The Challenges

Developing a sub-prime website in 2016 is more challenging than ever before. That’s not to say actually building a website is difficult, but success is.  The past 5 years of sub-prime lead generation online has seen a dramatic increase in competition, and in turn cost. High demand aside, the big banks are having the most significant impact on the cost of generating leads online. Given search CPC (cost per click) is driven by an auction, the bigger budget typically wins. Banks are able to spend more per lead because they are able to earn more per lead. Think about the difference between your net on a sub-prime deal vs. the banks net on a 29% loan. The difference in available customer acquisition budget is clear.

However, cost isn’t the only challenge in generating sub-prime leads online. Trust can have a similar impact. If  “ABC Dealer’s” ad is showing next to “Big Bank 1’s” ad, which is most likely to get the click? Building trust online is already one of the most significant challenges dealers face outside of the sub-prime market, and the competition of banks in sub-prime doesn’t help.

The Approach

“If you build it, they will come”, is only in the movies. In a peak-saturated space, Dealer’s brand equity in local perception and domain equity with Google are their greatest assets.  In competing against name brand banks for clicks, a Dealer’s tie to the local community is its biggest advantage. Name recognition is a key component in driving trust and engagement online. The other competitive advantage is domain equity and local SEO (search engine optimization). Dealers drive quality automotive focused traffic to websites every day.  The more quality traffic driven to a site, the more trust (domain equity) is built with Google. Just like public perception and word of mouth, you are building a relationship with Google. By splitting out sub-prime traffic onto a brand new domain with no brand or domain equity, you put yourself at a significant disadvantage. While the intention is to funnel specific credit traffic to a sub-prime focused site, the result is splitting off your traffic between two domains and reducing the equity opportunity with your primary domain.

The Solution

Invest a minimum of $5000 per month in digital advertising if you choose to launch a sub-prime specific site. With an average CPC of $13, a $5k budget should bring you about 400 unique visitors (users) per month. In addition, don’t overlook a monthly traditional media spend to drive direct traffic which will help grow organic traffic faster than digital. Look at your sub-prime lead generation as a business unit, not a website. The digital side of the business is only the most challenging component.

If you choose to go the recommended route of building additional equity in your primary website with a sub-prime landing page/section, investment is much more palatable. You can build the business slow, and invest an additional $1k-2k a month to piggyback off your existing media spend.

The bottom line is sub-prime lead generation is hard. I personally receive 3-5 calls a month from dealers starting a sub-prime department, and around 30 in the months of December and January. To be successful in online sub-prime lead generation, utilize existing competitive advantages in brand/domain equity and be patient. Anything worth doing right is hard.

Kyle Orlando is the Director of Product Development & Marketing at e-Dealer. He has 7 years experience creating effective online solutions for car dealers. For more information, he can be reached at 647.638.1452 / [email protected].

Article from October issue of Canadian Auto World