There is a reason for everything and metrics always tell the story. If you measure all the key aspects of your business, compile the data and can understand the language in which they are written, you will have a wealth of information about your business. You’ll know how it’s performing, and you will know exactly what you need to improve sales and/or profits. Knowing the metrics for your dealership is critical for success. Without them, running your business is like flying a jet without any gauges. You would have no way of knowing your altitude, heading, airspeed or location, and if you encountered bad weather, you would probably crash.
The same holds true when purchasing Internet leads, hoping to boost sales. If you don’t manage the metrics and follow a set process, these leads will be an incredible waste of time, money and effort, regardless of the source, and your sales staff will view them as garbage and pitch them to the bottom of the priority pile. Internet leads, however, can be a great sales stimulant if they are handled correctly and are followed up on consistently. The difference between a 10:1 return on investment and a 3:1 return on the investment made when purchasing Internet leads is most often due to process.
The national average for converting purchased Internet leads into sales is roughly 3 percent, but almost every dealer with a set process for managing the leads will experience an 8 percent to 10 percent conversion rate. The reason for the difference is usually centered on a set sales process with 100 percent accountability for every lead. The first step to success with Internet leads is to measure the sales metrics. The rule of thumb to remember is based on five numbers, 10:6:3:2:1. These numbers represent a series of interrelated ratios to which you can measure and compare the effectiveness of your store at converting Internet leads into sales, and you can also measure and rate each lead source provider for quality.
Basically, for every 100 leads purchased you should contact 60 legitimate prospects who are still in the market for an automobile. You should set appointments with at least half of those prospects for a total of 30 appointments set per 100 leads purchased. Then, you should expect two-thirds of the set appointments to actually show up to the dealership, and sell half of those . Out of 100 leads, 20 appointments should show and you should sell 10. Remember, this is just a rule of thumb and these numbers will vary month to month and from dealer to dealer. The important thing is to track these ratios every month, so you can measure the effectiveness of your sales team and identify trends.
If you are not setting appointments with at least half of the legitimate prospects you contact, there may be a problem. For example, I have a client who has been purchasing leads from three different sources over the last six months and regularly converting 9 percent into sales.
Out of nowhere, he called me screaming that the leads were terrible and wanted to know what the provider had done to cause his conversion ratio to drop below 3 percent. We pulled out the tracking sheet, reviewed the metrics and identified one trend. His appointment-set ratio that had always been between 52 percent and 56 percent suddenly dropped to 28 percent, so we looked further into the process. What we discovered was that one of the two call center coordinators was setting appointments with only 19 percent of the prospects they contacted. The other was setting appointments at a 64-percent rate.
After looking deeper for the cause, we learned that the coordinator with only a 19-percent ratio decided unilaterally to make some minor changes to the outbound call script. He eliminated the confirmation number wording because he thought it sounded “hokey.” Once we corrected the overeager coordinator and replaced that hokey little phrase, the appointment-setting ratio for the store immediately jumped back up to 55 percent.
That simple little mistake wasted approximately 125 leads over a three-week timeframe, $3,125 in lead cost, and at least $25,000 in missed sales. Without the metrics, I may have agreed with the dealer and just eliminated the leads all together and invested the advertising money into something with a higher return.
I mentioned earlier that the national average lead sales conversion is just over 3 percent (3 sales per 100 leads), but dealers who accurately measure the metrics and have a set process for tracking and managing the leads can expect an 8 to 10 percent conversion. Benchmark dealers on the other hand experience a 15 percent sales rate month after month because they have perfected the process, stick to the phone scripts, manage the metrics week to week, and do not randomly assign the leads to salespeople.
Let’s do the math and compare. If we factor the average gross profit per vehicle sold at $2,500 and the average cost per lead at $25, those dealers who experience a 3-percent conversion will generate $7,500 from the initial investment of $2,500. Many think that’s good enough. However,, dealers who convert 10 percent will generate $25,000 for a 1,000 percent ROI and benchmark dealers will earn $37,500 from the same investment for a 1,500-percent return. Venture capitalists anywhere in the world would jump all over an opportunity that presented that type of return. Is it luck? No! It’s due to metrics, process and accountability.
In order to reach benchmark numbers, a dealer must religiously follow these five fundamentals when buying Internet leads.
1. Track and manage the performance metrics weekly.
2. Diversify the number of lead source providers to at least two and preferably three different vendors who perform well in your market.
3. Methodically adhere to the phone scripts for all calls made, including those for which you leave a voice mail.
4. Immediately respond to the prospect’s lead with a personalized e-mail followed up by the initial phone call. You have 15 minutes to contact them or your competition is going to reach them first.
5. Train the staff thoroughly on the sales approach and enforce a strict selling process for which there is 100 percent accountability for every lead purchased.
Buying Internet leads can be a very rewarding venture that provides a much-needed boost to sales. But, it is a very competitive industry today and many markets around the country are sold out. There are no more leads available to purchase. However, don’t give up. There are so many dealers in the 3-percent club that there is plenty of room for improvement, and the demand is not being met. So many of these special finance prospects have been contacted by unprepared, fast-talking salespeople that they have become jaded by the process and are very leery of car dealers. A dealer who can offer a viable solution to the customer’s problem, measure sales metrics and stick to a routine sales process with accountability, will absolutely excel with Internet leads and quickly eclipse the competition.
Special finance is still the fastest-growing segment of the automotive market, and since we live in the information age, the fastest way to reach new prospects is through the Internet. People who have credit problems, especially those whose problems are recent, shop at home and research their options online. It’s safe and there is absolutely no risk of embarrassment from being turned down for a loan in an F&I office. Our job is to find these customers and present them with a real message that they believe and then deliver on that message and exceed their expectations in every way.
Don’t fly by the seat of your pants. Instead, measure everything and do so consistently. Inspect what you expect! Know what’s going on in all areas of your business, in your market, and in the industry. And then, make informed decisions that impact operations. When you have accurate information that you can review on a regular basis, the answers to your questions and the solutions to your problems become crystal clear.
Vol. 2, Issue 3