October 10/17, 2016: Volume 31, Number 9
By Jim Augustus Armstrong
(First of two parts)
“Whenever I hear dealers claim closed sale ratios of 70% or 80% I don’t believe them because the national average is only around 35%.”
I was on the phone with a floor dealer who needed help closing more sales. He made this statement after I told him about dealers who are getting very high closed sale ratios.
“You don’t need my help to be average,” I told him. “You can accomplish that all by yourself. You’re speaking with me so you can learn how to blow the doors off ‘average,’ right?” And hopefully that’s why you’re investing time to read my column and this publication. Our mission is to help you do far better than average, not just in sales but in every area of your business.
The first step to blowing the doors off sales averages is to let go of a limiting mindset that says average is the best you can hope for, and commit to learning how to do better. The second step is to implement strategies and principles that will enable you to do better than the herd of average dealers. Let’s look at one of the most powerful strategies for making this happen.
Shift your dealership towards repeat and referral customers. I was speaking with a dealer whose sales team had a 32% close ratio, but his personal ratio was closer to 70%. Why? Because he mostly dealt with repeat and referral customers. I recommended he begin marketing to his past customers and create a referral program in order to drive more repeat/referral business to his team.
Making this shift is the single most effective thing you can do to increase your closed sale ratios. Every dealer knows how much easier it is to close repeat and referral customers, yet few of them have an on-purpose marketing plan to increase this segment of their business.
By making this shift you can increase your revenue without spending another dime in advertising. Let’s say you rely heavily on cold advertising, which generates leads who are mostly strangers, and as a result you’re closing three out of 10 leads. So you direct a portion of your advertising budget to market to past customers, and a portion towards a referral program. As a result a lot more leads consist of people who already know you, like you and trust you. Your close ratio increases from three in 10 to four, thus increasing your revenue by 30% without increasing your ad spend.
My good friends Scott and Sally Perron launched 24-7 Floors in Sarasota, Fla., in October 2014. Their business model relies heavily on generating repeat and referred business. They market to past customers and referral partners with a monthly printed newsletter and with a weekly email newsletter. In their first full year in business they did over $700,000, most of which came from referrals through networking. Their close ratio for all leads is currently 48.5%, a third higher than the national average. For estimates, their close ratio increases to 67%. These numbers are impressive considering how new their business is, and are a direct result of being referral-driven. Once they reach the five-year mark their repeat business will begin to snowball because of their robust past-customer marketing, and their close ratios will likely increase.