5 “Non-Inventory” Metrics Auto Dealer General Managers Must Understand
In order to run an efficient, profitable automotive dealership or dealer group, it helps to understand the following metrics in your business. We work with car dealerships to set appropriate benchmarks, put robust reporting in place and deploy world class data analysis tactics to help make great decisions and improve profitability.
Here are the numbers you need to understand:
Cost per lead
It’s important to understand each lead’s individual cost. Most third party lead sources make this very simple by invoicing you for the number of leads you received and charging $15-$30 per opportunity. However, dealers also need to understand cost per lead for other ad sources such as television, radio, print, events, and their own website. Too often, digital advertising is held to a “cost per lead” standard while all other advertising is evaluated based on anecdotal evidence and “feelings” (i.e. “I feel like we got busy when we started running that radio advertisement”). You should keep close track of the dollars invested in comparison to the lift in traffic you experience in order to get a true picture of your advertising effectiveness.
Closing rate, by source
Cost per lead is not the whole story, though. You also need to understand the closing rate, by source, in conjunction with the cost per lead metric. This is because your cost per lead only tells half the story. For instance, let’s say BlueSky leads cost $30 apiece, and Cars.com leads cost $20 apiece. It might appear, on the surface, that Cars.com is a more economical lead source and that a savvy internet manager ought to purchase as many of these leads as possible. However, there are plenty of other factors that should play into this lead mix decision, most importantly being the closing rate on the leads themselves.
Let’s say BlueSky leads close at 20% and Cars.com leads close at 10%. This means your dealership must purchase twice as many BlueSky leads to close a sale, and must allocate twice as many dealership resources. For many Business Development Centers, this means 7-10 phone calls, emails, text messages, and other forms of contact.
Dealerships with appointment-driven cultures spend a great deal of time monitoring “show rate” as an indicator of lead quality, phone call quality, and overall sales process. In our experience, a healthy show rate hovers roughly in the 65-70% range when spread across all lead sources.
A disproportionately high show rate could mean your Business Development Center is “cherry-picking” and missing opportunities to set appointments with people who represent great sales opportunities. We see artificially high show rates when BDC reps are not willing to chase lower quality leads for fear that their show rate will suffer.
A disproportionately low show rate could mean your Business Development Center. is not taking the necessary steps to get customers to the finish line. They might not be providing ample information to make customers feel comfortable about visiting your dealership, or they might not be confirming appointments.
ROI by ad source
In order to truly understand your best advertising sources, you must have a clear picture of each source’s return on investment. Unfortunately, this metric can be incredibly unclear since customers visit multiple websites prior to making a purchasing decision. Multi-touch attribution can be helpful in determining which of your advertising sources are bringing value, and should therefore be scaled, and which ones should be scaled back or eliminated.
Ad cost per transaction
How much does your dealership spend, in advertising dollars, to sell a vehicle? And how is that advertising spend allocated between digital, TV, radio, print and other types of media? These are important questions. But the most important factor is to determine which ad sources are actually driving the traffic and which ones need to be eliminated or optimized. For too long, auto dealers have used “gut feelings” and anecdotal data to make advertising decisions. “It feels like we’re busier when we run TV ads” or “Had a guy come in yesterday and mention the ad so I know it’s working” are common statements among automotive management teams. But do “busier” and “working” justify the investment made? It’s impossible to know the answer to this without true data tied to actual customers in your showroom.
How to get it all in one place, with expert interpretation to help you take action and get results
Exigent Digital brings you intuitive dashboards and expert level guidance to help you make the best decisions on a daily basis. Our team has decades of experience in data analysis and can not only present your data in an easy-to-understand format, but also can provide you with guidance as to how to put that data to best use.
It’s not just about the data
Take this popular chart, for instance: “Site Sessions Generated By Source.” This chart would lead many managers to believe that “Display” is one of the most valuable sources of site traffic, and that social media and direct traffic are relatively insignificant. However, our team of experts would look behind this immediate data to truly understand what is happening. Some of our questions would be:
- How much was spent on each source during the given time period?
- What is the conversion rate of each source?
- What is the cost per conversion of each source?
- What is the average bounce rate of each source?
- What is the average cost per sale of each source?
- Which ad is bringing the bulk of traffic to each source?
- What time of day is each of these sources most likely to generate traffic?
- Is the traffic primarily coming from mobile or desktop?
- Does the traffic have intent, or did it land on our advertising by accident?
- If lower-traffic sources have relatively high conversion rates, is there opportunity to expand those sources for more conversions?
How to get started
If you want to have a better understanding of your own data, along with the ability to take action on that data with expert advice and guidance, contact us here for your free consultation.