By
Duane Sprague
If you have
been keeping up on the current marketing books, you have no doubt
read or heard about the hottest trends in "one-to-one marketing,"
"database marketing," "relationship marketing,"
or "frequency marketing." Although they have different
names, they all share some common denominators, such as:
o reward customers for their patronage
o keep in regular contact with their customers
o survey their customers
o build a file for each customer, containing likes and dislikes,
past purchases, past problems, personal and family information
o sell to each individual customer, one at a time
o focus more on customer retention vs. customer acquisition
o rely more on personalized one-to-one advertising vs. mass media
o concentrate on share of customer vs. share of market
They all look
at the customer or prospect as an individual person, with unique
needs. They all understand that sales take place not as an aggregate
group, but to one person at a time. They all use some sort of
specific offer, targeted to specific people, using specific criteria.
And most importantly, they all understand the need for customer
retention, instead of the endless pursuit of new customer acquisitions.
Or to put it another way, the need for increased share of customer
rather than increased share of market. This is a key point for
modern marketing.
Share of market,
is the traditional concept of shotgun marketing using mass media
in an attempt to reach every breathing adult in your market area.
This approach worked better a couple of decades ago, when there
were not as many media options, not as many product options, and
when people were not quite so skeptical of advertising.
Share of customer
on the other hand, looks at the entire lifetime value of each
customer individually, as a single profit center over a period
of their lifetime of purchasing potential with your company. How
many vehicles will one person purchase over a 40 year period?
How much service, parts and body shop business will they require?
What about financing, insurance, extended warranties, alarm systems,
protective coatings, sealants and the like? How about referrals?
How many people will a single happy customer send your way over
a lifetime?
The truth
is, a single happy (and I don't just mean satisfied) customer
can be worth hundreds of thousands of dollars in gross sales volume
over a lifetime to your dealership. Some aren't. Some cost you
money, and others are a one time flash in the pan "gross
and go". However, 20-30% of your customers are probably generating
70-80% of your net profit. This ratio has been proven to be true
in nearly every retail industry.
If you accept
the basic 80/20 rule, and you see that new customer acquisition
with ever increasing amounts of mass media is becoming more and
more costly, with less predictable outcomes, you invariably become
curious about other solutions.
Living from
promotion to promotion to increase unit sales can also be a tricky
endeavor. In a typical promotion, you will increase your ad budget
significantly for a short period of time in order to drive the
traffic. You will then usually have some type of contest, drawing,
or premium gift. Free food and drink is often involved, and sometimes
entertainment of sorts. And of course, no promotion is complete
without the sale prices, the discounts, the check mailers, dealership
rebates, etc. All of this costs money to stage, while simultaneously
reducing the gross margin per unit.
Not to say
that a good promotion is all bad, or should never be done, as
we know-they should. Because they clearly reduce inventory levels,
reduce the floor plan overhead, generate new customers, create
cash flow, and they create additional reach and frequency for
greater name awareness. None of these are bad things. Its when
we become addicted, dependent, and we don't look to other methods
to supplement our need for increased revenue and profits every
year.
How much more
profitable would your promotion be, for example, if you could
retain 40-50% of those new customers for future sales and service?
And what if those happy customers became just a little happier,
and they actually sent you more customers by way of referrals?
Great idea, everybody talks about it, but how do you go about
it?
Well, it boils
down to three elements:
1. Satisfy them at the time of sale
2. Satisfy them after the sale
3. Keep in touch with them regularly during the product life cycle,
and remind them of the great products and services you offer at
competitive prices
Sounds simple,
and it is, but it's far from easy. It's simple because it's common
sense. After all, isn't that what keeps you coming back to your
favorite stores and vendors? But it's not easy because of all
the different expectations, values, standards, and perceptions
that each individual customer has. Then you have sales people,
F&I people, delivery people, service people, phone operators,
and cashiers. Any one of which is fully capable of rubbing a customer
the wrong way, and sending them spinning out of orbit, never to
be seen again. Despite all of your training, processes, policies
and procedures-it happens.
However, most intelligent customers will forgive the occasional
problem, or misunderstanding, if deep down they feel that you
appreciate their business, and that you have planted this feeling
from the beginning. Most people will have this feeling of appreciation
if you let them know that you thought of them, and that you did
something tangible to show your true appreciation.
You plant
this seed of good will with a simple "thank-you" card,
and a gift showing your appreciation for their business from the
very first time they purchase a vehicle from you. Then you remind
them of your gratitude throughout the product life cycle, with
holiday greeting cards, birthday cards, and vehicle anniversary
cards. These are not sales or promotional messages. These are
just reminding them that you appreciate them as a customer.
Then at least
on a quarterly basis, you should be sending them a newsletter,
apprizing them of the new specials, products, services, people,
etc. Service coupons or seasonal service reminders are also a
plus.
Its all about
one-to-one personalized contact. As stated, it's simple, but it's
not easy. To pull all of this off, you need a proven systematic
process, motivated people with a variety of talents and skills,
as well as the right equipment, and the time. Doing it in-house
can be difficult if not impossible to pull off with regularity,
quality, and afford ability.
Which is why
so many companies have sprung up over the last decade and recent
years to fill this need. One such company, the OCT Group has been
helping dealers stay in touch with their customers, and letting
them know that their business is appreciated.
Using a series
of highly personalized mailings over the course of ownership,
as well as purchase related gifts of appreciation, surveys, and
telephone contacts, the OCT Group has a very precise and system
and timely manner of keeping the dealers name and message in front
of the right customer, at the right time.
Effective
customer retention marketing means regular, individualized, and
relevant communications with your customers on an on-going basis.
It means intercepting any problems early, before they fester into
a negative feeling toward your dealership, and affect your CSI.
It also means making sure that they feel appreciated, with a timely
gift of thanks for their business.
It means creating more opportunities for your customers to provide
you with feedback on how you are doing in all areas of your operation.
