Dealer Principals and Sales Managers will have had a tough year this year. The market is down, consumer confidence is weak, electric vehicles are in turmoil, stock turn is low and the only bright spot has been ute sales which have weathered the storm. There is real pressure on the bottom line.
There is also so much going on that sometimes it’s hard to work out what to focus on. At Boost Auto we run planning sessions to help dealers get to grips with creating action plans for the coming calendar year. Sometimes a simpler solution can help you get on the right (or at least better) path.
What we know with certainty is that enquiry for new and used vehicles is down. Yet what has been surprising is that many dealers I have met don’t know what their conversion rate is from lead to sale. This has huge and long reaching implications for your business.
Photo by dominik hofbauer on Unsplash
If it’s not measured then it’s not managed, as the saying goes, so a good sales manager really should know his numbers. This simple piece of information can be transformational.
Let’s take a closer look at a very simple lead to sale conversion number. Whether it is 5 leads to 1 sale (5:1) or four leads to one sale there is a big potential upside to your business.
Consider these three example dealerships.
Smith’s Small Cars Dealership. They sell 100 new and 100 used cars a year. They generate 1000 leads per year. Their conversion is 5:1.
Malcolm’s Middle Motors. They sell 400 cars a year (200 new and 200 used). They generate 2000 leads per year. Their conversion rate is the same as Smiths; 1:5.
Garry’s Grand Garage. They sell 1000 cars a year, 500 new and 500 used. You got it, they generate 5000 leads to sell 1000 cars.
There are two things to note – firstly the conversion ratio (do you know yours?) and the number of leads the dealership therefore has to generate to hit their sales target.
A quick check in with AutoPlay when working on this article, confirmed that the conversion rate being between 5:1 and 4:1 for New Zealand dealers.
Let’s assume for a moment that it costs you $20 per lead and therefore $100 per sale for all of these dealerships and your dealership. That would be a tough number to hit given the cost of TradeMe currently, however it should also be about right ($20-$25 per lead should be your target).
This means that Smith's marketing spend is 200 units x $100 = $20,000 (or 1000 leads at $20 per lead), Malcolm's is 400 units x $100 = $40,000 and Garry's 1000 units x $100 = $100,000.
The impact though of moving your conversion rate from 1:5 to 1:4 though is dramatic. If the lead cost is the same, then for the same total budget you will sell more cars (or conversely you can reduce your marketing budget).
With a 1:4 conversion, and the same cost per sale – CPS (but reduced CPL, cost per lead), Smiths would be 250 sales per year. That’s a 25% lift in sales performance, other things being equal. Malcolm's has decided to keep his CPL the same but spend less on marketing (i.e. a lower CPS). His total spend can reduce to $32,000, down from $40,000. Garrys’ keeps the same CPL but now sells 1250 cars for the same marketing spend.
Imagine what an improvement of 25% in sales volume would do for your business. Then imagine that these new and used cars were always cars you would service and sell parts to for the next 3-4 years (the last part is just about having a clear used vehicle profile and ensuring you focus on the brand you represent to also be the only vehicle you sell used).
Photo by dominik hofbauer on Unsplash
Of course, you say, it is all well and good talking about a lift of 25% but how do I achieve that? Here are 9 things you can do that will improve your conversion rate.
1. Create a dashboard in AutoPlay (or your Lead Management System) and measure your sales funnel every week. Look at leads generated and sales made.
2. Adopt the rule, "All Leads in AutoPlay (or your LMS) every time, always," because you can’t manage what’s not measured.
3. Ensure you don’t allow your sales team to ‘Close Lost’ in AutoPlay; ensure that they can only be closed by the sales manager.
4. Every week call 10 Closed Lost leads using a few key questions, to get a real feeling for how customers are being treated with respect to their sales enquiry (out of 5 how professional was the team, did they offer a test drive, did we do a finance quote, did the process feel genuine, was the trade in negotiation professional, did we follow up when we promised, what else could we have done?)
5. Mystery shop your dealership via email. This will give you a sense of the first impression that your business leaves with a new customer (I call it an ‘e-meet and greet’). I suggest getting two or three responses from ‘different’ sources and people.
a. Look at how professional the response is
b. Look for the ‘nudge’. That’s the guiding question or call to action that encourages the recipient of the email to respond / and or book a test drive.
c. Look at how quickly the email is followed up.
d. Ensure that any questions in the initial request for information have been answered.
6. Jump into AutoPlay and look for overdue or stalled leads. Aim for none.
7. Look at the Lead Efficiency Widget.
a. Sales with 0 or 1 contacts made (take a moment to think about that…) illustrate that AutoPlay is not being used properly by your team.
b. Most dealers will have a distribution like the illustration below (red bars), whereas the best dealers will have a distribution in a bell curve (represented by the green line).
c. Sales with 6+ contacts show polite persistence, which is mission critical to move the needle.
8. Ruthlessly interrogate your TradeMe listing data. Look at how many enquires, watch-lists and views each listing has had.
9. Aim to have the best TradeMe listings in your local area (quality and quantity of photos matter; descriptions tell the story of the car, accurate specifications). Make them great and don’t settle for average.
These pointers won’t be a magic bullet. But they will shift your dial. In this market every little helps, and the best bit – it is free.
Photo by dominik hofbauer on Unsplash
©2024 Boost Auto.
Boost Auto is an automotive consultancy working in seven main areas.
• Sales Training
• Sales and Marketing effectiveness for brands and dealers
• Market Insights & Trends
• Business planning and facilitation
• Operational Effectiveness
• Get Ready Automations
• Go To Market strategies for emerging brands.
You can contact us at hello@boostauto.co.nz
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