January 21, 2011 — It was about 27 years ago when Arthur (Artie) Spector walked into his former sales center known as ‘The Reef Room’ on the island of Oahu, Hawaii and announced to a staff of about 35 licensed sales reps that the cost of tours had reached a staggering “$75”, vowing in no uncertain terms that if it got any higher he’d “just shut this whole place down”!
In today’s dollars that tour cost would be about $164 but the fact of the matter is, back then, as it is today, most developers really don’t understand what their actual cost per tour is because they fail to factor in the other variables, the big one being all those ‘NQs’ dragged through the feeder!
For the sake of simplicity, for every 100 tours attending a presentation let’s say ‘A’ developer produces a 20% closing ratio. Let’s further say the average sale is $18,000. End result from those 100 tours is obviously 20 deals, $360-K volume and a VPG of $3,600. Fair enough: TS math 101-A!
Now let’s add into the equation what every seasoned TS Pro has known for decades: That ‘X’ percentage (we’ll use 25%) of all sales guests have no business attending a TS presentation in the first place, primarily because of their lifestyle issues/situations and/or being ‘income-challenged’, etc.
As such, using that 25% factor, then what ‘A’ developer is actually producing are results not from 100 tours but the 75 tours who should attend the presentation. When you crunch the costs and losses resulting from those ‘other’ 25 tours the result is the proverbial game changer when it comes to actual developer (sales teams) ‘stats’, costs and losses, etc.
For those who won’t take a few moments to run their calculator, rest assured I have and the losses alone push tour cost upwards of $1,500 (in this example). But on the other side of that coin is how to separate that “25%” from the herd and keep ‘em out of the sales centers in the first place.
It’s actually a pretty simple process, as one developer has been doing it for many years and produces an incredibly high net VPG. But as for the rest, it has been and will continue to be business as usual and be damned with the costs/losses!
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©2011 Inside The Gate