It was 10 years ago that the Cars.com site went live. To celebrate this milestone, DealerADvantage sat down with the very first Cars.com customer to see what’s changed in the decade since he came on board as a leader in online automotive sales.
You might say that Todd Cahan got his start in automotive retail the old-fashioned way: He was born into the business. The nephew of Max Madsen, the owner of a three-store Mitsubishi group near Chicago, Cahan learned the ropes as a porter during high school before returning after college to earn his stripes as a full-time salesperson.
“He’s mad and bad, but he’s not crazy,” Cahan said of his uncle, quoting Madsen’s long-time advertising tagline. “He hired me!”
In the 15 years that followed, Cahan has proved to be a good hire. He steadily worked his way up through the ranks from floor sales to his current role as managing partner. As general manager a decade ago – in June 1998 – he earned the distinction of signing Max Madsen Mitsubishi on as the first dealer to advertise listings with a fledgling online automotive shopping site known as Cars.com.
“I was an early fan of the internet, and we were one of the first dealers to actually utilize it as part of the commerce that we did at the dealership via our parts department,” Cahan said. “Shortly after that, Cars.com approached us about its platform and what the company would be doing with it. It was clear to me and everyone else involved that this was the future.”
Although he left the dealer group for a few years to develop his own business, Cahan said his love of the industry soon called him back.
“My office is just off the sales floor,” Cahan said. “I very much enjoy dealing with customers. I like dealing with people. I like dealing with my sales staff. That’s really the end of the business that I grew up in, and it’s probably where I’m most comfortable. What I enjoy most about the dealership is that it is a big business that still operates like a small business. You still have family-run stores that have significant revenues, but there’s still a hands-on approach. The decisions that you make every day can make big differences in the way that the business operates.”
We recently spoke with Cahan to discuss how Max Madsen Mitsubishi manages its online initiatives and how its internet strategy has evolved.
DealerADvantage: What led you to believe, 10 years ago, that advertising online was a smart decision? What were you seeing personally that gave you confidence?
Cahan: Personally, it was the forum. At the time, America Online was just becoming a household name, and people were jumping on the bandwagon everywhere you looked. I just enjoyed what the internet created: It made the world a smaller place. We immediately saw the opportunity to make our goods available for sale to the entire world. Just as long as we have been working with Cars.com, we have had dealership websites. We were using the internet to sell parts through our parts departments well before it was common for a dealership to have a website.
Also, given that the Chicago Tribune was one of the companies behind Cars.com, that lent it some credibility as well. If the Chicago Tribune was bringing this to us, they must see the future in it, and that made it a little easier for us to make a decision.
DealerADvantage: When you started working with Cars.com, how did you select the inventory that you would put online?
Cahan: We wanted to get as much of the inventory that we could online and available for people to see. We saw results right away, and we still see results to this day. It started primarily with used cars and within a few years new cars became something that people sought online. We probably have more than 500 used cars combined for our three stores, and the same thing for new.
DealerADvantage: What type of audience does advertising online help you reach?
Cahan: Well, it used to be a unique audience, and now it’s the mainstream. Today it’s an oddity if somebody doesn’t find us via the internet.
DealerADvantage: Was it primarily Chicago people that initially found you, or were you surprised that you were reaching buyers outside your market?
Cahan: Initially, it was people from all over the country, and then it became a little bit more of a local market. Now again, it has opened back up. It has even become a world market, and people are trying to purchase cars from outside of the U.S. market at a savings.
DealerADvantage: How many countries at this point do you think you’ve sold to?
Cahan: At least 10 in Europe, South America, Canada and Mexico. It’s pretty neat, and we’re making good grosses on those deals.
DealerADvantage: How has your process changed from how you were using Cars.com 10 years ago versus today?
Cahan: Initially, it was an exclusive-type club feel that we tried to offer to the internet buyer, but today the process is as mainstream as the internet itself. It’s just another way of customers communicating with you. Because it’s electronic and fast, you need to be as quick with your response.
DealerADvantage: What about internally? Did you initially have any trouble getting buy-in from your salespeople about the validity of internet customers?
Cahan: Always. Even to this day. You have to help everyone keep the faith. Fewer people make their way into showrooms now because the showrooms virtually exist in their living rooms. It’s important for salespeople to help customers shopping understand that there is more benefit in coming out to touch and feel these cars than seeing them online. That’s really what their jobs are today — more than anything, answering questions and convincing them to make their way into the showrooms.
