Are You Measuring Your Dealership’s Success With the Right KPIs?

By Jazel Auto Marketing

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Dealerships and measurement don’t always go hand in hand. After all, dealers have better things to do than come up with ways to figure out how well they’re doing. Like sell cars.

Still, this can mean that inefficiencies are quite hard to catch and disappointingly easy to repeat.

So today, we’re tackling Key Performance Indicators (KPIs) — from common KPI concerns to some of the most important KPIs your dealership might not be tracking.


Common KPI Concerns

Dealership KPI Concern: Definition Confusion

There’s some justifiable confusion about what KPIs are. On the face of it, key performance indicators and success metrics seem like… well, two words for the same dang thing. But there’s a difference, we promise.

Let’s break it down like this: All KPIs are metrics, but not all metrics are KPIs.

Metrics are anything that is measured, KPIs are the ones among that number that actually matter. And there’s the rub when it comes to KPIs. Finding what matters.


Dealership KPI Concern: Too Few or Too Many?

Another common issue with KPIs is not knowing how many your dealership should really be keeping track of.

Often, there’s a bit too much emphasis on the most visible success measures. Chiefly, there’s a common notion in the automotive industry that sales are the ultimate metric. How much metal did you move?

For many dealerships, that’s all the matters. Other metrics (even if they are tracked) aren’t given the attention required to reveal useful insights, and are wasted.

It’s also not uncommon to have issues on the other side of the spectrum. As hard as it can be to unravel a mystery from only a couple clues, it’s equally difficult to make sense of things when there’s a glut of information and no way to know what matters.  


Dealership KPI Concern: Success Measures For Your Situation

A common problem with KPIs can sometimes be paying too much attention to buzzword-y, trendy measures, instead of the most relevant and pertinent metrics.

For example, Snapchat may be the social media platform everyone’s talking about. Snapchat marketing can be brilliant and creative and innovative. But are Snapchat views the most practical and meaningful metric for dealerships to track? Not really (unless you have a crazy cool modern marketing campaign — in which case, we want to hear all about it).  

All the KPIs we’ll detail below are solid, insight-driving, bottom-line-boosting metrics to measure, but it all comes down to what works for your dealership. Factoring in location, history, inventory mix, sales record, and available resources can mean that each dealership might track slightly different KPIs — and that’s a good thing.

Alright, now that we’ve covered the basics, let’s jump into real dealership success KPIs that your dealership should seriously think about tracking:  


7 Dealership Success KPIs to Consider

Online Lead Response Time

Let’s face it, when it comes to responding to leads, dealerships are letting internet shoppers down.

According to a recent study, over 18% of the dealerships in the study never responded to online shopper requests.

On top of this honestly pretty disappointing number, only 16% of dealerships responded within 15 minutes to online inquiries.

Brace yourselves — the overall average internet lead response time was over 24 hours. If your online experience is supposed to showcase your on-the-lot experience (which, yes, it should), that’s a major problem.

Can you imagine if you went to a dealership, asked about a car, and had to wait 24 hours until someone even spoke to you about it?

Even worse (and we don’t mean to be alarmist here), in that time, modern car shoppers are checking out other vehicles, likely on another dealership’s site — or even another dealership’s lot. They’re thinking: “Okay, I’ve requested some info about this car, I’ll go check out the others nearby and see if they can give me a better offer.”

What if that 24 hour looking-for-something-else period was actually just a 15 minute getting-excited-about-that-car period before they got contacted by the equally enthusiastic dealership? Can you imagine the difference in sales experience and satisfaction?

The same study that brought us all those doom and gloom statistics also revealed that internet shoppers who get a response within 10 minutes are three times more likely to visit your lot.

That’s the importance of a timely lead response.

Our recommendation: Lead Response Time is a KPI you should be measuring. What’s your dealership’s average time? What can you do to bring it down?


Asset Management Efficiency

What’s worse than a vehicle that’s been sitting on the lot for weeks? Well, a vehicle that’s been there for months, but careful attention to automotive KPIs can help prevent cars gathering dust on you lot.

One of these helpful inventory-specific KPIs is Vehicle Demand vs. Inventory. This is a measure of what vehicles people are looking at most on your site compared to what you actually have on the lot.  

For example, if your two top truck models are getting 35% of the views on your dealership website, but they only make up 10% of your inventory, it’d be a good idea to think about getting more of these on the lot.

This is one of those measures to consistently keep an eye on — trends change, and what people are browsing on your site can be a great indicator of which way the automotive wind is blowing.

Our recommendation: Begin paying close attention to Vehicle Demand vs. Inventory. This KPI is a market compass that all dealerships should be using.

As we all know, inventory that isn’t moving loses a little more of its profitability each day — but attention to this type of KPI can help you manage your inventory much more efficiently.


Sales and Service Connection

Like managing your inventory, connection between your dealership’s sales and service departments is naturally. Kind of a big deal. And that’s putting it mildly.

