Given the fact that I work all day every day looking at customer finance agreements and working out how best to categorise them I’m often asked what conversion rate dealers should be working to. I feel it’s quite often confused with a muddled picture of what the brand would like them to achieve and more often than not one figure is given to all to try and achieve.
Yes the figure given is often based on an average of what the network has achieved however this figure is based on past results and not actual information about what position the dealers customers are in. Afterall it’s these customers that we are trying to target and ultimately renew, therefore why do we base so much emphasis on customers whose agreements have already expired and not on the facts of the active customers we still have available to us? My view is a simple one…most dealers just do not have this information to hand. If they did they would easily be able to forecast a realistic conversion rate of how many customers they can renew and ultimately give a clearer picture to the brand about how many customers they will sell to in the given quarter. Surely this calculated approach is beneficial to everyone? The sales teams know how many cars they should sell from the renewal activity, the dealer should know how many part exchanges they are likely to get, the workshop will have an indication to the prep work they will be expected to do and the renewals team know exactly who to target and with what message.
As a whole we can see that there a 2.8 times more customers who are in a parity position on a New car PCP agreement which is within the final 12 months against the used car agreements, yet due to the message given that the used car market is the one to target at present many dealers feel the need to try and shoehorn these customers into a deal that isn’t quite yet fitting. It would make more sense to know exactly which customers are in the strongest position and focus on ensuring the right deal is offered to these customers, which in turn would increase profit along with customer satisfaction and a happy sales exec!
From a cross section of data taken 11.9% of New car customers ending in the next 12 months were in parity against just 4.16% of used car customers, yet a whopping 54.13% were said to be in equity against 18.75%. Now from this we can assume that there are 4.5times as many customers in equity as there are in parity, yes this conversation will need to be structured slightly differently, but I wonder just how many dealers are taking the time to analye data like this to ensure they get the correct message to the correct customers?
*data taken from Feb 2019
So my answer to the question is a relatively simple one, if you can take the time to find out the position of the customers that are due to end and not the customers that have already ended then you can easily get your true answer, if you can’t then you will be aiming for what the Brand hopes for you to do, sometimes however this figure is not realistic based on the customers you have available to you.
