Contrary to what you might hear from other experts, focusing on attracting new customers should not be your sole marketing strategy to attain a profitable business. When marketing your shop, it’s important to have a strategy dedicated to seeking new customers through a variety of channels, such as direct mail, search engine optimization and social media, to name a few. However, when it comes to managing your revenue (keeping your sales bucket full), it’s more cost-effective to maintain your current customer base than to constantly recruit new ones.
New customer outreach is extremely important, however, businesses that focus solely on growth are missing a crucial aspect of their overall sales success. If you consider that your business is a bucket, the new customers you attract every month serve as a constantly running hose pouring water into the top of that bucket. In a perfect world, all the water, or customers, would never leave that bucket. In this example, you’d simply need to increase the size of your bucket every month, or else it would overflow with continuing growth.
Unfortunately, every shop loses customers for a variety of reasons. This is called the “sales leak”. It’s a hole, or a series of holes, in your revenue bucket that is constantly letting future sales slip away. The solution may seem simple, bring in new customers to make up for those lost sales, but financially, that is a losing strategy.
Consider that an average shop will lose approximately 18 percent of their current customers per month. That shop now has to increase its new customer acquisition by 30 percent to see a 10 percent gain in sales. Imagine if that shop cut the sales leak in half. Now that 10 percent gain rises to nearly 20 percent, doubling the sales for that month. The added advantage is that simply retaining the customers you have allows your sales bucket to fill faster, even if your new customer acquisitions remains steady.
According to an article in Entrepreneur Magazine, it costs at least five times more to attract a single new customer than to retain the customer you already have. Simply by increasing your customer retention rate by only five percent, you can double your annual profits. Match that with well-planned new customer acquisition strategy, and your business will be booming.
With that said, here are some effective strategies to stop those leaks and keep your revenue bucket full.
Be a detective
Before you can start to plug your leaks, you must first do a little detective work. You have to figure out what percentage of your customers are leaving each month. The easiest way to do this is to look at your customer database over the past quarter, or year, and then check to see which of those customers are still with you. If you had 1,000 customers over the past year, but only 500 of those have returned, your attrition rate is a whopping 50 percent.
Once you’ve figured out how big your leak is, you have to determine how much of it you can actually fix. Let’s face it, customers leave for reasons beyond your control. If the customer moved, there’s nothing you could have done about that, it’s simply a loss in sales. If the customer started using your competition, that is an issue that you can control.
Identify the leak is a bit more difficult and perhaps the most important of these identifying steps. This may require some outreach on your part as shop owner. It may require developing a survey, making a phone call or sending an email, but it’s important that you understand why those customers left you.
Customers leave for any number of reasons. They may feel they are getting better value with your competition. Your competition may offer a service or product that you don’t. They may simply have had a better experience elsewhere. This information matters because in order to fix your leak, you have to be able to understand exactly what is driving your customers to your competition.
Don’t take existing customers for granted
Everybody likes to feel wanted. Yet, most shop owners are so focused on growth, they forget to nurture the customers they already have. It’s almost impossible to grow if you have to keep replacing customers that have leaked away. Most shops will bend over backwards and offer all kinds of incentives to attract new customers, but most shops don’t have any programs in place to cater to the needs of existing customers.
In my experience, the No. 1 reason shops lose sales has everything to do with the customer experience. If your customers walk away from your shop less than satisfied, you risk losing them to another shop. Delivering top-notch customer service starts with being a “Yes” shop. That means saying yes when a customer calls about scheduling an oil change even if you’re backed up with repair work. It means saying yes when a customer asks if they can drop off a car early or pick it up late. It means saying yes to texting or calling with updates when it’s convenient for the customer, rather than when it works best for you. Saying yes will leave customers feeling like you went above and beyond to accommodate them and will lower the risk of them jumping ship to a competitor.
