How many of your leads are actually converted to closed deals? If you could do a slightly better job at lead conversion, what effect would that have on sales? Do you have a standard lead-conversion process in place? The answers to these questions have haunted many dealership managers. Let’s take five steps toward examining the lead-conversion process and try to determine what we can do to improve it at your dealership.
1. Identify the problem
Most dealerships focus on processes for lead generation and never take the time to work on lead conversion. This problem is not unique to our industry. Michael Gerber, author of The E-Myth Revisited and numerous other books, has been working on this problem for more than thirty years.
2. Find the solution
In his books, Gerber explains that businesses should implement processes and procedures throughout their operations, the way McDonalds has done with its franchise system. The ‘E’ in E-Myth stands for “entrepreneur.” The myth is that an entrepreneur who is really good at building widgets also must be able to build a successful widget company. Gerber has done years of research and found that successful entrepreneurs must have expertise in seven critical areas of running a business. One of those critical areas is lead conversion. In fact, he feels that a complete lead-conversion process must be in place before any money is spent on lead generation.
3. Follow the lead-conversion process
Many working parts comprise the lead-conversion process. For this example, we will use the best-known metrics: You will set appointments with 50 percent of your leads; 50 percent of those appointments will actually show up, and you will sell a vehicle to 50 percent of those who show. Using these metrics, you should sell 12.5 percent of your leads. Now, we all know that this does not apply to every type of lead. There are lead sources from which you are lucky to sell 3 percent. Even so, it’s a starting point for our example.
4. Map out your process
If you are about to take a road trip, you must know the starting point and the end point. Once you know where you are, you can set goals for where you’d like to go. You’re going to need good CRM software that ties all of the processes together and tracks results. Small increases in each step in the lead-conversion process can create big increases in sales.
For example, if you increase the number of appointments set from 50 percent to 60 percent, but see no improvement in your appointment/show percentage or show-to-sale ratio, your overall leads-to-sales ratio would increase from 12.5 percent to 15 percent. If you were to also increase the percentage of shows to 60 percent, your overall leads-to-sales ratio would increase to 18 percent. Taking your leads-to-sales ratio from 12.5 percent to 18 percent means that you have increased sales by close to 50 percent. Are you getting excited?
5. Look for opportunities to change the process
In most cases, appointments are set with a salesperson. If the salesperson can’t close the deal, the customer is turned over to a manager. What if the appointments were set with a manager? They could complete the meet-and-greet before turning the customer over to a salesperson.
This may help sales in a number of ways. First and foremost, the consumer feels important. They’re meeting with a manager, which is an appointment they’re less likely to break. Hence, you’ve already improved your appointment ratio and show ratio. You also have a better chance at closing the deal: By that time, the manager already has a relationship with the customer. You can also increase the show ratio by having the manager make an appointment confirmation call. During that call, the manager should let the consumer know that he has cleared his schedule for their appointment. Wouldn’t you agree that a consumer is more likely to show for their appointment if they know that a manager has “cleared their schedule” for them? Send us an e-mail, and we’ll be happy to send you some sample scripts for this type of call.
These are just a couple of examples, but I’m sure you can see how making a few changes to your lead-conversion process can greatly increase sales. Proper processes will always increase sales and profits. McDonalds is built on processes, and it has only lost money during one quarter after more than 50 years in business. Good luck and good selling!
Denny Long is senior vice president at Dealer Marketing Services. E-mail him at [email protected]
Part 2 of this article can be found here.