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Car companies wrestle with Internet challenge

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2 million of the 15.1 million light vehicles sold last year were sold to people who never went into a new-car dealership Computers are rapidly taking the place of salespeople when it comes to purchasing vehicles.

According to Ross Roberts, Ford Division general manager, 2 million of the 15.1 million light vehicles sold last year were sold to people who never went into a new-car dealership, except to take delivery. Some of this is due to brokers, but it unquestionably includes a substantial number of Net-driven sales.

Similarly, Thomas Pappert, Chrysler VP-sales, predicted that more than 25% of all vehicle sales will come via the Internet by 2000. Mr. Pappert said Internet sales currently represent 1% to 2% of Chrysler's total vehicle sales.

12,000 LEADS A MONTH

And beyond pure sales is the impact of Internet pre-selling. Jim Pisz, national direct response manager for Toyota Motor Sales U.S.A., said consumers are taking only two or three days to make vehicle purchase decisions after the first visit to a Toyota dealership, compared with two or three weeks in the past.

Mr. Pisz said that Toyota gets about 10,000 to 12,000 leads a month on the Internet, and that the company closes about 3.5% of those leads.

He says this indicates that services such as the Internet are giving consumers much more information about vehicle specifications and prices.

"It's rather alarming to me that 2 million people bought vehicles before going into a dealership," Ford's Mr. Roberts said. "We're trying to find out the ramifications of the Internet."

Most automakers are encouraging their dealers to establish Internet home pages to accommodate the growing number of consumers who do research by computer.

DEALERS MAY FACE A DILEMMA:

  • Internet advertising gives them an avenue to reach customers far beyond their primary marketing territories.

  • Some factories are balking at providing dealers with the additional vehicles they may need to handle the potential expanded customer base, particularly if those customers are not within a dealer's selling region.

    Chrysler Corp. has made it clear that it will provide dealers with vehicles as they turn them, whether or not those vehicles are sold in a dealer's territory.

    "We can't and won't limit where customers want to buy their vehicles," Chrysler's Mr. Pappert said.

    Ford Motor Co., General Motors and Toyota are not so liberal.

    "We're trying to get our dealers educated about the Internet," Toyota's Mr. Pisz said. "The Internet will allow broader selling, but the Toyota allocation system will not allow a dealer to get way out of line with the numbers in his primary marketing area."

    THE NET KNOWS NO BOUNDARIES

    Some Buick dealers feel threatened by Internet sales, and have said if a dealer poaches a sale from another's market, the dealer whose territory was raided should be compensated.

    Bob Coletta, general manager of Buick, opposes any such compensation, but he doubts that Buick would allow dealers to increase their allocations significantly if they use the Internet to sell outside their areas.

    At least one dealer has proven that customers will drive 100 to 200 miles to get a good deal. Dave Smith Motors in the small town of Kellogg, Idaho, has used mostly word-of-mouth advertising and some Internet advertising to attract customers throughout the Pacific Northwest with low prices.

    Smith Motors handles Dodge, Chrysler, Plymouth, Pontiac, Cadillac, Buick, Oldsmobile, GMC and Chevrolet. The store sold more than 4,000 Dodges last year to become the second-largest Dodge dealer in the nation. Smith's GM sales totaled about 1,000 units.

    Owner Ken Smith said he believes his Chrysler sales have soared because Chrysler does not limit his allocations; GM does.

    "Chrysler has the only true turn-and-earn system," Mr. Smith said.

    KEY FORD STRATEGY

    A recent study by Dohring Co. of Glendale, Calif., shows that 63% of all respondents would use the Internet to obtain information about vehicles they are considering for purchase.

    Ford's Mr. Roberts said marketing on the Internet is one of four key strategies that Ford Division wants dealers to focus on in 1997.

    Within the last year, Ford Division handled several cases in which dealers used the Internet inappropriately, Mr. Roberts said. While he would give no specifics, Mr. Roberts indicated the cases involved marketing methods outside a normal trade area.

    "We're trying to look after our individual dealers," Mr. Roberts said. "We will not allow dealers with 100-unit planning volumes to sell vehicles into another dealer's market area; every dealer has to make a living."

    One big question that remains is the effect these new selling methods may have on customer service. Some Dodge dealers already are refusing to service some of Dave Smith Motors' customers, saying that if those customers want to travel hundreds of miles to buy Smith's products, they should travel the hundreds of miles to get their vehicles serviced.

    This story is reprinted from Automotive News, a sister publication of NetMarketing.

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