S.A.L.E.S. Is Not a Dirty Word
by Dave Yoho
August 16th, 2021

Is Rescission (Customer Cancellation) a Malfunction in Your Selling Practices?

A homeowner’s right to cancel or rescind a new contract should not be defined as a quick prescription for buyer’s remorse. Despite this, many salespeople interpret it this way.

A homeowner has the legal right to cancel a contract within 72 hours or three business days. It’s an inevitable—and manageable—part of doing business if you’re selling in the home. Despite this, many companies have rescission rates that are unreasonably high.

Here’s the rule of thumb for rescission: If the size of your contract is $4,000-$5,000 (or less) rescinded contracts should be under 5%. If your average contract is $8,000-$12,000, rescission should never exceed 10% and should be less if your salespeople are receiving the proper training. If your contracts exceed $25,000, your rescission rate might approach 15%; however, in all these cases, a percentage of rescinded contracts are recoverable with the implementation of a systematic cancel/save program.

Keep in mind that if you have little to no rescission, it’s probably because you’re primarily closing on the second and third prospect calls instead of attempting first-call closes.

In-home salespeople are required by law to visually display and explain in detail the customer’s right of rescission. Another requirement is a document that contains a written explanation of the cancellation process, along with obtaining signatures to verify that the cancellation process was explained (specifics vary by state). The process was created to protect homeowners from unscrupulous sellers employing deceptive tactics, but it’s not an assurance that customers don’t have to live up to the terms of the contract they’ve signed. Nor is it an invitation for homeowners to change their minds about signing the contract. The salesperson who mis-states the three-day right to rescind, its purpose, and/or uses it as a close or “credibility statement” does him or herself and the company a disservice.

The most common reason why customers cancel involves some element of the price. In a large percentage of these cases, the salesperson failed to establish need for the value of the product as being equal to, or exceeding the price agreed to.

Well-run companies track, on a weekly basis, a minimum of five sales metrics:

  1. Leads issued;
  2. Presentations;
  3. Sales;
  4. Sales on credit (financing); and
  5. Cancellations (rescissions).

The most efficient way to track rescission is to measure the percentage per salesperson. Identify those whose rescission rates are significantly higher than others. At this point it is critical to send a message to your salespeople that it’s not okay to have a high rate of rescission. They should be re-trained, re-scripted and if their numbers do not improve, they will likely never succeed with your company.

Well-run companies train their salespeople to say the following before they leave with a contract: “If you feel a reason to change your mind, let’s discuss it now.” After all, if there is doubt, this is the best time to resell your company, your product and your price.

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