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Cost of a conversation

Alex Snyder

President Skroob
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May 1, 2006
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I stumbled across an old email from @john.quinn about the cost of a conversation based on some NADA numbers and Driven Data stats from @jon.berna. Thought I'd share it to see if it sparks any thoughts.

  • The average dealer spends around $7,500 acquiring leads (3rd party sources, website plugins, marketing, etc.)
  • The average dealer gets around 300 leads from these efforts
  • The average dealer engages around 16% of their leads

300 × 16% = 48 engaged leads... also known as "conversations"
$7,500 ÷ 48 = $156.25 per conversation
 
It isn't pretty out there, Jim. @jon.berna has been showing a decline in closing rates year over year. Last we spoke about it closing rates were headed into the 5% territory on all internet leads.

But let's say there is still the standard 7% a lot of companies still claim. That would mean 21 of the 300 leads sold for a $357.14 cost per sale just on the lead acquisition side. This also means the 21 of the 48 engaged leads bought for a 44% sold rate on those.

At the end of the day, it all means dealers should concentrate on how to engage internet leads better. Everything looks better when you do that.
 
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Businesses (dealers or not) are bleeding only because follow-up is underestimated.

Too often systems are not in place to accelerate follow-up sequences.

Whoever you are, you will lose money today because you did not follow-up (me included).

CPL/CPConv/CPA conversation is endless because whether a 184/conversation is good or bad will differ it's for a Hyundai Accent vs. a Chevy Suburban.
 
Most dealers are doing the "Task to do the Task" vs doing the "Task to get engagement". Big difference in mentality for a store to change the culture. Just recently look at Aug 2020 info. 21 dealers, 19,500 leads. Engagement ave: 75%. Each lead average 19 activities using AI, Phone, Text, Email to get engagement. Technology has evolved to use AI to get more engagement and have the dealers be better responders.

Conversion for an engaged lead ave = 40-50% to an appointment is what should be the target
 
Most dealers are doing the "Task to do the Task" vs doing the "Task to get engagement". Big difference in mentality for a store to change the culture.

:iagree:

It is tough to get dealers to think about quality responses from the customers' perspective after 20 years of fighting a lead clock, OEM mandate, difficulties with the desk, lack of training, and the sheer volume of leads.
 
@Alex Snyder If engagement is high, and conversion to an appointment is low.....then they know they need training. Whether or not they invest in it or not is another question. However, I hope you would agree that 19 activities per lead is better than many dealers. We just randomly pulled this info and did not cherry pick for a study I'm working on.

NADA shared a study that shows nearly 60% of the dealer spend goes to payroll.