SCI Lead Scoring

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SCI Lead Scoring

SCI Lead Scoring

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  • 1. Lead Scoring – An Emerging Best Practice A Point of View
  • 2. TABLE OF CONTENTS Lead Scoring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 No Scoring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Current State Of Leads . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Why Are We Paying For A Lead? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 What About Batch Leads? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Score, Or Not To Score . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 What Next? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Scoring The Next Opportunity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Scoring 101 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Hybrid Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Putting It All Together/Scoring Quartiles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 2
  • 3. There has been a long standing debate over lead scoring, with two main camps . One camp states “Scoring helps efficiency in the dealership .” The other camp states “All leads should be worked, so scoring adds little value, and can even be detrimental .” If we look deeper into the lead process, we will find that in actuality both sides are right . What is wrong is choosing one over the other . Let’s look at the two positions . LEAd SCOriNg Lead scoring used to be applied to batch handraiser files (BRCs, events, etc), in order to determine when and how to incubate these sources of leads . Because the sources were batched, the tendency was to send them in bulk transfer, to dealer personnel for follow up . Given the constraints and issues confronting showroom personnel on a day to day basis, such bulk transfers turned the showroom from an environment of “managed chaos” to one of “unmanaged chaos .” Since not all bulk transfer leads are critical in terms of timely follow up, lead scoring had a value added position in keeping the peace and affording efficiency . Thus, “If it works for campaign leads, it should work for all leads .” NO SCOriNg Real-time leads, and many 3rd party leads are actual customers requesting information . They come in at a daily pace, vs . large batches . Because the customer has actively engaged, by definition it is a Hot, or high score lead . Ignoring, or not acting on these leads creates a lost sale, so process efficiency is not a primary concern . Thus, “Scoring hurts more than helps .” CurrENT STATE OF LEAdS To fully answer the scoring debate, the current basic facts that drive them need to be reviewed . They are as follows: • Number of leads handled is growing • Response time to leads is improving • Quality of response is not improving • Approximately half of all leads convert within 60 days • Brand and dealer defection remains high The facts above are often used in positioning the need for lead scoring at the time a lead is initially distributed, so as to indicate quality or priority of lead follow up . The argument goes as follows; “We can’t follow up with the appropriate level of quality for all leads that come into our store today . As a result, we need to know which leads are most deserving of a timely and quality response in order to better manage dealer-level personnel, as well as, sales lead response and conversion .” 3
  • 4. At first glance, it is easy to understand why some people jump to the above conclusion . After all, “Why waste time responding to a bad lead?” Wouldn’t we all be better served if we could eliminate the time and effort put into responding to bad leads? At the very least, wouldn’t we all be better served if we could respond to the good leads first and get around to the bad leads later? Why ArE WE PAyiNg FOr A LEAd iN ThE FirST PLACE? However, is that also the case of real time and third party purchased leads? If it is possible to distinguish between a good and a bad lead with such accuracy that you would delay responding, why is anyone buying the lead in the first place? Let’s look at it from the volume perspective . Eighty percent of all dealers get 150 leads/month (7 per day), or less . 95% get 350 leads/month (16 per day), or less . Are 2 leads per hour an excessive volume that needs prioritization? Since these have been directly generated by a potential customer, is there a distinguishable “good” and “bad” lead? Is it worth the risk not to respond immediately? This appears to be a clear case of treating a symptom and not a cause . If you’re buying poor quality leads, shouldn’t you drop that bad habit instead of developing (and paying for) another? This is not to say that lead scoring does not have an opportunistic role . But let’s start with the basics . One can only assume that if you’re paying for a lead, you want to put forth your best effort in getting a return from that investment . Since the industry knows empirically, from study after study, that a timely and thorough response correlates to the highest possible conversion rate . Thus, the idea of prioritizing one lead for a good and timely follow up and another lead for something less does not make sense . It is not a good idea . Rather you should spend your money to improve response time by responding to that customer who is expecting a near term response . (Data that is now available shows that after 3 hours 50% of potential customers have lost interest in that dealer/brand) . WhAT ABOuT BATCh LEAdS? While it is now clear that scoring real time leads causes more harm than good, what about batch leads? As mentioned earlier there are several marketing techniques (e .g ., Events, Business Reply Cards, etc .) that generate lists of potentially interested buyers . There are also several analytical tools that can identify people who are potentially in market . In these cases a person hasn’t directly reached out, thus their state of interest has to be deduced . They are also processed in bulk/batch creating periodic floods of information . These types of leads can be better considered as prospects vs ., true leads . As such, scoring can add value . It can help to smooth the work effort to manage these types of leads . It can also help to determine when, and which type of sales technique is best . 4
