Have Your Special Finance Leads Been Around the Block?
As you probably know, special finance leads have become big business. The other day I was talking to someone very involved in the automotive lead business who told me that there are over 1.5 million leads generated every month. That, he believes, is a conservative number. Four or five years ago there were only a handful of players in the auto lead business. Now there are over two dozen.
A side effect of this expansion is that marketing firms not primarily associated with automotive leads are entering the space. They are generating leads that are not necessarily genuine auto shoppers, but consumers who are initially interested in other products. These leads are being disseminated on the wholesale market. With the average cost of leads currently over $20, it pays to learn how to distinguish genuine auto shoppers and leads from people not primarily looking for auto loans. How do you go about doing so? In an article you’ll never find in a trade magazine, we’re going to tell you how.
The Wholesale Lead Network
Most of the leads that you’ve been purchasing are generated when a consumer starts searching for alternate finance options on the internet. Most of the time, these shoppers will use a search engine, such as Google, and use keywords like “auto loan” or “car finance“. Special finance lead generators pay big money to ensure that their landing pages, like the one below, come up high on the page when these terms are submitted.
If your lead provider is sending 100% of these leads to you, then you’re getting what you were promised. Of course, you’re not going to close every one of these leads, but at least you’re getting your money’s worth.
Wholesale Leads and Coregistration
When you sign a contract with a lead generator and ask for 150 leads a month, his goal is to organically produce these leads on his own landing pages. Let’s call him Generator A. However, he may have several dealerships in your area. Or, you may exist in a lead scarce market. If that’s the case, and he does not have enough “inventory”, then he’s going to look to the wholesale market for more leads to meet your demand.
Generator A will have pre-arranged partnerships, let’s say with Generator B and Generator C, where he can buy leads when his inventory runs out or sell when he has excess leads. This takes place automatically, so nobody feels the difference. As long as he’s done his homework about his wholesale partners and has investigated their lead quality, everyone wins. He gets the supply he needs and you are a happy paying customer.
However, the demand for leads has put pressure on everybody to source more and more volume. Let’s say, responding to this demand, A decides to start two new partnerships, with Generators D and E. Let’s also assume that D is in the payday loan business, and E is in the prepaid credit card business. Those leads are going to perform differently than the others because they are not organic auto shoppers. How does D and E generate auto leads if they are not in the auto business? Through a process called coregistration.
Coregistration
Coregistration is a common tactic online marketers use to generate many leads from a single customer. Simply put, a coreg lead is generated when a consumer, interested in a particular offer or product (such as the payday and credit card examples) is asked to “opt in” on related offers. If they agree, and choose “auto loans”, then a special finance lead is generated, sent through the wholesale network, and sold as a special finance lead to a dealership.
Before you panic and call your lead generator, understand that not all coreg leads are the same. For example, a consumer who subscribes to a free credit report service in order to prepare for an automobile purchase is a genuine auto shopper. This lead will perform as well as any other. I would feel good about buying these leads.
How can you ensure that the leads you buy are genuine auto buyers? How do you protect your close rate and maximize your return on investment? Unfortunately, there is no simple answer. You’re going to have to do your homework.
In the next article, “Ten Questions to Ask Your Lead Generator”, we will examine the coregistration issue further and give you solid tips you can use to maximize lead quality. Subscribe to The Subprime Report for email notifications when new items are posted. We value your feedback. Contact Us today if you have questions, suggestions, or complaints. We invite you to leave comments for your peers as well. Or, Visit Our Forum to share best practices and solutions with your peers.
Have a Safe and Happy New Year!
This is useful information. My question is, when a lead provider makes promises that they don’t keep. For example, if they send us leads we bought from another company, is that due to coregistration, or is that a result of them reselling the same lead more than once? Seems there is opportunity to work the dealership and charge for leads more than once.
I think all lead providers do one form of coregistration or another. I’ve had several cases where I’ve called customers who’ve told me that they have no idea why I am calling them, and do not remember applying for anything related to an auto loan.
I always refuse to pay for these leads. I don’t try to stuff them down the lead providers throat, but I won’t pay for leads that don’t seem legit. Whether or not it’s done intentionally, I don’t know.
I’ve been deeply involved in internet generated subprime leads for the past six years. Co-reg and re-selling of leads is a much larger problem than any one dealerships perspective can possibly see. In any given month I get $3000 to $4000 in credits for leads that “didn’t apply” or have bad phone numbers. Unfortunately, there are even more that you can just never get to respond. Cars Direct openly sells leads for $35 each to three or more dealers. These are leads that wholesale for $12-$15. Seems like a huge profit margin for co-reg, insurance quotes, free x box’s, free iPods, etc., etc. Most of the lead providers are buying “leads” from sites like http://www.cashadvanceexperts.com, http://www.freegiftworld.com, http://www.getmyfreelaptop.com, etc. through publishers or “affiliates” that re-sell to three or four lead providers. Here is what has become my solution for the time being: Define what a lead is. We sell cars, if its not a car buyer, send it back. If the prospect can’t be reached at a phone number provided, send it back. Make sure you have a CRM that helps you to get credit for leads on the fly or at monthend (I like the simplicity and carguy friendliness of AdTel). Master your game. The more you understand, the more you’ll save. Last, try to deal with the more reputable of the providers.
Until the dealers decide to do something (together) about this problem, this is what we have to deal with.