3 Numbers Every Dealership Should Know

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.


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 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.

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 mwalkerx@gmail.com

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


3 Numbers Every Dealership Should Know

More Related Content

What's hot (20)

Similar to 3 Numbers Every Dealership Should Know (20)

Recently uploaded (20)

3 Numbers Every Dealership Should Know