What is the Return on Investment (ROI) on Customer Retention and Referral Systems?
As you have probably realized I am a big supporter of customer retention and appreciation systems, as I believe this will be the single greatest differentiator in the new auto industy ...every manufacture is getting really good!
I was fortunate to receive some great industry information, by Beers & Cutler, 2008 Automotive Industry Guidelines on the AutoTeamAmerica website. The report looks at sales, gross profit, expense control for new and used domestic, import and highline dealers.
The gross profit for 2008 new cars in the domestic, import and highline dealers are $1403.00, 1082.00 and $2480.00 respectively.
My interest is the advertising cost per retail new car is $266.00, $277.00 and $283.00.
In a domestic dealer that retails 1000 units per year his average advertising cost is $266,000.00
A couple of questions;
1. Where is the lion’s share of advertising dollars going?
2. How much are we spending per retail unit for customer retention and appreciation?
3. Where is the best bang for the buck, statistics please if available?
My goal is to find out the distribution of advertising dollars, and it's effectiveness. For example the dealer spends 75% of the advertising dollar on newspaper and receives 30% of the retail sales, while a customer referral system spends 10% of the advertising dollars and receives 25% of the retail sales?
I was fortunate to receive some great industry information, by Beers & Cutler, 2008 Automotive Industry Guidelines on the AutoTeamAmerica website. The report looks at sales, gross profit, expense control for new and used domestic, import and highline dealers.
The gross profit for 2008 new cars in the domestic, import and highline dealers are $1403.00, 1082.00 and $2480.00 respectively.
My interest is the advertising cost per retail new car is $266.00, $277.00 and $283.00.
In a domestic dealer that retails 1000 units per year his average advertising cost is $266,000.00
A couple of questions;
1. Where is the lion’s share of advertising dollars going?
2. How much are we spending per retail unit for customer retention and appreciation?
3. Where is the best bang for the buck, statistics please if available?
My goal is to find out the distribution of advertising dollars, and it's effectiveness. For example the dealer spends 75% of the advertising dollar on newspaper and receives 30% of the retail sales, while a customer referral system spends 10% of the advertising dollars and receives 25% of the retail sales?
Replies to This Discussion
-
Permalink Reply by Jessica Russell on
-
I have a spreadsheet I can send you that can show you the direct impact customer retention has on your bottom line. I would also like to share the following with you. If you have any questions about it please feel free to contact me. Hope you find this valuable.
Typically dealerships have three distinct kinds of customers:
“A” customers usually make up only 20% of the customer base. They gladly recommend and voluntarily refer the dealership to family, friends, and co-workers, return to buy more vehicles, use the dealership’s service department for maintenance and repair at full retail rates and generate 80% of the dealership’s net profit.
“B” customers rarely refer or recommend family, friends, or co-workers. They use the dealership’s service only for warranty or highly discounted service specials, don’t intend to buy another vehicle from the dealership, generate around 30% of the dealership’s revenue and only 15% of the dealership’s net.
“C” customers never recommend or refer the dealership. They only want the lowest price and never return to the dealership’s service department unless something breaks or your offering something Free. This group makes up 50% of the customer base, takes 80% of the staff’s efforts, and generates only 5% of the dealership’s net.
Dealerships typically spend so much time and effort acquiring new customers that they are spending most of their time on these least profitable (“C”) customers. This insures that the “staff” stays very busy and produces great activity, but also insures a low or flat level of profitability. The constant need for new business requires so much of everyone’s time it leaves very little time to “WOW” customers. The majority of dealerships replace the loyal and profitable “A” customers that leave with those least profitable time consuming “C” customers. Keeping the right customers is crucial in managing customers for growth, especially in increasing the percentage of “A” customers in the base.
Dealerships can have high CSI and still be losing 15-20% of their customer base per year, especially if the majority of the effort is on chasing the CSI score and not pleasing customers and building loyalty.
Customers that come back voluntarily typically generate ten times more profit for a dealership than customers responding to advertising or other persuasion.
Most Customer Retention Experts agree that a meager 5% increase in customer retention can increase the “bottom line” by at least 25% and many times more.
-
Permalink Reply by Orest D Serwylo on
-
Jessica, thank you for your offer on the spread sheet, please send to orest@orestserwylo.com.
I am presently using the Send Out card System which works well.
Jessica Russell said:I have a spreadsheet I can send you that can show you the direct impact customer retention has on your bottom line. I would also like to share the following with you. If you have any questions about it please feel free to contact me. Hope you find this valuable.
Typically dealerships have three distinct kinds of customers:
“A” customers usually make up only 20% of the customer base. They gladly recommend and voluntarily refer the dealership to family, friends, and co-workers, return to buy more vehicles, use the dealership’s service department for maintenance and repair at full retail rates and generate 80% of the dealership’s net profit.
“B” customers rarely refer or recommend family, friends, or co-workers. They use the dealership’s service only for warranty or highly discounted service specials, don’t intend to buy another vehicle from the dealership, generate around 30% of the dealership’s revenue and only 15% of the dealership’s net.
“C” customers never recommend or refer the dealership. They only want the lowest price and never return to the dealership’s service department unless something breaks or your offering something Free. This group makes up 50% of the customer base, takes 80% of the staff’s efforts, and generates only 5% of the dealership’s net.
