Editor’s Note: The following article is one in a series of industry-related articles provided by Hal Ethington and ADP Lightspeed.
What does it take to create loyal customers?
Before the Great Recession it seemed liked all you had to do was turn on your “open” sign. Sure you had to take care of your customers, but if he went somewhere else there were always more coming in.
Then the crisis hit. The past few years have proven that loyal customers are as valuable as rare metals, and just as difficult to find. Even during the roughest times, you had the old reliables, they walked through your doors and slapped money on the counter. They are your lifetime customers, thick and thin. Thanks to these customers, your doors are still open.
Now things are starting to turn around. More door swings, more sales, more customers, each one, a new opportunity to build dedicated customers. The kind that you can rely on. So what are you doing to make sure they stick? Are you just hoping they’ll stumble back, eventually?
Things have changed. There is more competition, and they are willing to cut their prices deeper. Every customer has infinite opportunities to price shop on the internet (haven’t heard of the internet, search it on Google). Somehow you need to convince your customers that you are worth coming back to, even if your prices are higher. So how do you do it?
We turned to the purchase history of 3 million first-time Parts customers over 2009 and 2010 to find the answers. The goal: see how to get first-time customers to return, and more often.
64% of the customers came once, bought something from the parts department and never came back. This group found your business through a friend, your marketing or the internet and decided to come in. They walked out the door, and did not return. One and done.
You spend a lot of money on your building, marketing and staff to get new customers. It would seem that the war is won once they finally cross the threshold and make a purchase. But that is just the beginning. It’s your job to make sure they want to come back, and bring their friends.
Losing 64% of the first-time customers really hurts when you put it into perspective of dollars lost. On average, each over-the-counter transaction in our survey was worth $96. That means that if the “one and done” customers came back just one more time it would add $170,000 in parts sales per dealer. That’s a chunk of change. So how do you get to it?
The answer lies in the 36% that became repeat customers.
Of the roughly 3 million customers, there were about 1 million that came back, and not just once. The new loyal customers came back three times on average in a single year. Every time they visited, they spent an additional $96 and some repeat customers spent $2,000 or more on parts and accessories in a year.
So what’s the key? How do you get customers out of the “one and done” bin to the “loyal customer” pool? The answer: Get them back… quick.
The first time customers that turned into repeat customers returned to the dealership within two months of their first purchase. The average time between their first and second purchase was 62 days. Once the first purchase happens the clock starts ticking. The first two months is the incubation time for loyal customers, or the black hole for the duds. The good news? You can influence the outcome.
Once you get a new customer in your doors you need to give them a reason to come back, soon. If you see that they are a first time customer, go above and beyond to make them feel welcome. Invite them to next week’s event. Get their email and put them on the newsletter list. Give them $10 off their next purchase, if they come back within a month.
Use all the tools at your disposal to get them back. One of the biggest misconceptions in our industry is that marketing tools are only for the Sales department. If there are any departments that would benefit from a CRM, newsletters and email blasts, it’s the Parts and Service departments.
The sales team sees a customer once every three to four years. The Parts and Service Department wants to see that same customer at least 12 times in that same time frame. If you’re not using marketing tools to draw customers in on a consistent basis through birthday discounts, manufacture specific specials or preventative maintenance reminders, then everyone is losing customers, including the Sales department.
First-time customers need to be nurtured. Tie the excitement they feel from the outdoors, to the excitement in your store. That takes more than just good customer service. It takes effort in reaching outside your walls and pulling them back in.
Those two months after their first buy are vital to forming loyal customers. Don’t miss your opportunity to build lifetime customers.