is it that the Internet is not a more effective advertising medium? Simple: It is too fragmented. There are an average of 5,000 new web sites being created every day. The search engine companies that allow the consumer to find these web sites when they do not have the specific Web address can only catalog 30-40% of all these web sites.
Once the Internet consumer does find your web site, they still have to be sold on your dealership and your product, visit your dealership, test drive the car, and negotiate price, financing, and trades. Therefore, I argue that few cars are actually "sold" on the Internet. For the most part, cars are sold on the lot by salespeople just as they always have been. There are a few stories of cars being delivered directly to the consumer's home, but these are few and far-between, and usually occur after the consumer test-drove the car at some dealership.
The latest figures from J.D. Power and Associates released on 7/12/99 show that 40% of new car shoppers and 26% of used car shoppers use the Internet to get pricing information, or to search for a specific year, make, model, color, etc. And 28% of all franchised dealers are under contract with at least one online buying service. Impressive figures, and growing, but again, this is a research or commerce function and not true advertising for the dealership, because the online buying and research services are advertising their service, not necessarily the individual dealerships.
The J.D. Power study also reports that the average dealer who subscribes to an online buying service receives 37 leads each month, and 39% of these leads are non-serious shoppers. The report also reveals that Internet leads also require a higher degree of personal sales attention. In another J.D. Power report, it has been revealed that "a very small percentage of consumers buy the used vehicle they have located on the Internet using a vehicle locator service."
What about all the futuristic stories about the Web replacing TV, newspapers, magazines, catalogs, etc? It's all just talk. Remember in the 1980's when the media was talking about how computers were going to create a paperless society? The fact is that we use more paper per capita today than we did before the computer craze. There are more printed magazines today than there were ten years ago. Yes, daily newspaper readership has been on the decline for years, but readership of weekly newspapers is up.
In the 1940's the concern was that radio would kill live music; in the 1950's the concern was that TV would kill radio; in the 1980's VCR's were going to kill the movie theaters; satellite dishes were going to kill cable in the 1990's; and now the Internet is supposed to kill everything in the millennium!
The truth is that no medium has ever been replaced by another medium; the pie only gets bigger and more fragmented. There are more radio stations, more cable and network TV stations, more satellite stations, more magazines, more theatre construction, and more VCR's than ever before, but none of them have killed a competing medium.
The bottom line for dealers is that you should view the Internet as a communication tool or a utility, just as you do your fax and phone equipment, and not as an advertising medium. Whatever you do, do not use your advertising budget for web sites or banner ads. This will surely lead to a disappointing return on investment. All Web activity should come from a separate budget.
This is not to say that you should ignore the Internet-you should consider the Internet as an electronic brochure, or vehicle locating service for consumers. But do not expect the Internet to replace advertising and do not forego advertising in favor of the Internet. Consumers will increasingly turn to the Internet for a variety of reasons and conveniences, but to date, banner ads are not cost-effective and a dealership web site is not the do-all, end-all solution some proclaim it to be.
It may sound like I am anti-Internet. Not true. I simply want to put it into perspective and call the Internet what it is and not get carried away with what it could, might, or should be some day. Yes, there is a great deal of future potential and growth in regard to Internet activity and commerce. But today, we need to take it into perspective and advertise in the traditional mediums, while we take the Internet one step at a time, let the technology and market develop and not sacrifice our bread-and-butter advertising for something that is not yet what it may appear to be.
Duane Sprague is an automotive marketing and advertising expert, consultant, and author of "35 Tips For Successful Direct Mail Marketing." If you have specific questions or require more information about this subject, please check the appropriate box on the reader response form on page 3. dsprague@dealeronline.com.