Internet Close Percentage Math - Two Formulas?

[Dan Sayer]

Those of you familiar with the path of "Internet Sales" over the last 20+ years, whether Retail or Vendor, probably have a single KPI that sits atop your reporting: Internet Lead Close Percentage. This one metric has been the center of debate among the "nerd" department in dealerships for decades. I'm not going to get into the typical retail arguments that sway topics of Internet close rates like, "That's not a Good lead, they didn't buy, don't count it," or "That's an Internet lead because they called from AutoTrader," or my favorite, "Can you delete this lead, they're unrealistic about their trade".

But let's talk about a particularly elusive math puzzle that still baffles many: Sold from Leads or Sold in Timeframe. In full disclosure, I've been calculating Internet Close rate by the latter since 2001. Internet Leads Sold in timeframe divided by Lead count within same timeframe. I didn't even know of the "Sold from Leads" math until I joined a dealer group with Ford stores in 2010. Some "Internet god" in a suit and tie from FordDirect would come with Internet Close Rates for our month. His numbers never matched ours PLUS prior months seemed to change ongoing. It took a couple of visits before he and I figured out we were doing different math. FordDirect, at the time, was using and defending "Sold from Leads". I think they've since shifted to "Sold in Timeframe"? Ford "Internet god", you still out there?

Breaking it down...

Sold from Leads (old FordDirect, VinSolutions option, DriveCentric Standard Reporting default are the ones I know)
10 Leads in October
1 Sold from those 10 Lead names = 10% Close Rate

10 new Leads in November plus still working the 9 names from October that didn't buy
1 Sold in November but it was one of the October names
0 Sold from those 10 Nov names = 0% Nov Close Rate BUT
October Close Rate is now 20% because 2 names in the October lead bucket of 10 sold.

Sold in Timeframe
10 Leads in October
1 Sold from those 10 Leads = 10% Close Rate

10 Leads in November plus still working the 9 from October that didn't buy
1 Sold in November but it was one of the October names
1 Sold in November (doesn't matter how old it is) and had 10 Leads in November = 10% Close Rate
October Close Rate stays 10% (and will never change) and now November Close Rate is 10% as well.

In the Sold from Leads example, past Internet Close Rates can change. Imagine reviewing salesperson performance and coaching a rep based on their 10% close rate at the end of Oct. In November, they now show a 0% for month end. How do you coach that? "You sold one but it didn't count on your KPI this month. You were at 0% in Nov but good job on getting Oct to 20%!"

This entire topic has been revived in my mind because I learned that DriveCentric actually has Sold from Leads as their core math on their Standard Internet Report. I'm 5 of 7 stores into a CRM change (and very happy about their CRM overall). Their language for Sold from Leads is "Fixed" and their language for Sold in Timeframe is "Rolling". Thankfully, we CAN have them flip that switch within their custom reporting to "Rolling". VinSolutions provided both equations within reporting and you could just select the one you want but their default on Coaching Dashboards was Sold in Timeframe.

So, dear Internet Sales enthusiasts, what's your poison? Sold from Leads or Sold in Timeframe? If you're out there bragging about your Internet Close Rate in peer groups, make sure you know what mathematical sorcery you and others are using so you can be on the same page.

@Alex Snyder and @Jeff Kershner I tried to launch this as a Poll but no go....?

 

[Alex Snyder]

@Alex Snyder and @Jeff Kershner I tried to launch this as a Poll but no go....?

Yeah, the plugin that shows all the latest activities at the top of the forums page breaks the polls. Support for that plugin stopped years ago, but we like it too much. One day we will have to let it go.

Back on topic: my vote is for leads received this month vs. sales made with attribution to those leads = closing ratio. It isn't a moving number unless you messed up the reporting.

 

[Dan Sayer]

Yeah, the plugin that shows all the latest activities at the top of the forums page breaks the polls. Support for that plugin stopped years ago, but we like it too much. One day we will have to let it go.

Back on topic: my vote is for leads received this month vs. sales made with attribution to those leads = closing ratio. It isn't a moving number unless you messed up the reporting.

"made with attribution to those leads" meaning only counting sales from the names in those leads?

 

[Alex Snyder]

"made with attribution to those leads" meaning only counting sales from the names in those leads?

