January 23, 2015 — Perhaps the real question should be what is an acceptable lost sales ratio (LSR)? I ask because when a sale that should have been made – isn’t – there is a lot more rarely discussed revenue that ‘walks’ away from the developer than just the advance proceeds from the transaction. There is the interest on financed transactions, the closing costs, the annual maintenance fees as well as potential owner/member referrals and possible future upgrades to more ‘time’, larger accommodations, etc.
So Here’s The Scoop: The deeper you analyze the LSR, the more money, over time, eludes the profit motivated timeshare developer. This includes funds that would have been spent at the resorts on all those extras at the shops, in the restaurants (including tips) and purchasing resort activities controlled by the developer as well as additional rental time revenue that may be acquired by the owner/member over the years or perhaps their relatives, friends and co-workers when vacationing together or separately.
And then there are all those sales that were made but should have never happened in the first place. In our industry, IMPO, those sales account for the lion’s share of rescissions for causes that include the sales guest being financially challenged in the first place and/or they bought the dream but their real world lifestyle, employment and other social factors are not conducive to vacationing on a regular basis.
Obviously I would be remiss if I didn’t also include the LSR of those sales guests discovering, sooner or later – that they were perhaps misled during the presentation by either a poorly trained, apathetic or halfhearted uninformed rep as well as those reps who are simply overzealous or who outright lie regarding the overall timeshare plan, its uses, actual points value (if applicable) and other costs, etc.
Now add the LSR all up, and that’s going to take some pondering and crunching those darn numbers but I’ll dare to suggest that for every lost sale — and those sales that should never have been made in the first place that kick — the bottom line is that a mind boggling amount of revenue escapes from most developers in our business each and every time (day). And the amount of real money ain’t chump change!
I fully understand that in our industry developers have ‘X’ set as their bottom line acceptable VPG (value per guest) etc.; but that is part of the problem because I’ll bet the farm that as an industry nobody can justify the following LSR example.
Why is it wise to invest the required capital annually to lure (e.g.) 1,000,000 sales guests into our industry’s sales centers and then boast that it’s just fine and dandy that 820,000 of those prospects – 82% – responded with a resounding ‘NO THANKS’ and didn’t purchase a vacation plan?
Using just that figure and a 10-year window, that’s a little over 8 Million very expensive sales guests; and you can rest assured that within that number there were tons of both lost sales opportunities and bucket loads of revenue lost forever.
Equally troubling is that improving any developer’s LSR is not some new notion and includes no trickery such as voodoo concoctions. No, it’s always been right in front of their faces – free of cost – no reinventing the wheel – since the dawn of our industry.
And for those developers interested in lowering their LSR – consider the following for your perusing delight.
- Your TS plan is top notch, proven and successful. Consumers have been saying ‘yes’ for the last (up to) 50 years. As such, you have something that is viable and fully marketable and indeed travelers the around the world – every day of the year – continue by their own efforts to seek out the very vacation lifestyle and experience that you provide your owners/members anyway. Understanding and accepting that reality should be a no-brainer. And with a targeted market it’s not a ‘hard-sell’ at all!
- It is also quite correct that well trained sales professionals’ net closing ratios are always in direct proportion to the quality and/or lack thereof of the sales guests (prospects) they encounter. There are — and you must accept this — actual factors beyond representatives’ control that contribute to a sales guest’s final decision as to whether they purchase or not. That, too, is a ‘sales absolute’!
- You, the developer — especially those who’ve never sold TS plans at the consumer level — have likely been lied to by management and others. In fairness most of those good folks have just been ‘parroting’ a few myths that started generations ago in our industry, so they’ve just passed the torch on to you; and one of my personal favorite myths is “AN UP IS AN UP”.
“So tell me Amigo – Is a car a car? Is a jet a jet? Is a university a university? A religion a religion? A grocery store a grocery store? A doctor a doctor? A lawyer a lawyer? A set of tires a set of tires? A bowl of ice cream a bowl of ice cream? A taco a taco? A hamburger a hamburger? A swimming pool a swimming pool? A politician a politician? A haircut a haircut? A spouse a spouse? A teacher a teacher? A mechanic a mechanic…”
I’m guessing that if a developer’s management and perhaps the developer him/herself all agree that everything within any category is just straight across the board the same – well, that’s the end of ever improving a developer’s LSR and increasing their revenue/profits.
And I say that because the same management and developers will also concur that not only is – “An Up Is An Up” – but also that “Either you sell them or they sell you” – not to be outdone by “You are only as good as your last deal”, etc.
That mindset and those 22 words describe TS sales and marketing insanity, 22 words that are the direct cause of massive revenue losses via LSR’s, high rep turn over and wasted human resources/capital, low moral, excessive rescissions, and unimpressive net closing ratios and their corresponding, underperforming low VPG’s.
There, I said it and – I hope that was as good for some of you as it was for me?
Good Luck Out There
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Contributing sometimes extravagant, bombastic, emotional, pompous or even pretentious writings about the timeshare industry, Scoop covers an array of industry related subjects each week including inside information, tips, scandals, interviews, forecasts as well as new (good or bad) products and services — and, of course, all the ‘Good’, the ‘Bad’ and the ‘Ugly’.