DealerADvantage: How do you go about that? How do you give prospects just enough information to entice them without giving them so much information that they feel they can shop you?
Cahan: That’s the million-dollar question. It’s just a matter of personality and helping them understand that there’s more to purchasing a car than the price. Especially with used cars. It’s unlike a new car in that each one’s different, and that helps us get the customers into the showroom.
DealerADvantage: Ten years down the road, how does online advertising fit into your overall media mix?
Cahan: Every day it becomes more valuable. Today, I would say it’s at least 50 percent. That’s a lot if you consider how much of a goliath Max Madsen is in the advertising and marketing he does with regard to radio, print and cable TV. I believe that a mix is important always, but I think that naturally the internet is going to replace some mediums. Way down the road, I see a convergence of TV and internet, and print is going to be in trouble.
DealerADvantage: How does that 50 percent figure compare to, say, five years ago?
Cahan: Huge. About five years ago, it would have been approximately 15 percent. Because we like to keep a balance and a mix, we’re making more room for some of our internet and interactive efforts.
DealerADvantage: How do your stores manage internet sales?
Cahan: All of our internet inquiries come through our CRM system and get distributed to the people who are assigned to handle the internet for us in each store’s internet department. They are monitored by management, including the sales manager and general manager at each store and myself, on a daily basis.
DealerADvantage: When you receive a lead, is your first response an email response or a phone response?
Cahan: Both. My people will try to come into communication with the shopper in any way that they can. During business hours, I’d say the initial response is within the first few minutes of receiving an internet lead and then, obviously, a telephone call is instantaneous.
DealerADvantage: What changes are you seeing in car-shopper behavior when they respond to your listings?
Cahan: I will tell you one of the shifts that I have seen on the internet is the shift from email communication back to old-fashioned telephone communication. It’s pretty dramatically shifted. At the onset of the internet, email seemed the quickest way that someone was going to get the information that they were after. Now people have learned that as fast as an email is, it’s not quite as fast as picking up the telephone to get the information they want. All of our websites have been redesigned to acknowledge that. When you have someone who is really ready to rock ‘n’ roll, the telephone is the quickest way to get in touch with them.
The people who are picking up the telephone are deeper into the funnel. It’s a good thing that it’s happening because these are the ones that are trying to get those last-minute bits of information put together before they pull the trigger. Those are the customers that we definitely want to be on the telephone with. Some of the ones who send email are a little bit farther out; they are just starting to research, starting to gather the information. It’s important to maintain relationships with them too, but it’s our experience that the ones that call you on the telephone are really ready.
DealerADvantage: We’re hearing at industry conferences that 2008 is “the year of the telephone.” Have you changed your training processes to focus on phone skills?
Cahan: Absolutely. Everyone is open to be on the telephone, but because we have the ability to track and record most incoming calls, that gives us an opportunity to really train our people as best we can and make sure they’re doing what they’re supposed to be doing when they do come in contact with people. It’s always about selling the appointment.
DealerADvantage: How long do you have your salespeople work leads?
Cahan: I believe that just like we were taught a long time ago, you work a lead until that customer buys or dies. Very often, because of the volume of leads that some of these internet specialists come in contact with, they give up way too soon. The key is to truly hang on to the opportunity and don’t ever give up.
DealerADvantage: How long do you work a lead manually and at what point do you turn it over to an automated database effort?
Cahan: A minimum of 60 days.
DealerADvantage: Is there a prescribed number of phone calls and emails in that 60-day period?
Cahan: It’s whatever it takes without being overbearing. It is their job to get into communication with this customer that requested information. Then our CRM takes over and it becomes an automated follow-up. That’s far less fertile, though. We use quick email blasts. It’s like a dragnet almost: try to drudge the river for someone who might still be lingering out there. From time to time, it does snag on to somebody who resurfaced and is re-engaged in the purchase.
DealerADvantage: At what point do you start working price into the equation with prospects?
Cahan: When they’re at the dealership. We have our internet price pretty much posted on every vehicle that they would be inquiring on. We indicate that we might be able to help them with slightly better than those terms, but they would need to come to us to make the offer. That seems to work.
DealerADvantage: Do you find that it’s just as easy to maintain gross with an internet customer as it is with a “showroom customer?”
Cahan: Yes, once they’re in your showroom. It’s no different than it really ever was. You need to have a relationship with the customer. Our experience is that you cannot work with a customer via the internet as far as pricing and negotiations go.
DealerADvantage: How many vehicles, on average, do you sell each month? What percentage would you attribute to the internet?