  • 5. SCOrE, Or NOT TO SCOrE As you can see both camps are right when used in the proper context, but wrong when used holistically at the expense of the other . The best practice is to do the following: • The first priority should be to respond to a leads as quickly as possible with high quality . • The second priority is to measure lead source conversion rate, and stop (reduce) buying from low quality sources . • The third priority is to treat marketing leads as “prospects” and utilize scoring for better management and treatment . WhAT NExT? Now that we have the scoring of inbound leads debate behind us, with an average industry lead close rate of 8%, we most likely have not sold a car . We may have been fortunate to book an appointment, but nonetheless not sold a car . In most cases, the lead goes in the circular file, or stacked in a dust covered piled and forgotten while moving on to the next hot lead . SCOriNg ThE NExT OPPOrTuNiTy As mentioned earlier, there is another opportunistic utilization of scoring . Scoring can bring back those lifeless “lost sales” by helping to determine when and how to reengage marketing into the process of lead conversion (sales) . Consider, for example, the two most prominent factors or questions in scoring leads today: 1) What is the time to market (to buy) 2) What is the match to my customer/product portfolio (look alike/likelihood) 5
  • 6. SCOriNg 101 Generally speaking, development of a lead scoring model is based on the examination of a universe of historical leads at the point-in-time in which they converted . The exercise takes into account a large array of data elements, as they existed at the time the lead converted . The operative theory is that by understanding the dependent variables present at the time leads convert enables the resulting algorithm to score leads in the future based on similar characteristics (high priority lead) or dissimilar characteristics (low or normal priority lead) . intention To Purchase Intention to buy, as it relates to the purchase horizon remains a critical element in the prioritization of leads . Outside of the current owner portfolio, self-reported data continues to be one of the best indicators for market timing and as such is a strong indicator of how “hot” a lead is . However, the manner for determining how “hot” a lead is has great variability . Consider: Current Owner relationships: Existing owner households or leads from current owner households are more likely to buy than a previous owner household (disposer households) and previous owner household are more likely to buy than first-time buyers . • Current Owner readiness can be assessed through: – Understanding readiness (how close to purchase) for the above can be calculated in various manners . – Current owner readiness can be measured against empirical information such as: Vehicle age Mileage RO Patterns (However, failing confirmation of the above does not eliminate a self-reported in-market lead from true readiness because the household could be adding to the family fleet . Therefore, the potential to increase share of garage for Brand must be considered .) Previous owners and pure prospect readiness can be much more difficult to accurately measure and predict beyond their self-reported readiness . Methods used most effectively here include: • Modeling against recent historical buyer profiles (typically including life stage) – Utilizing off-the-shelf IMT models built from vehicle registration data • Other contributing factors to accurately measure readiness include: – Recent dealer visits (sometimes confirmed through access to dealer CRM systems - Ups) – Behavioral characteristics such as requests for quote • Indication of vehicle available for trade-in (trade-in valuation) • Financial deadlines (ie ., end of lease, positive equity position) • Activity across multiple sources (typically within a 30-60 day window) – This is particularly indicative when focused on a specific brand or vehicle segment . 6
  • 7. Appropriateness: A consumer or household that matches the portrait of the brand or vehicle segment owner . These instances are more easily modeled and identified than readiness and are useful in developing follow-up communication strategies to optimize conversions/sales . Areas of concentration include: • Portrait match • Household resides in dealer trade area • Other same-Brand vehicles in the household • Previous (recent) TDM (targeted direct mailer) campaign targeted the household • Vehicle familiarity as indicated by references to specific vehicle trim level or options package Value: Leads from households which represent “high value” consumers may be given special consideration where high value equals highly profitable or loyal . These are primarily current or previous owners who have a known history of: • Purchasing from stated dealer in the past • Financing through captive finance • Frequent dealer servicing It is also possible to model the characteristics of “high value” customers using demographic and life stage attributes and extend identification of desirable “high value” households out to the prospect universe . 7
