Leak #2 Not Measuring Conversion Rates – Leaking Profits: Article 5

In earlier Leaking Profits Articles we talked about marketing techniques and sources used by new home buyers. Another important leak to examine is what happens when you don’t measure your conversion rates.

You know the saying, “Measure twice, cut once”? That’s important to avoid making a costly mistake.

But are you measuring at all?

Conversion rates measure the ratio of opportunities presented (leads) to opportunities seized (closes), and this statistic is critical to measuring performance. Knowing how often a salesperson converts a prospect into a sale will tell you how well that person performs when it counts most, which is in the model home itself. Your marketing—advertising, promotion, online—focuses on bringing people into your model home. But once those prospects are there, it’s the job of your salesperson to turn them into buyers.

Conversion rates are to new home sales as batting averages are to baseball. A player can be batting .1000, but if he has only come to plate once or twice, that statistic is worthless. How will he perform throughout the season? Once that player has had 100, 200, or 300 at bats, you’ll know whether you have a Mickey Mantle or a Mickey Mouse.

By measuring a salesperson’s conversion rate, you can potentially plug up another profit leak. Maybe you have an under-performing salesperson who is actually costing you sales—and profits—because of his inability to convert company generated traffic. Maybe you have a great salesperson in the wrong neighborhood who isn’t working enough leads. Both scenarios represent lost profit.

Some managers tell me they don’t believe they should measure conversion rates because you can’t prove this number. Really? Statistics are probability based on actual events. If your salesperson has a conversion rate of 10 percent, then it’s not likely he’s going to turn around and convert the next four prospects that walk in the door.

You must benchmark to evaluate performance.

Don’t penalize honesty on a traffic report. You need their honesty, not fabricated numbers.

BOTTOM LINE: Conversion rates aren’t about profit, but measuring what happens between the four walls of your model home. If prospect conversions aren’t being monitored and measured there, you have a profit leak.

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