How Much Per Lead?
Almost everyday I encounter General Managers and Special Finance Managers that want to sell more cars to the special finance segment of the market.
I say almost because some of them tell me that they are satisfied with the number of cars they are selling to this market.
I think those people need to evaluate why they are in the car business at all, but that is just my opinion.
However, for the people that want to sell more cars, they are typically looking for the lowest priced leads that will generate the most sales.
The conversations typically start with "How much do your leads cost?"Great question but most of the time there is a bit of unknown confusion.
I think they are referring to the price of the lead and not how much is this actually going to cost me.
The question lingers "What is the cost then?"Sparing everyone from a long disposition on the different types of leads, I will work with total price and total number of leads generated.
The two scenarios are Company A and B.
Company A will generate 100 leads for $5,000 and Company B will generate 100 leads for $10,000.
Obvious choice is Company A.
You get the same number of leads for half the price.
That is a great deal! Time to apply some math.
Company A is selling a lead that has an average closing ration of 4-6%.
That is 4-6 cars sold at an average of $2,500 gross profit.
The good news is that Company A just produced $10,000-15,000 in gross profit.
Back out the expenses and net profit is between $5,000-10,000.
Most folks at this point are thinking, "Great, I covered my expenses and made some money.
" How about Company B, they have an average closing ratio of 15-18%.
That is 15-18 car deals at and average of $2,500 gross profit per deal.
That translates to an additional $37,500-45,000 monthly gross profit.
Back out the expenses and that is a net profit of $27,500-45,000.
Looking at a best and worst case scenario, that is the best of Company A and the worst of Company B.
With Company A, the net profit was $10,000 and with Company B, it was $27,500.
A difference of $17,500! Back to the original question "How much do your leads cost?"Well Company A had a price tag of $5,000 and made an additional $10,000 net profit.
Company B had a price tag of $10,000 and made an additional $27,500 in net profit while generating $17,500 more than Company A.
So yea, Company A had a lower price but ended up costing $17,500 in missed profit.
In the big picture, Company A will earn you an annual profit of $120,000.
Company B will earn an annual profit of $330,000.
That is NET profit!That means that Company B, for twice the price, will triple the profit.
As I once heard in a song, we pay for what we get.
I say almost because some of them tell me that they are satisfied with the number of cars they are selling to this market.
I think those people need to evaluate why they are in the car business at all, but that is just my opinion.
However, for the people that want to sell more cars, they are typically looking for the lowest priced leads that will generate the most sales.
The conversations typically start with "How much do your leads cost?"Great question but most of the time there is a bit of unknown confusion.
I think they are referring to the price of the lead and not how much is this actually going to cost me.
The question lingers "What is the cost then?"Sparing everyone from a long disposition on the different types of leads, I will work with total price and total number of leads generated.
The two scenarios are Company A and B.
Company A will generate 100 leads for $5,000 and Company B will generate 100 leads for $10,000.
Obvious choice is Company A.
You get the same number of leads for half the price.
That is a great deal! Time to apply some math.
Company A is selling a lead that has an average closing ration of 4-6%.
That is 4-6 cars sold at an average of $2,500 gross profit.
The good news is that Company A just produced $10,000-15,000 in gross profit.
Back out the expenses and net profit is between $5,000-10,000.
Most folks at this point are thinking, "Great, I covered my expenses and made some money.
" How about Company B, they have an average closing ratio of 15-18%.
That is 15-18 car deals at and average of $2,500 gross profit per deal.
That translates to an additional $37,500-45,000 monthly gross profit.
Back out the expenses and that is a net profit of $27,500-45,000.
Looking at a best and worst case scenario, that is the best of Company A and the worst of Company B.
With Company A, the net profit was $10,000 and with Company B, it was $27,500.
A difference of $17,500! Back to the original question "How much do your leads cost?"Well Company A had a price tag of $5,000 and made an additional $10,000 net profit.
Company B had a price tag of $10,000 and made an additional $27,500 in net profit while generating $17,500 more than Company A.
So yea, Company A had a lower price but ended up costing $17,500 in missed profit.
In the big picture, Company A will earn you an annual profit of $120,000.
Company B will earn an annual profit of $330,000.
That is NET profit!That means that Company B, for twice the price, will triple the profit.
As I once heard in a song, we pay for what we get.
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