Fire Him. Wait. Give Him a Raise.

by David Tingley on March 25, 2012

You're Fired

 

“My dealership has a closing ratio of 5% on leads. Is my Internet Sales Manager doing a bad job?”

 

“That depends. Tell me more.”

 

 

Early in my career, while working as a service manager at a Honda dealership, I was introduced to Performance Group composite statements. Although I don’t recall exactly what the hours per (retail) repair order was at our store, I do remember it was not as high as it needed to be.

Long story short, we eventually increased our numbers by coming up with additional products and services to sell our customers.

I later learned there were other stores who improved the numbers simply by raising the price of an oil change so high, price sensitive customers stopped showing up.

Higher hours per R.O. by driving away o & f business? Hmmmmm…

The experience got me interested in studying “numbers.” I learned it’s wise to dig deep before drawing any conclusions from just one metric.

 (30 years ago, you didn’t see a Quick Lube on every street corner. I wonder how much our industries collective focus on hours per R.O. had to do with that?)

How does this story from the 80’s relate to the closing ratio of Internet Leads today?

I’ve observed three ways Sales Managers alter their “reported” closing ratio on Internet leads;

 

 1) Close more Internet leads.

 2) Only count those leads deemed “real”

3) Reduce the number of “low value” leads at the source. (Or rather, leads perceived as low value).

 

The first option is obviously preferable.

The second is not uncommon.

The third…

Keep in mind, one of the ways dealers measure the performance of Internet Sales Managers is the closing ratio on Internet leads.

What I’m about to say may seem more than a little counterintuitive;

“Some of the most successful car dealerships today have, (or had), exceptionally low closing ratios on Internet Leads compared to stores around them.”

“Closing ratios on Internet leads are meaningless unless taken in context with the number of leads received and the quality of those leads.”

Consider this;

If you had an event sale at your dealership that brought in 200 more ups than you normally would see over a weekend, you would consider that a success.

If the closing ratio was low you might say something like;

 “We were too busy to handle all the traffic.”

What you would not say is;

“Fire the manager who figured out a way to get all those incremental people to the store.”

(You might instead end up giving the manager a raise).

 

What should the closing ratio at your dealership be on Internet leads?

If you receive 50 leads a month and only close 5% of them, you have a problem. (Actually, more than one).

If you receive 500 leads and close 5%, that’s a completely different situation.

In my experience, the stores getting a lot of Internet leads, (who also have closing ratios rivaling that of sales calls and ups), all had low closing ratios in the beginning.

(It makes no sense to shut down a sale in the middle of the day just because your team is overwhelmed with traffic and people are leaving the lot before they talk to a salesperson).

 

Bottom line;

Having a high closing ratio on Internet leads is important, so is continually filling the top of the sales funnel with new prospects.

Which do you think is more important?

The more opportunities there are to get it wrong, the more opportunities there are to learn how to improve.

By the way, it doesn’t take an Actuary to figure out where your closing ratio should be.

You just have to ask the right questions.

We can help with that.

 

David Tingley

Comments

comments

{ 2 comments… read them below or add one }

Mike Nelson March 25, 2012 at 6:09 pm

So true! The solution is not driving more leads it is doing a better job with the ones you get. Well said.

Arthur March 26, 2012 at 2:40 pm

I like “closing ratios on Internet leads are MEANINGLESS unless taken in context with the number of leads received and the quality of those leads.” So true!

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