It takes multiple impressions to get a conversion. So, I attribute multiple advertising sources (lead providers too) to a single sale when I know which ones are involved.

 

[ryan.leslie]

So, dear Internet Sales enthusiasts, what's your poison? Sold from Leads or Sold in Timeframe? If you're out there bragging about your Internet Close Rate in peer groups, make sure you know what mathematical sorcery you and others are using so you can be on the same page.

Hey Dan - hope you are doing well!

Foureyes tracks it both ways too. I reached out to my Solutions Engineer for color. Here is his response:

Different calculations have different purposes. They shine a light in different directions if you will.

- "Sold from leads" or what I call "raw close rate" is valuable for understanding your pacing and overall store performance "right now" aka this month.

- "Sold in timeframe" which we have as a 7, 30, 60, or 90-day close rate is the better indicator of process quality and evaluating a lead source over time.

It takes multiple impressions to get a conversion. So, I attribute multiple advertising sources (lead providers too) to a single sale when I know which ones are involved.

Agreed @Alex Snyder! We have been doing a TON of consultative work with our dealer partners of late to help them understand ROI... Return On Influence. "There is no consummation without an introduction."

It's the end of the year, economic factors have some worried... many Dealers are in cut mode. They print a report from the CRM and draw a cut line based on "close rate." Anything under the line gets the 30-day notice. I strongly advise against this.

I'll give one quick reference and a data point to consider.

How many leads in your CRM are attributed to your chat tool? Do you think consumers visit your website BECAUSE you have a chat tool? One of those vendors on your cut list is likely responsible for that lead. They may be responsible for DR leads, organic leads, finance apps etc.

The team at Foureyes reviewed data for 1500 dealers recently to put a number to the inherent risk of pulling a report and making a cut line. Check this out:

Customers referred by a third-party marketplace are 17.4% more likely to close than the average website lead.

If you aren't accurately tracking referral traffic from marketplaces at the lead level, a cut line is likely to be cutting your profits.

 

[Dan Sayer]

@ryan.leslie and @Alex Snyder turn your vendor brains off for a second and focus on down to the retail Salesperson level. We track their performance based on sales and how well they convert the opportunity given to them (30-day rolling). They don't care about ROI or attribution and they all get an even mix of sources. Using the Breakdown examples, if you were measuring the success of a salesperson working Internet leads, how would you measure their close rate? Everything they sold in the last 30 days divided out by the count of leads? Or, everything they sold in the last 30-days but only if it was part of the leads counted in the last 30 days?

 

[Ryan Everson]

We primarily use and report on Sold in Timeframe, but still have Sold from Leads available as a hidden column in our reporting.

However, we are in the process of migrating from Vinsolutions over to DriveCentric, so this post comes at the perfect time and you've given me some homework!

 

[Dan Sayer]

We primarily use and report on Sold in Timeframe, but still have Sold from Leads available as a hidden column in our reporting.

However, we are in the process of migrating from Vinsolutions over to DriveCentric, so this post comes at the perfect time and you've given me some homework!

Let me know if you have questions about the transition @Ryan Everson

 

[Rob]

Sold in timeframe is the only right answer here, and there’s just no gray area.

I cannot live in a world where past month metrics change until the end of time. It’s insanity.

 

[Alex Snyder]

@ryan.leslie and @Alex Snyder turn your vendor brains off for a second and focus on down to the retail Salesperson level. We track their performance based on sales and how well they convert the opportunity given to them (30-day rolling). They don't care about ROI or attribution and they all get an even mix of sources. Using the Breakdown examples, if you were measuring the success of a salesperson working Internet leads, how would you measure their close rate? Everything they sold in the last 30 days divided out by the count of leads? Or, everything they sold in the last 30-days but only if it was part of the leads counted in the last 30 days?

I did not use my vendor brain to answer you. This is how I did it at Checkered Flag and how I do it to measure our own advertising at FRIKINtech.

But you're now asking about salespeople.

Other than attribution, I don't think there is a difference in measuring. I would measure a salesperson's close rate based on how many NEW customers (leads/opportunities) they worked vs. how many deals they sold in that calendar month.

@Rob stated it simply.