It seems to make sense on the surface: The more sales leads you have, the more likely you’ll be to convert some of those leads into sales. That’s not the way it often works in practice, however, say several experts on the front lines of the sales battle. Instead, they insist there is a law of diminishing returns beyond which additional leads can actually hurt rather than help dealers intent on closing sales.
“I’ve sat with plenty of salespeople who have to sift through a high volume of internet leads,” says David Kain, president of Kain Automotive, a dealer consulting and training firm. “They receive 100 leads and then close 15 of those leads, but that means they’re also hearing the word ‘no’ 85 times. That can get demoralizing after awhile. Increasing the ratio of ‘yes’ to ‘no’ energizes the sales force and helps salespeople stay focused. It also helps them love their jobs a little more — an important objective in any sales context.”
David Metter, chief marketing officer at MileOne/Atlantic Automotive in Maryland, agrees. He consults with salespeople in the company’s various divisions to determine what effect a reduced number of leads might have.
“I will typically ask one of our sales managers a simple question: If I remove 500 leads from your mix, will you still be able to sell as many vehicles?” he says. “Most of the time, the answer is yes, providing we remove the right 500 leads. Taking some of the noise off the table allows them to communicate with the remaining shoppers quicker, identify which ones are really in-market versus just starting their search, and ultimately present the hottest leads with something that compels them to come into the store. In short, they’re able to provide a better customer experience, which increases their success rate dramatically while helping the dealership build customer loyalty – which, of course, impacts repeat business.”
Define the ’Magic’ Number
Sure, you say, it’s easy to say you want quality over quantity. But what exactly is that point of diminishing returns? What is the correct volume of leads per salesperson that will maximize sales without overburdening the sales staff?
While all the experts we contacted seem to be in the same general range, there really is no one magic answer. Much of it is conditional as well.
For example, Metter says that the accepted industry average for the number of leads a salesperson can manage at any one time is 100 to 115. He believes that number is both too high and too low.
“For a salesperson taking in the lead, contacting the customer, enticing him/her into the store, and then trying to close the sale, 80 is probably a better number – if it’s the right 80 leads,” Metter explains. “With that number the salesperson should be able to sell 15 to 20 cars per month. The number changes dramatically, though, if the person making contact is working in a business development center and then handing the lead off to someone else in the showroom. In that case, that person should be able to handle up to 150 leads.”
Steve Stauning, ecommerce director at Asbury Automotive Group, says his company found that fewer leads led to more sales.
“When we began to check for patterns, we noticed that those stores with both the highest closing percentage and greatest number of sales per person also handled smaller lead counts,” he says. “Our top stores were selling twice the number of vehicles per person with half the lead counts of our lower-performing stores.”
That revelation has led to a reparsing of leads as they arrive. Asbury now staffs its stores based on more manageable lead counts.
Michael D. Capps, internet director for Goodson Auto Group in Houston, says 90 to 100 leads seems to work best for his team.
“In the early days of internet leads, we’d have as many as 150 per salesperson,” he says. “We thought the more leads the better, but we found we couldn’t really service the customers as well and really get to know them the way we should. By dropping the number back to 90 to 100, we found we’re selling as many or more vehicles and doing a better job of it. Our conversion rate is higher, too. It’s all about efficiency.”
Understand What Drives Lead Quality
We’ve talked a lot about the importance of generating smaller numbers of better-quality leads. But even within that thought there are differences between used, certified pre-owned and new vehicles.
Quality leads on used vehicles tend to have higher closing rates than new because someone inquiring about a used vehicle is interested in the vehicle – e.g., a red 2007 Honda Accord with 32,000 miles and certain accessories – whereas new-car shoppers are looking more at a type of vehicle (one of many red 2008 Honda Accords with a variety of trim packages).
“Used vehicles are a lot like the online site Match.com for dating,” Kain says. “You’re selecting someone/something in particular from the existing inventory, and each is unique. New-car buying is much more vague. The customers may have a set of parameters, and they may even be very specific. But they usually have several options of where to get it because the supply of matches is more plentiful.”
The growing acceptance of CPO vehicles among consumers has added another wrinkle. They have had a distinct effect on new vehicle sales, brand loyalty and even store loyalty. According to the November 2006 Certified Pre-Owned Consumer Awareness and Purchasing Behavior study by Cars.com and Experian Automotive, customers on in-market sites such as Cars.com may come in looking for a new vehicle, particularly a higher-end brand, only to find that it’s outside of their price range. But if they can find a CPO vehicle that closely matches what they were looking for at the same store, they’re highly likely to make that purchase.
It also works the other way. Customers who come in open to a CPO vehicle may find that the price difference between CPO and new is small enough that they will pay the premium for a new vehicle.
In the end, the quality of the lead is driven by several factors, including the type of lead and the source. It is important for dealers to understand which factors drive their sales in order to determine which will yield the best results — and thus deserve the most attention.
Create the Optimal Scenario
While there are many reasons to prefer quality over quantity, two factors stand out for all the dealers that spoke to us: having a happier, more satisfied and more productive sales staff and providing an outstanding customer experience.
“The ideal salesperson is someone who loves what they do, is a very talented and progressive individual who’s willing to go the extra mile to personalize phone calls and emails and understands what the customer really wants,” says Kain. “When you have that, the rest is about getting the process in place. Providing an optimal number of high-quality leads, rather than a large number of leads that are all over the board. That is what truly drives success.