What’s the ROI of an Automotive CRM? Here’s The Real Cost of Not Using One

December 22, 2019| Zachary Klempf

What’s the ROI of an Automotive CRM? Here’s The Real Cost of Not Using One

As an independent dealer or BHPH, your business depends on your ability to convert leads to customers.


Here’s the problem: It’s harder than ever to convert those leads. Buyers have too many choices and every dealer is racing to be the first to connect and close the deal.

There’s more competition than ever: bigger franchise stores/dealer groups, the emergence of online-centric retailers like Carvana, and the For Sale By Owner (FSBO) platforms like eBay, Facebook Marketplace, and AutoTrader.

And what do these larger retailers all have in common? They all use an automotive CRM.

If your store doesn’t use a CRM to help with lead conversions, it’s not only costing you money, but time, energy, and referrals as well.

So, what’s the Return on Investment (ROI) of using a CRM? Is it worth it for a small, independent dealer or BHPH? Why change what you have been doing for years?

The short answer: Yes, it’s absolutely worth it. Let’s take a closer look at the cost of not using a CRM and how they can truly transform your business.

 

How Is a CRM Better Than What I Already Do?

Many small and mid-sized dealers still use spreadsheets to keep track of leads. Some dealers keep file cabinets of buyers orders and rely on the sales staff to call every few months to see if leads are ready to buy or to ask for referrals. These methods are time-consuming and ineffective.

Today’s buyer is different. They want faster engagement and the ability to communicate through their mobile devices. Now car shoppers don’t even want a phone call— they prefer text.

Automotive CRMs help dealers streamline the entire communication cycle. Using a CRM can sharpen your marketing efforts, provide deep customer insights, and organize leads and outreach for your sales team.

No more losing paperwork and contact information, no more fights between sales staff over whose lead is whose. Your CRM will help get customers into the right car faster and more efficiently by providing all the data you need to turn shoppers into buyers.

Master the use of your CRM and watch the magic: Sales increase, your inventory turns faster, and your staff is happy. Or keep doing things the old way and watch your market share and sales suffer. That is the true cost of not using a CRM.

 

ROI and Your CRM...Can You Put A Dollar Amount on It?

When calculating the real ROI of using a CRM, it’s important to look at it as a simple equation: gain vs. cost of the investment. How much do you gain, and at what cost? Let’s take a closer look at what that means for your store.

To start, write down your current revenue and costs before implementing a CRM. Take a good look at your lead cycle, marketing spend, gross per deal, and overall revenue with your old system. Look at a 6-12 month time frame.

Now with a CRM in place, use the same consistent timeframe to compare those numbers. Some key indicators to look at:


  • Sales Cycle Length. What is the average amount of time it takes for a lead to turn into a customer?
  • Cost per Lead. How much are you spending on each new lead?
  • Cost per Sale. How much are you spending on each new sale?

 

Cost per Lead is the most commonly-tracked metric by dealers trying to optimize their sales process. Unfortunately, it’s only part of the equation. The MOST important metric to track is Cost per Sale. Cost per Sale should be the ultimate measure of your CRM’s success.

Let’s use an example. Say you spend $1,000/month on TrueCar’s internet lead service. Each month they send back 10 leads, making your Cost per Lead $100.

Sounds like a great deal, right? Hold on. What if only two of your 10 leads convert into customers? That makes your Cost per Sale $500. In other words, you’re spending $500 to sell each car. Is that in your marketing budget?

Most dealers should strive to get their Cost per Sale down to around $250. Automotive CRMs can help you manage your marketing spend by tracking which marketing channels bring in the most customers at the lowest cost.

 

What Gets Measured Gets Managed

Here’s the truth: If you aren’t using an automotive CRM today, you’re probably not even measuring these metrics. Do you know your Sales Cycle Length, Cost per Lead, and Cost per Sale?

If not, then a CRM will pay for itself immediately in knowledge alone. Once you start measuring your sales and marketing success, you can start to improve it. That’s where the real ROI is found.

Are you ready to start selling smarter?

Tags: automotive crm

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