Communicate, communicate, communicate
Staying in touch is the best way to make sure you are front of mind for your customers. It’s easy to forget that the competition is always going after your customers and inundating them with messages. You can perform outreach a number of ways – through email, direct mail campaigns or even phone calls. Text messaging is also becoming a more popular way to communicate with customers. You can text customers to remind them about upcoming appointments, alert them about special offers or prompt them to book services that might be coming due. You can also use texts to simply to check in with customers regarding their service. If your shop replaced the brakes for a customer, imagine how they might react if you sent them a text simply to check in and make sure they are satisfied with your work.
I know that texting can be a time-consuming process that employees have to often perform on mobile phones, but new technology now allows shop owners to text from landlines using computer software. However, you decide to communicate, being proactive via emails, phone calls, and texts lets the customer know you actually care about their vehicle, opinion, and satisfaction.
Offer incentives
Obviously, you want to keep every customer that walks through your doors, but as I noted earlier, that’s simply not possible. But you CAN identify those key customers you want to keep and make the effort to keep their sales in your revenue bucket. “Key Customers” are those that spend a certain amount of money with you over the course of a year. How much does a customer have to spend with you in order to be considered a key customer? You will make that determination yourself. Too often, though, shop owners don’t spend enough time reaching out to those key customers to make sure they feel appreciated. Shop owners often place too much faith in loyalty, assuming those customers will always be there to generate sales revenue. Even the most loyal customer can be lured away by the competition if they begin to feel ignored.
To combat this, shops can offer their key, or MVC’s (Most Valuable Customers) incentives to not only reward them for their loyalty, but to remind them that their business is valued. This can take the form of gift cards, discounts for referrals, or specials for recurring visits. Once you’ve looked at your customer database and targeted your key customers, it’s then an easy step to offer them a reason to return to your shop.
Remember, there is a cadence to this process. You don’t have to be contacting your existing customers every day, or even every month. Two to four times a year is more than enough to remind your existing customers you care about them. Use your database to identify those key customers and then establish procedures that allow you to reach out to them periodically.
By doing this, your existing customers will begin to feel a sense of ownership in your shop. They will begin thinking of your shop as “their” shop, something that they are a part of and want to see succeed.
Staff up!
As I said earlier, the customer experience is the number one reason why customers stay or leave a business. As we all know, the customer experience begins and, usually ends, with your frontline employees. You can do all the outreach in the world, but if a customer had a bad experience at your shop with an employee or manager, it’s unlikely they will return to your shop. From the very moment they walk through your doors, they have to feel wanted, and in qualified hands.
This means training your employees to provide a high level of customer service. It means educating them to know the product and services your shop offers. Your staff has to make the customer experience not just pleasant, but if possible, enjoyable. Think of it as offering an experience. When a customer walks through those doors the experience can be good, bad, or mundane. Ideally you want it to be good, but there’s another option. What if your employees made the customer experience, not just good, but memorable? Now your customers will want to return to your shop for future services.
Auto shops are unique because customers may only visit a shop once or twice a year – typically for a repair. However, there are a lot of services shops offer that can generate sales on a more consistent basis. Services such as oil changes, tire rotations, and brake inspections can serve as a constant source of revenue throughout the year.
Even if your employees provided excellent customer service and made the experience a pleasant one, there are still steps that can be taken to drive future visits and keep your revenue bucket filled.
Most shops will simply take payment for services and watch the customer walk out the door. Why not take advantage of the face-to-face time you have with that customer? They are already there, they are hopefully pleased with their experience, it’s the perfect time to try to schedule them for a future oil change or tune up. Put them on the schedule while they are still in the shop, then contact them in the future to remind them of the appointment and, if applicable, offer a discount for said service.
Ultimately, it all comes down to communication and nurturing. By simply making the customer feel valued and using existing tools such as direct mail, texts, phone calls, and emails, you can keep your existing clients in your communications loop and help cultivate loyalty for your shop. We all know that a customer who has had a bad experience is more likely to tell someone about it over a customer that didn’t have a bad experience.
You will always have leaks in your revenue bucket, and you should always be looking to grow your new customer base. If you nurture the relationship with your existing customers, you’ll end up spending less money in the long run to grow your business. Take the necessary steps to plug those leaks, making your new customer growth more effective when it comes to growing your sales revenue.
