3 numbers every dealership should know

3 Numbers Every Dealership Needs to KnowEssential Metrics for Automotive Retail in the Internet Age

© 2013 n-FLUENTS Information Solutions, LLC

3 Numbers Every General Sales Manager Needs to Know

The doldrums of January – February are the perfect time to assess sales performance for last year and make changes before demand thaws in the spring. Consider these metrics:

• Close Ratio to measure individual salesperson success.

• Lead Cost Per Sale to evaluate Internet lead sources.

• Net Promoter Score to measure customer satisfaction.


Close Ratio as a measure of individual salesperson performance: Eliminate duplicate leads from the same customer.

For salespeople who take only Internet leads, calculate Close Ratio as the number of closed sales from Internet leads ÷ the number of Internet leads.

Allow enough cycle time for leads to close. We know that about 40% of leads that result in a sale do so within about 40 days, but only about 2/3 of those leads close within 90 days. Most will close within 180 days.

So, calculate Close Ratio each month as a trailing six month average of sales divided by leads, and favor your stronger closers for better yield.


Lead Cost per Sale as a measure of Advertising Cost: Except for three states where it is

illegal, lead providers normally charge on a per lead basis.*

Actual cost/lead is irrelevant.

What matters is the total advertising cost per unit sold.

Cheap leads that close at 3% are actually more expensive than 5% closing leads that cost 33% more.


Lead Cost per Unit Sold

Close Ratio 3% 4% 5%

$18/Lead $600 $450 $360

$20/Lead $667 $500 $400

$24/Lead $800 $600 $480

Assumes 100 leads / month

*Lead providers have ways to get around price per lead prohibitions.

Net Promoter Score as a measure of Customer Satisfaction Healthy, organic growth in any enterprise derives from satisfied customers

who generate the most cost effective form of advertising, “Word of Mouth.”

Ask “Would you recommend us to family and friends?” on a 0 – 10 point scale. The number of points is critical, and a high % in the 9-10 range, ideal.

Survey as many customers as possible to ensure enough replies to let you go back to those who rate you below 8 to diagnose problems among a large enough sample to get definitive answers. Fix what is broken.

For more information, see www.hbr.org “The One Number You Need to Grow” by Frederick F. Reichheld.


A Note about Performance Measurement Virtually all good performance measures are ratios, e.g.,

“sales/lead” or more generally “sales/up” “lead cost/sale” or more generally “ad cost/sale” “net promoters” = customers rating 9-10/total customers surveyed.

I call these “worth” ratios in the sense that they measure value/cost. Another one you already watch is return/investment.

Every one of these measures implies an opportunity cost, e.g., “What is the cost of routing one more lead to an over-burdened high performer who will not follow through vs. a hungry low performer with time and motivation?”


In Closing I hope you found this deck useful.

Please feel free to comment on my Linked In account at: www.linkedin.com/in/mikewalkermba

Or you can contact me directly at [email protected]

n-FLUENTS Information Solutions, LLC is dedicated to optimizing performance through information, analytics and technology.


3 numbers every dealership should know

Automotive

lead providers

lead basis

lead prohibitions

close ratio

leads month

number of internet leads

internet lead sources

cheap leads