You could increase your profits up to 25 percent!
Now that I have your attention: “Across a wide range of businesses, customers generate increasing profits every year they stay with a company.”
Those aren’t my words. They’re Fred Reichheld’s in his book, Loyalty Rules! How Today’s Leaders Build Lasting Relationships.
A fellow of Bain & Co., a speaker and New York Times best-selling author, Reichheld cites, as an example, that in financial services, a 5 percent increase in customer retention can produce more than a 25 percent increase in profit. He attributes it to making loyalty marketing a priority.
It’s more often called customer retention, and if loyalty to a business ever seemed automatic, you can kiss those days goodbye. Today, everyone faces an onslaught of information and slick solicitations that can quickly make any customer forget all about you. We need to remind ourselves that customer loyalty can be far more profitable than acquiring new ones.
Indeed, think about the cost and effort it takes to get one new customer. According to a report in the Harvard Business Review, it costs five to 25 times more to acquire a new customer as it does to retain an existing one.
I’ll never forget an opportunity I had some years ago to hear Chick-fil-A founder S. Truett Cathy speak at a Regal Boats-sponsored “Leading with Vision and Values” luncheon at the Miami International Boat Show. His legacy is unmistakable and unduplicated in the fast-food space.
Chick-fil-A has so effectively mastered the economics of customer loyalty that it can afford to pay store operators double, even triple its industry’s average compensation while staying closed on Sundays and giving 10 percent of profits to charity. Essentially, loyal customers increased sales at a lower cost.
“People want to work for a person, not a company,” Cathy said at the Miami show. His reference was to the tone set by the leadership. It makes caring for and, therefore, pleasing customers the highest priority. So instilling customer retention in the DNA of any dealership will always begin with the leader.
And to follow the Chick-fil-A example, not long ago, I forgot to order desert when I placed my order at the drive-through. When I pulled up to the window, I told the woman that I had forgotten. “What would you like,” she asked. I told her and she said, “just pull over there, we’ll bring it to you right away.”
When it arrived, I attempted to hand her my credit card. “There’s no charge,” she said. “It’s our pleasure.” You think being treated like that might make me a returning customer?
So how do we measure it all? The critical gauge of customer loyalty is found in the frequency he or she gives your dealership business — service, parts, accessories, dockage, fuel, storage. Taking the time to research your sales and service records will reveal whether or not you’ve been successful.
The “not” refers to what’s called the “churn rate.” This measures how many customers leave and don’t come back at all. It will take some effort, but study your records and determine if a customer didn’t return after making their first big purchase or suddenly stopped after regularly doing business in the service department. There’s always a pattern.
Once identified, reach out to those customers by sending them a card, email or text message that says, in effect, we know we haven’t seen you for a while, and we care about that. Consider giving them a special offer, such as a limited-time discount, some courtesy service or an invitation to a special event to reinvigorate the relationship.
You can also send targeted messages that tell them you have new products they might be of interest and could make their boating time an even more exciting experience. Remember, we don’t sell boats, we make experiences.
I think of information like: “Six of the Best Spots for Florida Boating,” put out by Regal, or a steady series of helpful boating ideas sent out by MarineMax. Communicating today is not rocket-science. The topics are endless if you’ve studied your customer base.
Finally, another benefit of identifying and nurturing loyal customers is that they can help build any dealership simply through word-of-mouth. Moreover, they are more likely to remain loyal, even in the event of some unusual mistake that’s temporarily had a negative impact on them.
Above all, make certain your entire team is aware that customer loyalty is a daily goal in every dealership. It’s not just a buzzword; it’s serious business. In return, loyal customers will give the dealership a lower cost avenue to increase sales and, subsequently, better profits.