In the latest of our series, thanks to legendary service adviser trainer, Lloyd Schiller, of LloydSchiller.com and Brooke Samples of Profit Blueprints, Brooke shows you how to turn a lost sale into an opportunity to improve.
We know we can’t sell something to every Customer. However, when we track Lost Sales to discover the underlying reason for the losses, we ultimately will improve our sales. There are probably no more than half a dozen reasons for a Customer to say “No thank you,” whether they voice their excuses or not. The most common excuses are: Price was too high; we did a poor job explaining the benefits of buying the service or product from us; we didn’t have the vehicles or parts in stock. But if we were better at tracking the Lost Sales, and determining “why” we lost them, we could better anticipate the demands of the marketplace, and thus continue to grow our sales. We need inventory to sell vehicles and parts, but we know that to stock inventory that doesn’t sell is simply a recipe for high holding costs, inventory damage & obsolescence. It is a balancing act with a lot of money on the line. When you track Lost Sales, you have the necessary information to stock inventory that is in demand and what will be in demand. Each Department Manager has his or her own challenge of gathering and using Lost Sales data to make their department thrive and grow.
Vehicle Sales Department
Surveys show that Customers visit an average of less than two dealerships before they make a buying decision as so much preliminary work is done on the Internet. With that in mind, the goal should be to have at least a 50% closing ratio. Regardless what your closing ratio is, we can improve our sales if we understand why a prospective Customer didn’t buy from us. Are there specific salespeople or certain products or services that have a higher Lost Sales rate? It is only when we ask the Customers why they didn’t buy (whether it is the staff, the price, the vehicle selection, product availability or the services offered) that we can determine the cause of the loss. Even if we don’t make a sale, the information gathered will help us make the next sale. This same principle applies to the Finance Department—why didn’t we sell a recommended product and what can we do better next time? Many years ago, I wanted a used convertible. This was before the proliferation of Internet sites to find the exact vehicle I wanted, so I toured the dealerships most likely to stock a convertible. While not one had a used convertible in stock (this is Florida–what’s wrong with that picture?), no one bothered to take my information should the Used Car Manager “come across one.” The reason for this Lost Sale was because they didn’t stock the car and no effort was made to obtain a vehicle. To this day, I wonder if it was because I was a “girl” or because the Salesperson wasn’t properly trained. (I have since then owned three convertibles and not one was purchased from the dealerships I shopped.) Make it part of your best practices to log and understand why a sale wasn’t made. Then take the logs and develop a strategy to do better next time.
I hate to say it, but probably the most frequent reason for a Lost sale in the Service Department happens when the Advisor simply doesn’t ask for the sale. Price, time, and not providing the Customer with a compelling reason to buy today, are the next most frequent culprits in Lost Sales excuses. When you implement a Second-Effort process, not only do you have another chance to make a sale, but you then learn why the recommended work was declined in the first place. After the Manager checks the vehicle’s service history, the Manager’s contact might sound like this: “Hi Ms Jones, this is Brooke Samples, the Service Manager at Paradise Motors. First, I want to thank you for all of your past business. My Service Advisor Gabby Smith advised me that you are here for a recall and your vehicle was due for brakes and tyres. Your tyre treads are down to 2/32” and your front brakes were down to 3/32mm. Both of these measurements are below safety standards. We recommended that you replace the front brakes and resurface the rotors; and we offered three prices to replace the tyres. I’m just curious, if you don’t mind my asking, why did you decide not to get the work done today?” Log the responses (even if the Customer ultimately decides to have the work done). Is pricing a consistent issue? Then evaluate your pricing and menu packages; do you need to offer BEST, Better, good options? Is there one Service Advisor who does worse than the other Advisors? Will training help, or do we need to upgrade an Advisor? If the Customer didn’t have time, can we offer alternate transportation or break the job down into what can be done today and schedule the rest for later?
If the mindset is “we can get the part tomorrow, we don’t need to stock it,” consider the Parts and Service Gross Profits lost as a Tech waits (averages between $100-$125 per hour), or the potential Wholesale Customers stop calling because the parts are “never in stock.” The Parts Department is fortunate because the DMS is built with the ability to track lost sales, IF we use it. Last year, for Dealers from whom I receive Parts management reports, I added “Lost Sales” to the Parts Inventory analysis. I did this because I would see huge variances between dealerships, even those in the same Dealer Group. Some would show hundreds of Lost Sales, while others showed Zero! Zero? How is that possible? Well, it could be true if you have NO incoming phone calls for the front counter or for the wholesale counter. From the size and locations of most dealerships, zero probably doesn’t reflect reality. Most parts management systems are smart at inventory control; they take your stock orders, customer orders, emergency purchases and lost sales to determine what you should stock. This assumes all emergency purchases (regardless of where they were purchased) are posted with the factory part numbers.
Problems arise when people try to outsmart the system and think “Oh, we’ll never stock that part, no need to post the Lost Sale,” or “It’s just another Dealer who called, no need to post the Lost Sale.” Lost Sales are defined as a part you would have sold had you had the part and the price had been right. This means if you have to go down the street to get a part for a Customer, it’s not a Lost Sale. If you order the part from the factory, it is not a Lost Sale. If you order a part and the Customer went elsewhere to get the part, instead of waiting, the DMS will log the demand in the system and that is good enough since you receipted a customer ordered part. In my opinion, most of the time I wouldn’t enter it as a lost sale.
If you quote the part’s price to a potential Customer and he doesn’t want the part because of the price, there is no reason to enter it as a Lost Sale…after all availability of the part wasn’t the issue. You can track the reason why the sale wasn’t made which could be useful for you and your Manufacturer. You can define whether the parts number should be considered when looking at parts to phase in. When I see Zero to Low Lost Sales logged, I wonder why a Counter Person wouldn’t take the time to accurately track a demand. After all, if the part had been on the shelf, the part could have been sold, profit would have been made and commission earned. Perhaps it comes down to education and the importance of just a few key strokes.
For the Front/Wholesale Counter Sales People,a log can help determine whether a part number should be posted as a Lost Sale or not. Track Customer inquiries by jotting down the name and part number in a spiral notebook. At the end of the day, if the Customer didn’t call back to order the part, enter it into the Lost Sales Screen. If the Customer just called to check on the price, do not enter it as a Lost Sale. Post-It-Notes, like Pattie, a Texas Toyota Parts Manager, uses on the Counter People’s computer monitors, help her have an inventory that supports the Technicians, instead of hindering them, and makes her Parts Department the choice of Wholesale Customers.
Track your estimates and two days after the estimates were written, follow-up with Customers whose vehicles weren’t totalled or who did not set an appointment. Use a script similar to the Service Manager’s script to try to set a date for the work. If the Customer says the work will be done at a different shop, inquire as to why your shop wasn’t selected. If the Customer wants to keep the insurance cheque, explain the downside of that action to the Customer. Track your closing ratio of sales to the number of estimates written. Eighty per cent sold is a good target. Ultimately, your log, and noted explanations of “Lost Sales” will help you sell more work in your shop.
Each department needs its own system to track lost sales and then determine which Lost Sales could have been prevented. The amount of time necessary to track and analyse the information is small compared to the benefits. With better processes, you can minimise the loss of these opportunities. The upside to a Lost Sale is that it gives us the opportunity to become better, and who doesn’t want that?
This article was written by Lloyd Schiller, Fixed Operations Consultant and Brooke Samples, President, Profit Blueprints, LLC.