The customer retention process may be the most important measurements that can be performed in any dealership.
It gives you a firm grasp on the "percentage" of your customer base who buys from you year-after-year.
Learning how to measure and understand the customer retention process will allow you do take steps to improve the sales and profitability of your business.
When I discovered how to track this important measurement I was able to work magic in terms of sales and profits.
Remember, we are trying to determine what percentage of your customer base who purchase from your dealership on a repeat basis (historically comparing one year to the next year).
In order to have the most effective customer retention process it is best to use a five year history if you are able to do so.
A reasonable goal would be retaining 80% of your customers in Parts and Service departments and 95% in the Sales department.
You don't need to be a math wizard or a specialist in database management to accomplish this.
You will see how DO-ABLE this is as you read further.
When I have studied dealer's customer retention I have found that most dealers lose at least 50% of their customers in a five year period.
In order to survive you must find a way to replace that income or perish.
One way to replace that income is to find new customers to replace those who have left your business.
However, adding new customers to your customer base is the most expensive way to survive.
There is a better way!
It is much more valuable and less costly to find ways to sell to existing customers rather than to add new customers as the sole method of making your business grow.
Consider this; you have probably spent a considerable amount of time, energy and money building a relationship of "trust" with you current customers.
You must "leverage" this relationship of trust to benefit both your customers and your business.
It has been estimated that it costs 5 to 14 times the amount to add a new customer as it does to sell to an existing customer.
Most dealers DO NOT have the resources to sustain that type of activity.
This information comes from my study of dozens of dealerships:
A. 5% of customers leave a business because they have moved out of the area.
B. 5% leave because of changing their buying habits.
C. 10% leave because they prefer the competition.
D. 12% leave because they did not like the service the business provided.
E. 68% of customers leave because they believed they were treated with indifference or have felt unappreciated.
Here are some important questions to consider.
After a customer purchases from your business how soon should you contact them with a telephone call, post-card, email, letter to say "Thank You"?
Do you have a standard practice in your business to "follow-up" on a recent purchase?
Retaining a customer is nothing more than finding ways to meet and exceed the customer's expectations.
And...It is much easier to do that than to continuously find new customers.
By determining the percentage of customers that buy from you, year-after-year, you will be able to specifically measure the "financial" impact to your dealership.
Here is a remarkable fact:
For every 5% improvement in retention you can expect a 25% to 80% improvement (or more) in the profitability of your business.
Since a majority of dealers never measure customer retention you will be creating a significant advantage over your competition.
It is like having a road-map to improved profitability.
Once you know where you stand you will be able to make significant changes to improve it.
If you want to be light-years ahead of you competition click on this link, you will be taken to the process of measuring customer retention.