By
Duane Sprague
Have you ever
thought about the actual dollar investment you have made
in acquiring your list or database of customers? Well, in
today's dollars, according to a study done by the NADA,
the industry average is a total marketing cost by the dealership,
of $439 per vehicle sold. This figure includes both sales
and service advertising budgets.
Now, if you
take the average dealership customer list/database of 15,000 customers,
and times that by $439 (the average cost to acquire a new customer
in today's market), you have a $6,585,000.00 investment. Now,
if I had a six and a half-million dollar investment sitting in
my computer, I would want to protect, nurture, and leverage that
investment to make absolutely certain that I was getting everything
out of it that I possibly could.
Ironically,
so few do. So here sits a very expensive investment in customer
acquisition, those people who actually shopped and purchased from
you. People who currently service or have serviced from you in
the past. People who have referred others to you. And at least
20% of these people are in the market for a car this year. A recent
Chrysler report said that according to their findings, 5-6% of
the population is in the market for a car in any given month.
But what are
you doing? Your spending thousands of dollars this very moment
on more mass advertising. Advertising to whom? Not to your past
loyal customers, but to people who have never stepped foot in
your dealership. How much will it cost to get these unknown quantities
into your dealership to purchase or service a car? You guessed
it, about $439 each. I have personally talked with dealers who
say that they spend $600 or more on advertising per vehicle sold,
and others who spend as little as $200 or less, which is why we
have an average of $439.
Now I ask
you, who is easier to get into your showroom and your service
bay. A person that you have no idea of their name, their address,
the current vehicle they are driving, their service history, and
how often they replace their car, and, who has no idea who or
where you are? Or is it easier to personally invite the people
you already have a past experience with. People who you have names,
addresses, and current vehicle information on. People who know
who you are, where you are, and what you sell. These are the people
who are most likely to buy from you again, and if treated well,
again and again. And they will refer others, who will refer others,
and so on and so on.
What does
it cost to market to this gold mine of customers sitting in your
computer database? Using direct mail, about $12 per customer per
year. That totals $180,000 for the year, or $15,000 each month.
What do you get for this investment? You will sell 3,000 vehicles
to this customer base of 15,000, with an average front and back
gross profit of $1,800 per unit. You will stand to gross $5,400,000
from this investment of $180,000 for customer retention. In addition,
you will realize a dramatic increase in parts and service revenue,
which alone will pay for the program.
The marketing
game today is all about customer retention. Call it QCP if you're
a Ford or Lincoln Mercury dealer, or TLC if you're a Toyota or
Lexus dealer, and on and on. But it all comes down to the same
common denominator. Its cheaper to retain a customer and re-sell
to them over and over, than it is to acquire new ones, and replace
existing ones you already had, but forgot about, and gave up to
your competition.
So should
you do away with your media advertising and focus entirely on
your customer database? Never! But you should focus an adequate
portion of your advertising budget, talent and resources on a
sure thing, rather than always gambling on the more expensive
unknown.
