I like to win. Even if it is just a game of checkers, I hate to lose. What I hate most is losing a sale. It’s not just my ego on the line, now my pocketbook and the business take the hit. When a customer leaves the parts counter without making a purchase, you may shrug it off or it may bother you for a while. There is no time to lick your wounds. You need to take action right away.
The first thing you must do is identify the reason for the lost sale. It is almost always due to availability or the price of the part. Now you need to record the lost sale. Don’t count on your memory for this. You have too many transactions in a day to remember what happened. Ideally, you can record it in your system. Most systems have a feature to capture this. Look for “Lost Sale” in your system. Usually, you will be able to indicate in the system if the sale was lost due to availability or pricing.
If you don’t have a “Lost Sale” feature in your software, you still need to record it. You could keep a handwritten log or an Excel file handy where you can record what happened and why. Now that it is recorded, what are you going to do about it? That depends on the reason.
ID the Reason with Research
First, let’s review Lost Sale due to pricing. It is tempting to look at your margin and decide if you could charge less. Don’t start there. Start with the market. How much are other businesses charging for that part. It is getting easier to do this research as online parts sales continue to grow. Keep in mind you don’t have to be the cheapest option. You provide a service, and you have the part on-hand, that is worth something. Look for signs that your pricing is high because your costs are high. If your competitor is selling the same item for a significantly lower price, they probably have a lower cost supplier.
You have four options when you lose a sale due to price:
- Ignore it and hope it doesn’t happen often.
- Review the market price and reduce your margin.
- Review the market price and find a lower cost supplier.
- Review the market price and decide it’s ok to lose an occasional sale to maintain the margin on future sales.
Be careful with discounting your parts. You need significant volume increases to get the same margin contribution. For example, if you are making 30% gross margin on a part and drop the price by 15% you need to sell twice as much to get the same margin contribution.
Pricing is important but it is not the most frequent reason we lose a part sale. Availability is far more common. Sadly, it is usually ignored or forgotten by the parts team. Even though you did not make a sale, you should be recording a “Demand Hit”. This is best done using your system.
Leveraging Lost Sales for Future Wins
Again, look for “Lost Sale” and click the option for “Availability.” This is critical because your system suggests you order parts based on Hits, not Sales. Of course, every sale is a Hit but so are lost sales. You would have sold it if you had it on-hand.
This may be a new part that you have never stocked or sold. If you don’t have a sale or Demand Hit recorded, you may never stock the part and may never sell it. Naturally, some customers will wait for you to order the part and have it shipped to your dealership. That will result in a sale and a Demand Hit, but that is not ideal. We want to have parts on hand, so customers don’t have to wait.
“... You lost a sale, but don’t give up. You can’t just hope it won’t happen again, hope is not a strategy. Take action and record those lost sales so you can win the next one.”
I love my job. Everyday I get to talk with dealers about their parts business. We frequently talk about how they are using their system to plan their parts inventory. It’s not always a fun discussion. Frequently, I hear they don’t trust their system and spend several hours every week manually creating a stock order. Best case they are spending hours reviewing the order suggested by the system. Not recording lost sales is a big part of the root cause for this. Your system can’t help you stock parts if it doesn’t know your customer needs them.
Many OEM manufacturers are offering Parts Planning tools or Automatic Replenishment systems. The goal is to help dealers have the right parts on the shelf before the customer needs them. Sometimes when I speak with dealers using these systems, I hear a familiar story about them spending time reviewing and editing the suggested order. Much of this comes back to the issue of not recording lost sales.
You want your customers to be happy and you have made a significant investment in your system. Adding one more task to your plate could make a big difference in your business. Take time today to locate “Lost Sales” in your system. Then, make sure everyone on the parts counter knows how to use it and explain why it is so important.
I am sure you like to win as much as I do. You lost a sale, but don’t give up. You can’t just hope it won’t happen again, hope is not a strategy. Take action and record those lost sales so you can win the next one.
