Keeping Your Customers for Life
According to NADA’s Average Dealership
Profile, the average dealer spends about $630 in advertising per new vehicle
retailed while averaging $1959.00 on gross profit PRU (but a net loss of $421
per vehicle). Looks like about 32% of the average dealer’s new vehicle gross
profit in fixed operations was spent on advertising. WOW! Does anybody see a problem
with that? In reviewing hundreds of dealer financial statements last year I
found that the average dealers is spending about $10.00 in advertising per
retail service customer per month which comes in at about 5-7% of service gross
profit. WOW! Does anybody see a problem with that for fixed operations?
Research shows that over 70% of all your
service customers who come back to your dealership for all of their service
needs will buy or lease another vehicle from you. What’s your closing ratio on
repeat customers? I guarantee you it’s not the 15 to 20% you’re getting with
walk-ins! A realistic number would be well over 60%. So the question is what
can you do to keep them coming back? The answer is: give them a reason.
It’s Just Common Sense
A Customer Retention Marketing Plan for fixed operations costs a fraction of
what most dealers are spending to bring bodies into the showroom floor. Again,
according to NADA the average dealer is spending about $25,000 in advertising
per month to sell a car. So if you’re an average dealer selling about 40 new
units a month you would then most likely be writing about 500 Customer Pay
repair orders per month and spending around $5000 in advertising and marketing
support for those 500 customers ($10 each).
So, the average dealer is spending $25,000 to bring in
strangers (20% closing ratio) and only $5000 to keep the customers they already
have coming back (60% closing ratio). Understand that these customers already
know where you’re located, already own your product, have already done business
with your dealership and they must like someone at your store since they are in
fact coming back. Here are some reasons for them to keep coming back:
● Have you told them lately that you appreciate their business?
● Do you remind them when it’s time to return for preventive maintenance?
● Do you have an appointment reminder system in place?
● Do you schedule their next appointment before they leave on each visit?
● Do they receive invitations for seasonal promotions?
● Do you follow up on all open factory recall campaigns?
● Do you have a process to follow up on “No Shows?”
● Are all “Lost Sales” followed up within 48 hours?
● Are 1st appointments scheduled at time of delivery?
● Do 100% of these customers get Maintenance Menus?
● Do you have an automated or live call program?
● Do you communicate with them through email and/or text messaging?
● Are these customers invited back twice a year for FREE Car Care Clinics?
Managing to Get Results in Your Fixed Operations
The important thing to remember about follow-up is that it must be done DAILY, not QUARTERLY to build customer retention. Most dealers spend more money on one weekend ad for the sales department than they spend in an entire month on customer retention. All of my reasons to come back as outlined above can be accomplished in most dealership fixed operations for around $2000.00 per month totaling $24,000.00 per year which, coincidentally is about what the average dealer spends in one month to sell cars.
As a former dealer, I know we all waste money on advertising whether it be on TV, radio, newspaper, direct mail event sales, etc. The tough part is figuring out which dollars were wasted, right? That
being said, you don’t need to increase your advertising expense by my $2000 a month budget you just need to re-allocate some of that $25,000 you’re already spending in your fixed operations.
Of course in addition to selling more new and used vehicles in the future you will also see a dramatic increase in your customer pay parts and labor sales when you keep your customers coming back.
I’m seeing increases in Service gross profit of over 60% in a lot of our dealers.
This result in increased Service Absorption is a terrific way to generate added profits in our current sales environment. Imagine unlocking the front door of your dealership tomorrow knowing that 100%
of your overhead is paid for before you sell your first car or truck. Sounds
like a plan to me.
Now is the time to evaluate your Fixed Operations Marketing Plan for 2010. Remember to give all
of your customer’s reasons to keep coming back and they will reward you with
big dividends.
Call me toll free at 1-888-553-0100
Or email dreed@dealerprotraining.com.
Don Reed
CEO-DealerPRO Training