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Customers move away, some are stolen by competitors, and some die. These are just a few of the reasons for lost customers. Most dealers just accept these losses as inevitable and beyond their control. Heck some even blame those damn disloyal customers. The nerve of those ungrateful SOB’s. Few lost customers actually leave kicking and screaming, most gradually depart due to a lack of interest or affinity. They silently wander off with a feeling of apathy; we call these quiet migrators. 

The common reaction to solve the lost customer challenge is to invest in more new customers. This seems logical, and after all, is recommended by all the traditional advertising experts. But, let’s investigate a little further. First off, there is something you should know about 80+% of the advertising industry. They tell you the purpose of your advertising is to build your brand and create top of mind awareness so you can spend your entire budget in the vaguest and least measurable way possible; to try to attract new customers. Much of this B.S. is pushed out there by ad agencies who get paid a percentage of their customer’s ad spend. Talk about an inherit conflict of interest.

When I first got a whiff of how this game was played, I knew it didn’t smell right. I felt there had to be a better way.  And there is; although the ad industry tries to keep it hush hush. But before we chase that rabbit, let’s look at some quick math on the cost of losing these quiet migrators and replacing them with new blood.

Here are some real numbers pulled from an old 20 group composite book combined with research on their customer data file. This store had $9,892,781 in annual sales with 3,462 active customers who did business with them in a year. Backing into the math that reveals each customer was worth $2,857.53 in total sales annually. So, each time you lose a quiet migrator you’re losing thousands of dollars in sales PER LOST CUSTOMER, ANNUALLY. Now consider most customers have a potential customer life of greater than 10 years and you’re looking at a loss of over more than $20,000 over the lifetime of a lost customer. But, wait.  It gets worse.

What does it cost to replace that customer? Let’s say this roughly $10 million dealership spends 1.5% or $150,000 per year in advertising. Now add an allocated percentage of the remaining dealership overhead (rent, payroll, utilities, taxes, etc.) to that number - the same percentage that new customers contribute to total sales, then divide that number by the number of new customers generated per year. For the sake of time, let’s say conservatively that number comes out to $500 per new customer created. But, it really cost you $1,000 because you invested $500 to get him, then another $500 to replace him. 

Understanding this math is very important. Even if you feel these numbers aren’t consistent with your store, that’s fine, cut it in half, then cut it in half again, and it still makes the case.

Now, back to that dirty little secret that the ad guys and gals selling radio, TV, billboards, yellow pages, etc. don’t want you to know. The primary purpose of your advertising isn’t to build your brand, create top of mind awareness, and generate new customers. That’s the crazy expensive way that big dumb companies choose to do advertising. The first dollar you spend on marketing should be Direct Marketing to your existing customers. This is called Retention marketing and it’s how you develop and nurture quality relationships with your existing data base of customers. This prevents lost customers so you don’t have to spend hundreds of thousands of dollars going after new business while ignoring those quiet migrators. 

When you commit to “touching” your buying base 52 to 104 times per year, with one-to-one relationship style marketing you’ll begin to see that losing customers isn’t inevitable and nearly 100% of the non-deceased category can be eliminated.  

Our Sharp Shooter marketing system is purpose-built to accomplish this mission and is 100% measurable, unlike traditional mass media (BTW, it will also conquest new customers).

And, our Local Web Dominator program has a built-in alarm system for customers that are about to be lost so you can safely rescue them prior to their departure. 

For more information on how we can help you increase retention and carve off new market share without the waste, contact us at 877.242.4472 or visit www.powersportsmarketing.com.