There are two equally important KPIs to track in this case:

  1. Percentage of Sales Customers That Use Your Dealership for Service
  2. Percentage of Service-First Customers That Bought Cars From Your Dealership

The first KPI helps track how well your dealership does at maintaining a relationship with customers after they drive away in their car. Did their experience at your dealership make them trust you to do their vehicle maintenance?

Hopefully, this percentage is high. If not, however, it shows room for major improvement and revenue generation. After all, in 2017, Autotrader found that less than half of new car shoppers (and less than 25% of used car shoppers) were introduced We’ll say it again: room for improvement. Start tracking this KPI today.

The second dealership success KPI we have here helps show how well your dealership service department wins over customers. Did their experiences with service make them feel confident in this dealership?

According to one study, close to half of car shoppers reported that their experience in the service department “greatly influenced” their likelihood of buying another vehicle from the dealership. That’s the sentiment this KPI focuses on, and the reason you should be tracking is.

Our recommendation: Look at the percentages of customers who formed a sales-service connection, and implement sales and service initiatives to start improving those.  


Repeat Customers

It is hard to argue that new car sales are the true heart of a dealership. What’s more exciting than a hot sales streak, killing it on commission, blowing up your quota, and stealing customers from all your competition?

So sure, the heart goes to new sales, but repeat customers are the backbone of a dealership and one of the most important elements for true long-term market domination. As a result, this is a key performance indicator that needs to be paid attention to.

The KPI to measure here is pretty simple: the percentage of your customers that are repeats. That should naturally be broken out by sales and service, but you can get more granular too.

Feel free to look at demographics, zip-codes with high repeat customer rates, etc. These can help you narrow down audiences to target with marketing that encourages repeat business.

Our recommendation: Keep tabs on your repeat customer percentage — and look into what makes a customer not come back to your dealership.

All this goes hand-in-hand with our next KPI, the dealer’s best friend… referrals.


Referrals Per Sale

Referrals are amazing. Referrals bring in new customers that end up having a 16% higher Lifetime Value (another very useful KPI to consider, actually). Who doesn’t want more of that for their dealership?

And yet, this is rarely a KPI that we see of major importance to dealers, and that translates into the same problem we see over and over — accidentally overlooking an awesome source of revenue.

This is an area with lots of room for improvement. In fact, a study by Texas Tech found that only 15% of dealership salespeople actually ask for referrals.  

This really shouldn’t be the case. According to the same study, an impressive 83% of people are willing to refer if they receive quality service, but only 29% do.

Really, all you gotta do is ask.  

Our recommendation: Start tracking the average number of referrals per sale, and do everything you can to help salespeople and service techs solicit referrals.  


Efficiency Among Your Personnel

Measuring efficiency among personnel might seem a little odd — often tracking this kind of metric means impending staff reductions and morale suffers.

But the intention here isn’t to use discoveries of inefficiency as justification for firings — it is an opportunity to find out how to maximize everyone’s ability. The goal isn’t to create more work for your employees, but to establish a benchmark to then work from.

An actual measure to use here is the Personnel Expense to Gross Revenue Ratio, that’s the expense of employing all personnel (though again you can break this up to be much more granular) compares to your dealership’s gross revenue.

Calculate this dealership success KPI, and then take steps to improve it. Where are inefficiencies occurring, and what training, tools, or technology can be brought in to remove that roadblock?

This is another KPI to track consistently and calculate historically. Matching this data against other time periods can help you diagnose the cause of inefficiencies and other issues.

Our recommendation: Get started tracking your dealership’s personnel expense to gross revenue ratio. Consider doing the calculations for the last three years while you’re at it, to give yourself head start.


Social Media and Online Word-Of-Mouth

This is actually a subject we talk about a lot — most recently in our webinar All Your Questions About Millennial Car Shoppers — Answered. We talk about it so often because it matters a great deal to the future success of dealerships.

We all know that the information age has shifted power to the consumer. Naturally word of mouth has always been important, but now people have access to mass word of mouth.

It used to be that if one person had a bad experience, they’d complain about it to a friend over lunch and not go to that dealership again. Now, they complain about it on Facebook, informing their 562 friends about how bad that dealership is, or go to a review site and let everyone who ever checks that review site know. Either is a much more impactful outcome from a poor experience than it used to be.  

This change snuck up on a lot of dealerships, many of whom haven’t totally adjusted to this new online reputation management. That’s one of the reasons social media interaction is such an important type of KPI to keep an eye on — doing so gives you a leg up on the sluggish competition.  

There are many individual social media and online WOM KPIs, and which are important will depend most on your dealership’s unique situation (callback to our common KPI concerns). Still, there are some powerful (and almost universal) Social Media and Online WOM channels — such as

Our recommendation: Track interaction on your most important social media channels, including online reputation channels like Google My Business and Yelp. Response rate (even response time) to negative reviews or poor experiences should be one of these social KPIs you pay the most attention to.

Got questions about these KPIs of dealership success? We’re here to help. Shoot us a message at marketing@jazel.com at any time!