Dealerships typically spend so much time and effort acquiring new customers that they are spending most of their time on these least profitable (“C”) customers. This insures that the “staff” stays very busy and produces great activity, but also insures a low or flat level of profitability. The constant need for new business requires so much of everyone’s time it leaves very little time to “WOW” customers. The majority of dealerships replace the loyal and profitable “A” customers that leave with those least profitable time consuming “C” customers. Keeping the right customers is crucial in managing customers for growth, especially in increasing the percentage of “A” customers in the base.
Dealerships can have high CSI and still be losing 15-20% of their customer base per year, especially if the majority of the effort is on chasing the CSI score and not pleasing customers and building loyalty.
Customers that come back voluntarily typically generate ten times more profit for a dealership than customers responding to advertising or other persuasion.
Most Customer Retention Experts agree that a meager 5% increase in customer retention can increase the “bottom line” by at least 25% and many times more.
-
-
I had a second chance to read your comments slowly ...great comments.
Especially, "Most Customer Retention Experts agree that a meager 5% increase in customer retention can increase the “bottom line” by at least 25% and many times more."
So what is the problem, this is intuitively obvoius???
Jessica Russell said:I have a spreadsheet I can send you that can show you the direct impact customer retention has on your bottom line. I would also like to share the following with you. If you have any questions about it please feel free to contact me. Hope you find this valuable.
Typically dealerships have three distinct kinds of customers:
“A” customers usually make up only 20% of the customer base. They gladly recommend and voluntarily refer the dealership to family, friends, and co-workers, return to buy more vehicles, use the dealership’s service department for maintenance and repair at full retail rates and generate 80% of the dealership’s net profit.
“B” customers rarely refer or recommend family, friends, or co-workers. They use the dealership’s service only for warranty or highly discounted service specials, don’t intend to buy another vehicle from the dealership, generate around 30% of the dealership’s revenue and only 15% of the dealership’s net.
“C” customers never recommend or refer the dealership. They only want the lowest price and never return to the dealership’s service department unless something breaks or your offering something Free. This group makes up 50% of the customer base, takes 80% of the staff’s efforts, and generates only 5% of the dealership’s net.
Dealerships typically spend so much time and effort acquiring new customers that they are spending most of their time on these least profitable (“C”) customers. This insures that the “staff” stays very busy and produces great activity, but also insures a low or flat level of profitability. The constant need for new business requires so much of everyone’s time it leaves very little time to “WOW” customers. The majority of dealerships replace the loyal and profitable “A” customers that leave with those least profitable time consuming “C” customers. Keeping the right customers is crucial in managing customers for growth, especially in increasing the percentage of “A” customers in the base.
Dealerships can have high CSI and still be losing 15-20% of their customer base per year, especially if the majority of the effort is on chasing the CSI score and not pleasing customers and building loyalty.
Customers that come back voluntarily typically generate ten times more profit for a dealership than customers responding to advertising or other persuasion.
Most Customer Retention Experts agree that a meager 5% increase in customer retention can increase the “bottom line” by at least 25% and many times more.
-
Permalink Reply by Ron Terry on
-
Jessica...I really liked your analysis. Is it possible to share with me your customer retention bottom line impact spreadsheet? My email is ronterry@BPSsuccess.com. Thanks.
Jessica Russell said:I have a spreadsheet I can send you that can show you the direct impact customer retention has on your bottom line. I would also like to share the following with you. If you have any questions about it please feel free to contact me. Hope you find this valuable.
Typically dealerships have three distinct kinds of customers:
“A” customers usually make up only 20% of the customer base. They gladly recommend and voluntarily refer the dealership to family, friends, and co-workers, return to buy more vehicles, use the dealership’s service department for maintenance and repair at full retail rates and generate 80% of the dealership’s net profit.
“B” customers rarely refer or recommend family, friends, or co-workers. They use the dealership’s service only for warranty or highly discounted service specials, don’t intend to buy another vehicle from the dealership, generate around 30% of the dealership’s revenue and only 15% of the dealership’s net.
“C” customers never recommend or refer the dealership. They only want the lowest price and never return to the dealership’s service department unless something breaks or your offering something Free. This group makes up 50% of the customer base, takes 80% of the staff’s efforts, and generates only 5% of the dealership’s net.
Dealerships typically spend so much time and effort acquiring new customers that they are spending most of their time on these least profitable (“C”) customers. This insures that the “staff” stays very busy and produces great activity, but also insures a low or flat level of profitability. The constant need for new business requires so much of everyone’s time it leaves very little time to “WOW” customers. The majority of dealerships replace the loyal and profitable “A” customers that leave with those least profitable time consuming “C” customers. Keeping the right customers is crucial in managing customers for growth, especially in increasing the percentage of “A” customers in the base.
Dealerships can have high CSI and still be losing 15-20% of their customer base per year, especially if the majority of the effort is on chasing the CSI score and not pleasing customers and building loyalty.
Customers that come back voluntarily typically generate ten times more profit for a dealership than customers responding to advertising or other persuasion.
Most Customer Retention Experts agree that a meager 5% increase in customer retention can increase the “bottom line” by at least 25% and many times more.
© 2024 Created by DealerELITE.
Powered by
