Importance of the Sales Appointment
The more things change in the automotive industry, the more things remain the same. The fact of the matter is 84% of shoppers still want a test-drive of their vehicle of interest before making a purchase. That’s right, only 1/6 shoppers is currently willing to fore-go the test-drive! A sales appointment is a critical component of your sales cycle whether you know it or not.
So, what’s your BDC team doing to get more appointments this month? And what is an appointment worth to your store? By calculating what an appointment is worth, you can start to put goal posts up for how to treat your prospects.
Calculating What a Sales Appointment Is Worth
Now that we know how important it is to calculate the value of appointment to your store let’s show you the math:
Value of a New Car Appointment =
Total Gross Profit On New Cars That Had Set Appointments
Total New Car Appointments
Value of a Used Car Appointment =
Total Gross Profit On Used Cars That Had Set Appointments
Total Used Car Appointments
Example: Optimizing Your Lead Mix For Performance
Let’s use an example “optimization instance”: Make a copy to follow along
Every dealership has different sources and tools they use to generate appointments. The key here is understanding their performance and ROI differences. From there, we can start to make intelligent decisions about optimizing our setup. In our example above, we list out all our tools like website providers and on-site widgets and also lead sources.
At the top, in green, we see the total cost, total appointments, and all the aggregated numbers. We can see with this dealership, their average cost per appointment is ~$90. Close rate on appointments is the other thing to look out for. Theirs sitting at 10% average. With these couple of KPIs in mind, we can start comparing which sources have the lowest cost per appointment and most ROI. We’ll explain both.
Calculating Cost of Sales Appointment
For cost per appointment, we simply divide the total cost by the number of appointments generated. While appointments that are cheap look awesome, sometimes the close rates on them are horrendous. Please watch out for this! We can see in the instance above, there are only 2 sources that are under the average $90 /appointment. Usually, this is something to be suspicious about.
Once we understand what our cost per appointment is by source, it’s important to calculate how much value was generated. Once we’ve got these two things, we can calculate the ROI, and start making some real moves. So how do we get the value of an appointment? First, we have to start off with our Gross Profit. Once you know the gross profit on new car appointments you simply divide that by the number of appointments you got. You’ll get your average value per appointment from this calculation, in our case $430, and you can use that number as a proxy for the value of an appointment moving forward.
Making Moves Based On Sales Appointments
To wrap this all up, we’re now to the point where we can make educated decisions about cutting or doubling down on sources. Use your averages as goalposts, and try to level up your mix by cutting out low performers. In our case, Lead sources #2 and #3 fell below the line and should be either renegotiated or terminated.
If you’re still reading, thank you for sticking with it. We hope you’ve got a good feel for how to analyze your sources now and improve performance as soon as today. If you’ve got any questions about how this analysis can be done for your operation, give us a call. We’d love to chat with you about best practices and answer any of your questions!