Cahan: About 100 per location. I personally would attribute 95 percent to the internet, but I think in reality it’s as much as 80 percent to 85 percent.
DealerADvantage: How do you define an internet sale?
Cahan: Any time a consumer utilizes the internet for gathering information and we learn about their effort, I consider it an internet opportunity, meaning that somewhere along the line they’ve submitted their information and we’ve gotten a hold of it.
DealerADvantage: Do you survey your customers to determine how they decided to come into your store?
Cahan: Absolutely. We do that at the dealership. We have a survey that customers who purchase a vehicle complete. It’s an unbiased survey that they take a few minutes of their own time to complete and turn in to the general manager of each store, and then we track it. This is done while customers are waiting to get in to the F&I office, and it keeps them busy while we prepare the paperwork. They complete the survey for us, alone and without any pressure of a salesperson. They’ll tell you the truth if you’re not prodding them. It’s a very comprehensive survey. Some people fill it out in its entirety, and some people just give us the information that they feel we should have. We put it all into a database and try to make the best sense of it that we can.
DealerADvantage: You sound like it’s been pretty useful for you.
Cahan: It is. It’s useful. It’s a funny thing, though. Advertising sourcing can become its self-fulfilling prophecy, meaning that you can source all of your customers and learn that a certain advertiser is working better for you than anything else. You pour more money into that certain advertiser and, lo and behold, it’s working even better than it ever did. But, really, the idea behind sourcing is to identify what doesn’t work. That’s how we’ve been successful, really, with monitoring all of our sourcing as well as our internet advertising.
DealerADvantage: What internet tools do you use to develop leads?
Cahan: We have just spent a ton of hours and resources redeveloping our website, and it is one of the most cutting-edge, state-of-the-art websites out there. Its architecture is of the latest code and is written specifically to optimize any search engine activity. We are already seeing an increase in the amount of time people spend on our website as well as how many pages they view — almost double some former websites.
DealerADvantage: What is your overall closing rate for the traffic that you drive through your internet advertising?
Cahan: Of the new-vehicle leads that we receive, we are tracked by our manufacturer and currently lead our region with a closing rate of approximately 30 percent, which is a job well done, but those are only the leads that we can track. How many people are brought to us via our internet efforts that don’t leave a trace? Probably many more. Used vehicles close a bit higher as each used vehicle is unique.
DealerADvantage: Thirty percent? I imagine some readers would like to know your secret. Can you tell us more about that process and why you think you’re seeing such good results?
Cahan: I think it really stems from us believing in the opportunity, and that comes from me on down through everyone who is involved in the process. I’ve believed in it all along and continue to believe in it. It has become our culture.
DealerADvantage: How do you measure your online advertising partners? What matters most to you when you evaluate their performance?
Cahan: We base their value mostly off of how many units we sell through any particular vendor. Obviously, gross profit and cost of the relationship are important factors, but that all comes out in the wash. We’re in business to sell cars, and when we sell cars, that’s how we profit. We know which vendors are working and which ones aren’t.
DealerADvantage: What do you look for in a partner when you purchase online advertising?
Cahan: Somebody who is not going to be sending us an ungodly number of frivolous leads. We have run into vendors in the past who have done that. We can’t even imagine how they drum up some of the activity that they get. We quickly learn which vendors are legitimate and which vendors are just out there to make a quick buck. They don’t stick around for very long. Cars.com for the last 10 years has been a quality partner of ours. They have always been in the business of helping us succeed. That’s why it’s worked out.
DealerADvantage: What advice would you give to an internet salesperson coming into your store today?
Cahan: Stick with it. As busy as it will keep you, it will give you that much more opportunity, which should convert to success. At times it can be frustrating and seem like more work than it should be, but eventually it will pay out. They just have to have the patience to see it through.
DealerADvantage: Are today’s internet salespeople tomorrow’s GMs?
Cahan: They very well could be. Like I said, you put your best salespeople into the internet and then your best salespeople often become your management.
DealerADvantage: Is that happening at Max Madsen?
Cahan: Yes. Actually, all three of our sales managers at our stores were former internet salespeople and two, if not three, of our finance managers were once internet sales consultants. So almost everybody in sales and finance management were internet managers at one point.
DealerADvantage: What do you perceive to be the greatest challenges in online automotive?
Cahan: I just don’t see it as a challenge; I see it as an opportunity. New online technologies will emerge, and we will embrace them. I clearly understand the internet is still in its infancy, and I can’t wait to see how we generate leads in the future. Give me more opportunity. Bring it on!