This is Real!!
Have you ever heard the statement, “you’ve run out of customer base”? It is a real phenomenon! The end result is almost the same every time, business is great 1 week and then it drops off by as much as 50% or more, seemingly overnight! To understand what causes this to happen we have to look at one VERY important issue first! That issue is caused by a failure in measuring your New to Total customer numbers! See what I said there, “measure” because unless or until you know that number, you could end up with a “Shop Closed” sign in your front window and never know why this happened. Sure, you’ll justify it somehow, but it happens so quickly that most don’t see it coming in time to stop it from happening.
The primary issue in this phenomenon is the lack of measuring, or understanding why you should measure it! Did you know that we statistically lose 30% of our business base (customer counts) EVERY year? We lose it through 4 primary factors we refer to it as “Natural Attrition”. Those are; 1--Customers pass away, 2-- they buy a new car, 3--they move out of the area or 4--they have a poor experience with us and no longer trust us! It is in not keeping up with this 30% attrition that starts this ball rolling and the size of your customer base is how much time you have to correct this before failure of the business occurs. The natural attrition cannot be stopped in 3 of 4 cases, it just happens, regardless! This is one of the primary reasons to work so diligently at making sure we make everyone happy and keep them trusting us!
So how does the natural attrition affect the business to the point that we could be forced to close our doors? How can a number as small as 30% close you down? Although there may be other reasons within this, the biggest reason is simple mathematics, if we lose 30% a year and only get 10% back, we are losing at a rate of 20% a year! Now look at your customer base count and say we are losing 20% a year, how long will it take to not have a customer base left? And that is the easy math, stepping up that loss (shortens the time frame) comes from hiring a good to great Service Advisor who sells at a level never achieved before, and we run out even quicker because we have fixed, repaired or serviced the vehicles (our current customer base) more completely than ever before! This means that our customer base is being cut by 20% every year and even further through a strong Advisor, starting to get the issue? Now you understand why we have to measure it? How do we know we have an issue if we don’t know that percentage? Keep in mind that generally larger facilities that have been in business longer will last longer because they generally have larger customer bases, and shops that have higher New Customer percentages will also last longer, but anytime you have less than 30% a year, you are on the losing side of the curve!
So, what do we do about it? Short answer: Market, market, market, as well as keeping the customer base as happy as possible. Marketing is different for all, and works differently for all! For those reasons we are not going to try and cover marketing specifics here but instead will look at the basics of what needs to be done. If you have a company that works with you in marketing (and you should) and you have less than the 30% new customers we spoke about earlier, you may need to have them work specifically on New Customer Acquisition. Look at what you work on most (again without measuring, you’ll never know this answer) and work on marketing to those potential customers. Express your concerns to your marketing company and let them know that this is what you want their primary focus and funds directed towards. I have fought for this marketing and with many marketers because not everyone believes it is real. I assure you, it is, I’ve been involved with it at every level personally, so please pay attention to it!
If you need help with your business and want to see and feel the successes you expected when you opened your doors, give us a call at:
The ACT Group, 805-444-2598 or visit our website for more information www.automotivecoachingandtraining.com