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3 Numbers Every Dealership Needs to Know
                                       Essential 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.

© 2013 n-FLUENTS Information Solutions, LLC
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.

© 2013 n-FLUENTS Information Solutions, LLC
Lead Cost per Sale as a measure of
  Advertising Cost:
      Except for three states where it is
       illegal, lead providers normally                       Lead Cost per Unit Sold
       charge on a per lead basis.*
                                               Close Ratio   3%       4%        5%
      Actual cost/lead is irrelevant.         $18/Lead      $600    $450       $360

      What matters is the total advertising   $20/Lead      $667    $500       $400
       cost per unit sold.                     $24/Lead      $800    $600       $480

      Cheap leads that close at 3% are            Assumes 100 leads / month
       actually more expensive than 5%
       closing leads that cost 33% more.           *Lead providers have ways to get
                                                   around price per lead prohibitions.
© 2013 n-FLUENTS Information Solutions, LLC
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.
© 2013 n-FLUENTS Information Solutions, LLC
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?”
© 2013 n-FLUENTS Information Solutions, LLC
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 mwalkerx@gmail.com

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




© 2013 n-FLUENTS Information Solutions, LLC

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3 Numbers Every Dealership Should Know

  • 1. 3 Numbers Every Dealership Needs to Know Essential Metrics for Automotive Retail in the Internet Age © 2013 n-FLUENTS Information Solutions, LLC
  • 2. 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. © 2013 n-FLUENTS Information Solutions, LLC
  • 3. 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. © 2013 n-FLUENTS Information Solutions, LLC
  • 4. Lead Cost per Sale as a measure of Advertising Cost:  Except for three states where it is illegal, lead providers normally Lead Cost per Unit Sold charge on a per lead basis.* Close Ratio 3% 4% 5%  Actual cost/lead is irrelevant. $18/Lead $600 $450 $360  What matters is the total advertising $20/Lead $667 $500 $400 cost per unit sold. $24/Lead $800 $600 $480  Cheap leads that close at 3% are Assumes 100 leads / month actually more expensive than 5% closing leads that cost 33% more. *Lead providers have ways to get around price per lead prohibitions. © 2013 n-FLUENTS Information Solutions, LLC
  • 5. 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. © 2013 n-FLUENTS Information Solutions, LLC
  • 6. 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?” © 2013 n-FLUENTS Information Solutions, LLC
  • 7. 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 mwalkerx@gmail.com  n-FLUENTS Information Solutions, LLC is dedicated to optimizing performance through information, analytics and technology. © 2013 n-FLUENTS Information Solutions, LLC