Customer Retention vs. Advertising: It’s Fight Night!

Enter the arena. This is fight night. The main event is the brutal battle between Advertising and Customer Retention. In this corner, weighing in at a hefty $300-500 per car sold, is Advertising. Strong in appearance, flashy, loud and creative, Advertising enters the ring ready-to-rumble. The opponent, Customer Retention, weighing in at $0, is silent, often ignored and even though much more effective than Advertising in the long run, he just doesn’t carry the same excitement or get the same respect.

The bell rings. Advertising, in the red trunks, is aggressive and throws the first of many wild, ineffective punches. Every month you spend thousands of dollars on TV, radio, newspaper, direct mail and billboards in the hopes of attracting ‘new shoppers’ to your store, either for vehicle sales or service. Pow – another wild punch. How much did you spend last month? Now don’t get me wrong, I’m not saying you should stop advertising, or even slow down. Keep on throwing the punches. The car business is competitive and you have to advertise. What I am saying is Advertising should be used to grow your business, not to maintain your current sales volume due to a lack of customer retention.

Customer Retention, in the green trunks, has dodged the many expensive hap-hazard punches and is all the time gaining momentum. Customer retention uses consistency and long term growth to build a solid future. But the problem, as you are aware, is that most dealers don’t spend much time or money on customer retention. In fact, most dealers have no focus at all on customer retention, no solid foothold and is in most cases forgotten and almost non-existent.

Bam! Advertising makes a nice upper cut. Advertising is exciting. It gives customers a reason to shop at your store with urgency, huge discounts, full page newspaper and TV ads with special incentives and even silly golf umbrellas as prizes just for coming in. You like it - keep spending more and more….it is advertising by the way, and advertising doesn’t need customer retention or CSI or even ROI. Just get out there and swing and spend, baby!

But Customer Retention is smarter. Customer Retention knows that long term makes sense and that if it is ready it can take advantage of Advertising’s hard work by keeping all of these new found customers forever. It makes sense if you think about it – new shoppers beat you up on the price, give lower CSI scores in general and usually don’t buy on the first visit. They play you against the competition, and you usually make less gross profit than you do on your existing, retained customers. Advertising takes a hard fall to the mat, but it isn’t over yet.

Customer Retention takes effort. You have to focus and you have to allocate a few bucks of your huge advertising budget to do it. Are you ready? Start with an owner loyalty club for your dealership just like the airlines, hotels, grocery stores and almost every other retail store has done. Track down lost customers and give them a reason to return with a special offer that targets their needs. Talk to your staff every single day about the importance of keeping the customers you have. Remember, warranty is going away. Maintenance intervals are stretched and the competition is fierce. You have to give your customers a real reason to stay “your customers!”