  • 8. hyBrid APPrOACh Most discussions infer that the purpose of lead scoring is to rank “intention to purchase” . Because intention to purchase is typically associated with a timing element, our perspective is that intention to purchase is best utilized when augmented with additional qualification . Additionally, because leads convert over varying periods of time, we believe that a best practice is emerging from a hybrid approach to lead scoring . This approach takes into account both factors/questions in order to implement strategy and tactics that compliment cadence and urgency of communications over the near term and long term opportunities . Thus, SCI’s recommendation is to compliment intention to purchase with a secondary scoring algorithm and build the appropriate response strategies around the combined scores . A complimentary scoring algorithm is a look-a-like portrait of a similar Brand owner/buyer household, or a series of look-a-like portraits . These could be deployed for each of the primary make/models in the same-Brand fleet . Another complimentary scoring algorithm option would be to deploy and utilize a customer-value model in conjunction with intention to purchase . In many instances we find that these types of complimentary scoring models already exist within the direct marketing departments of manufacturers we work with . The benefits of this are: • No development cost, only a deployment effort is required • Consistency in the recognition of who the ideal Brand owner is • Increased flexibility in response strategy In the case of a dual deployment of scoring algorithms, intention to purchase would remain the primary score for determining response strategy, particularly as it relates to priority/urgency of follow-up . However, the look-alike or customer-value portrait would be used to determine which strategy to employ in the response . 8
  • 9. PuTTiNg iT ALL TOgEThEr Now that we know what the “score” is for an un-sold lead, we can take the appropriate action to nurture that lead into a sale in the future . This process “mines” the untapped diamond mine of existing contacts generating sales from those that weren’t ready when first contacted . To understand the approach, picture a window with 4 panes . Each of these panes represents a cumulative picture of the customer’s intent to purchase horizon, and the appropriate response strategy . SAmPLE SCOriNg QuArTiLE HIGH FIGHT TO WIN DILIGENT PURSUIT Intention to Buy NURTURE INCUBATE LOW Match to HIGH Owner Portrait 9
  • 10. diLigENT PurSuiT: Scoring Result(s): Both the Intention To Buy (timeframe) and Match Owner Portrait scores are high . Context of Score: The consumer is deemed to be a serious near term buyer and has a strong match of the typical Brand owner, thus the Brand vehicle is likely high in their consideration set . Course of Action: Immediate and diligent follow-up and pursue to close in near term . FighT TO WiN: Scoring Result(s): The Intention To Buy (timeframe) score is deemed high, however the Match Owner Portrait score is deemed low . Context of Score: The consumer is deemed to be a serious near term buyer but does not match the typical Brand owner, thus the Brand vehicle is likely not high in their consideration set . Course of Action: Develop an aggressive “snatch and grab” strategy for conquesting consumers deemed more likely to convert to a competitive brand . iNCuBATE: Scoring Result(s): Intention To Buy (timeframe) score is deemed low, however, Match Owner Portrait score is deemed high . Context of Score: The consumer is not likely a serious near term buyer but does have a strong match to the typical Brand owner, thus as they come to market the Brand vehicle is likely to be high in their consideration set . Course of Action: Develop an incubation strategy that maintains awareness with the consumer while monitoring their timeframe to buy . Build an integrated response leveraging both Brand and dealership communications . Dealer customer actions should be focussed on keeping the customer prospect warm . NurTurE: Scoring Result(s): Both the Intention To Buy (timeframe) and Match Owner Portrait scores are low . Context of Score: The consumer is not deemed to be a serious near term buyer and does not match the typical Brand owner . Course of Action: Develop a nurturing strategy that builds a relationship and indoctrinates the consumer into the Brand owner experience (preferred social networks, blogs, etc) while monitoring their timeframe to buy . Build an integrated response leveraging both Brand and dealership communications . Consider SCI Lifecycle Management capabilities for communications integration . Dealer customer actions should be focussed on feeding the customer with interaction which will convert the customer into the “fight to win” and “dilligent pursuit” categories - not just require the customer to be further “incubated” by the dealer . 10
  • 11. A deployment such as the one described above provides the versatility to address multiple value propositions: 1) Increase Brand new vehicle sales (and lead conversion rates) 2) Build consideration set of the Brand 3) Build dealer awareness within prospect and owner communities 4) Further leverage marketing investments through lower funnel activity integration iN SummAry • Get the fastest impact by focusing on improving quality and response times to real time and 3rd party leads . • Measure lead source effectiveness and take appropriate action (i .e ., buy more from good sources and less from bad sources) . • Treat prospects as prospects, not as leads . One size process does not fit all . Leads need immediate attention, prospects need to be nurtured . • Utilize Hybrid Scoring model to effectively manage intent to purchase and response strategy building consideration, and converting longer horizon customers . 11
  • 12. For more information contact: John Olsen, director of Sales mike Lesinski, director of Sales Simon Chong, Vice President Sales jolsen@scitorque .com mlesinski@scitorque .com schong@scitorque .com Phone: 201 .741 .1079 Phone: 734 .674 .6976 Phone: 905 .479 .1595 ABOuT ThE AuThOrS: mike Lesinski, director of Sales Mike is a seasoned sales and marketing professional with extensive knowledge of the automotive industry . Prior to taking on the role of Sales Director for SCI, he directed the Marketing Information Products Group for an information services vendor, specifically focused on the automotive sector . In this role, he consulted with most OEMs in the areas of customer information compilation and utilization . Tim Evavold, VP Services and Operations Tim has held a broad number of business and IT executive positions within the automotive industry that have focused on developing and managing the customer relationship experience for dealers and automotive companies . He continues in this role through his work with SCI .