What is a "Lost Sale"? Is it confined to the Parts Department? Can we put a value on it?

Absolutely informative and educational input, Joe!  Thank you so much for your well though out comments!  We cannot manage what we cannot monitor!  This is a problem across the board...failure to track!!!!  We have all the software and hardware to make this happen, but it is the old saying...garbage in, garbage out...If the desk manager is logging the department "ups" and their pay plan includes a percentage on closing ratio, you can bet that bottom quotient is not going to be accurate!

Thanks for your contribution to this discussion!

Joe Clementi said:

This is an excellent post that makes us question our own habits.   This is how I would answer your well thought out questions.

Lost sales are an everyday occurrence in our business.  A dropped phone call, misplaced pressure by a salesperson or a simple failure to communicate, all creates lost sales.  Tracking is only one component of a lost sale; the most critical ingredient is in the process of following up.  Does a dealership have specific, measurable methods to determine what that lost sale equates to in "lost revenue" and more importantly, how that "lost revenue" affects the employee?  Here are just a couple of tracking methods for lost sales and the process of follow up:

1. Track all inbound sales calls and who took the call.  Find out what the outcome was and listen to the call to use as an opportunity to train.
2. Track all declined work through an "op" code in service.  Make the advisors post that lost sale and what was declined.  Follow up that op code utilizing phone calls and e-blasts.
3. Track the lost sales in parts daily.  Post all true lost sales in your DMS so that you can see the sales request for that part.  It will allow you to determine if your depth or breadth should be greater.
4. Track daily and weekly your inbound internet requests and what the response rate is. 
5. Track and measure your SEO/SEM by reviewing your SRP vs. VDP.  If you’re consistently fewer than 3% return you may have a placement issue.

Lastly, I believe it’s important to review the value of a lost sale.  We often talk about being “fired” by a non-returning guest.  Once that customer fires you – no amount of money will buy them back.  Why spend advertising dollars trying to capture new sales when you could just as easily spend that money on keeping the ones you have? 

Nancy,

Great questions, but I will respond only to that of the Service Departments' LOST SALES. As someone who works with dealer's Service Departments everyday, Lost Sales or Left on the Table dollars goes WAY, WAY beyond that of declined operations, which, as Joe indicated are easily measured with Declined Op Code Usage.

Unfortunately, and fortunately there are SO many more areas of lost opportunities, lost sales and left on the table dollars in various areas of a Service Department, it can become almost staggering.

One example is Missed Menu Sales - If a customer is "due" for a maintenance service that is $299, but the customer only purchases "some" of that service, ie. Oil Change and Tire Rotation for $60 - $239 has been LEFT-ON-THE-TABLE.

Very few dealers measure that at all, and it is likely never counted or written up as "declined" because it has only been partially declined. Consider how many customers arrive for any Service (Warranty, CP or anything) and then multiply every maintenance "due" by the dealers Maintenance recommendation at those mileages and I assure you that there are tens of thousands, maybe hundreds of thousands in lost maintenance sales for all dealers in maintenance sales alone!

Consider the complimentary vehicle inspections that dealers perform on virtually every vehicle that come in for service every day. Sure we measure recommendations not performed through declined operations, but who measures the quality of the inspection itself. I cannot tell you how many Inspections Ive come across (and every Service Manager would see it too) where a vehicle with 100,000+ Miles gets an "All Green" inspection report. The real measurement that would baffle the mind is not what a service department recommended and was declined, but even more tragically, what was NOT recommended that should have been! This represents, to an average size dealer, 50-100K per month in missed opportunities, but it is not measured by 98% of the nations dealers.

Consider also, something as simple as correct pricing. Many dealers utilize Grid Labor Pricing which then results in the Service Advisor being responsible for quoting and then billing the correct labor amount for each flat rate interval. Very few dealers actually "check" whether or not the correct labor sale amount was used, they simply look at the Overall Effective Labor Rate and if it is not "low" then they assume the correct rates are being used. Without an effective tool to measure this, someone would actually have to manually review every single RO, every single day and compare that to their Labor Grid/Matrix. This represents $10,000 per month in lost net, in most dealerships every single month, and again, 99% of the dealers in the nation dont measure it.

I have long questioned - Do you measure RESULTS or do you Measure Opportunities VS Results and the short answer unfortunately is - Dealers spend far too much time focusing only the results, and as long as this month's results are better than last months and/or better than Prior Year Same Month's results they dont look any further, and this tragic oversight (or ignorance) is costing dealers hundreds of thousands in lost sales just out of their service departments repair orders ALONE!

Not that I want to downplay the significance of SEO/SEM, Internet Leads or Phone Ups, but in reality they are insignificant in comparison to the hundreds of thousands of dollars missed every single month in the Service Department due to lack of management of these key performance indicators alone!

What is even more tragic is that even as I complete typing this post - I know that because it didnt address anything in the showroom, only Fixed Ops people read it, and even more tragic is that for those limited few dealers or GM's who did read it, most, will unfortunately be more concerned with gaining one more or two more vehicle sales per month by implementing a new SEO/SEM measurement tool than to even reach out and find out how to measure and then realize some of the missed opportunities listed above.

With vehicle sales rebounding, fixed operations will again return to its status as the "back" of the dealership, but I do very much look forward to those few progressive dealers, GMs etc who will reach out to learn more, as they truly realize that Fixed is not the "back", but it is in fact the "BACKBONE" of the dealership!