What is the appropriate Look-to-Book %?
I received the following email regarding look-to-book. My response is below.
Could you tell me what the look to book % should be?
There are many variables that can affect look-to-book. Some of these include the strength of your new car franchise, whether you require customers to make a firm commitment to buy prior to appraising their vehicle and other similar process issues. Further, the question of what is an appropriate look-to-book is incomplete because the natural assumption is the higher the better, and that is wrong. If I came to work for you, I could guarantee you a 100% look-to-book. Would you want that? I would accomplish this by way overvaluing every vehicle. I don’t think you’d be too happy; therefore, I think a more appropriate question should be, what should a look-to-book be relative to cost-to-market?
If appraiser 1 had a look-to-book of 40% and a cost to market of 92%, and appraiser 2 has a look-to-book of 26% with a cost to marketing of 74%, and appraiser 3 had a look-to-book of 33% and a cost-to-market of 77%, which one is doing a better job for you? Based on judgment and experience, I would say that the answer is appraiser 3. Tracking both look-to-book and cost to market, by appraiser provides you with powerful information for training and coaching. Let me know if this makes sense or if you’d like additional clarification.