The Secret of Out-Performing All Your Other Advertising!

Written for AutoSuccess Magazine
October 2001

By Scott Joseph

The customer is always right. Our customers sign our paychecks. My customer is my boss. We often recite these little phrases when trying to remind ourselves how important our customers are to us. I would like to suggest a new phrase:

Without customers, business dies.

No, this phrase isn't catchy. But it is very true. Customers are the seeds of growth in business, and should be treated as such every day, not just used as the subject of the occasional feel-good lecture.

But, rather than getting warm and fuzzy talking about how much our customers mean to us, I would like to talk about how much our customers could mean to us- in profits. Your dealership's most valuable asset is the relationship you maintain with your previous customers. This is probably the biggest soapbox that I have. Gaining new customers is an expensive, laborious, time-consuming process, especially considering that your own previous customers are such an incredibly valuable resource that generally goes untapped.

If a majority of your advertising time and budget is poured into conquesting new customers, take a step back and examine the benefits of marketing to your own previous customers.

Why? Because once you've developed a customer, you have direct access to the most cost-effective, single best source of FUTURE business there is. All you have to do is intelligently and logically work that list, and rework it over and over again.

First, let's look at the numbers. We have done extensive studies on our dealer's customer databases, and discovered that 75% of all households own more than one car. And less than 50% of those households buy both cars from the same dealership- even in dealerships with the strongest customer loyalty! That means that more than 37% of your customers are also buying from your competitors. How much profit have you already lost this way? Most dealers don't work their previous customers enough, if at all. And those who do work their past customers, produce only a fraction of the potential they're capable of producing.

Now, let's remind ourselves of the benefits. Previous customers have a higher response rate to your advertising, purchase at a higher margin, have closing percentages as high as 50%, and are cheap to advertise to. Isn't this the description of your perfect buyer? These are customers who already know and trust you, and can easily be put into the habit of buying from you again. Leverage off of the reasons that they purchased from you, and remind them once more of those reasons.

Think about this from your customer's point of view. Everyone wants recognition. People want to trust those they purchase from and they want to have a relationship with their dealer. Do not underestimate the power of habit and the desire for a relationship. People eat at the restaurants they know, and like it when the waiter recognizes them. People shop at the same stores, and love it when the salesclerk shows them an item that they would be interested in. Comfort zones are important, especially if you are considering spending thousands of dollars.

Think about which of these two scenarios you would be more comfortable with: 1.) Walking into a strange dealership where you didn't know anyone and had to explain your situation and what you needed out of a vehicle; or 2.) Walking into the dealership that you have purchased vehicles from for twenty years, and saying, "Tom- I need another car;" when Tom knows that you have a spouse, three kids, and a German Shepard named Skippy who goes on vacation with you?

Chances are you will be much more comfortable with Tom, your friend. And statistics show that you will negotiate less, spend less time in the dealership, and purchase a vehicle without having to make a return trip to the dealership.

The statistics are obvious- previous customers, people who you have already developed a relationship with, are easier to sell than anyone else, and you almost always make more money with them. Satisfied customers like to be, want to be and are already favorably predisposed toward working with you or doing business with you. They are simply silently begging to be led. So, why are previous customer lists not used more frequently? We usually see two reasons.

One reason is the inconvenience. Your previous customers are grouped together in only one place- your database (or sometimes in several databases). It can be a time-consuming, expensive headache for dealers to clean up their database(s) enough to make a direct mail campaign worthwhile. If one household has records of a purchased vehicle in sales and three oil changes in service, they will have four listings in your system, and you could easily waste time and money mailing multiple mailers to the same home.

What is worse is that if you do mail four times to that home, you have just told that household that you do not know them well enough to know that Michelle and David are husband and wife, that Michelle sometimes goes by the nickname Shelley, and that they moved last month to a bigger house down the street. Instead of reconnecting with the customer, you have just alienated them. A dirty database can potentially do more harm than good.

The second reason that previous customer lists are not used more frequently is a misconception that your previous customers are already all wrapped up. If they already own one of your cars, why should you try to sell them again? Over the past ten years, we have worked with thousands of dealers, and many believe that they should ignore their previous customers in favor of conquesting prospects. Their logic is that the previous customers have already purchased from them, so they will come back to purchase again when they need to. Focus on the reality of this situation- most households have more than one vehicle, and only a minority of those households purchased their second and third vehicle from the same dealership. Maximizing your share of driveway and current customer's wallet is less expensive and more profitable than trying to grow your share of market. It costs ten times more to acquire one new customer than to sell to the one you have again. If you feel the need to conquest, conquest that other vehicle from a customer that you already know!

Generally, digging into your customer database and attempting to clean it up yourself can be a huge pain. However, we have had remarkable success with these promotions, and make it simple for the customer. This data can quickly and easily be turned into an incredibly profitable promotion. Even for dealers who don't know how to put all the information on a disk, their system can be directly dialed into, the data downloaded and cleansed, and then everything sent through National Change of Address to ensure the highest deliverability. It is an inexpensive investment that can give you a valuable tool to work with. In fact, this is the first type of promotion that I recommend to dealers.

Previous customers are your strongest candidates for repeat sales, upsells, special events, referral programs, and service and parts advertising. Most importantly, they are a willing audience who wants to hear your message. Don't disappoint them!

Now that we have discussed the benefits of marketing to our previous customers, we are ready to learn the secrets of how to effectively market to them, and double your regular response rates. But, that will have to wait until next month!

Next month: The Number Once Strategy to Out-Market Your Competition

Read another AutoSuccess article: