The Most Expensive Cost Of Business

Do you know how much it costs to gain a new client, what's called the sale cost? It is one of the most expensive sales you'll ever make. But even more expensive is the sale you'll never make again. You're losing money as a steady stream of your existing clients sneak out the back door and never buy from you again. That's the most expensive cost of doing business. You end up spending more on front-end

Do you know how much it costs to gain a new client, what's called the “front-end” sale cost? It is one of the most expensive sales you'll ever make.

But even more expensive is the sale you'll never make again. You're losing money as a steady stream of your existing clients “sneak out the back door” and never buy from you again. That's the most expensive cost of doing business. You end up spending more on front-end sales by chasing new customers to replace lost ones.

Let's figure out the long-term worth of an average customer. Mrs. Jones, buys a car every 4-5 years. With an average profit per sale of $2,000, she is worth $10,000 in profit to you over a 20-year period. (Not to mention what she'll spend with your service department.)

But it doesn't stop there. Mrs. Jones has a sister, two daughters and a friend she refers to you. Add up their lifetime value as a customer, and Mrs. Jones is suddenly worth $50,000. If her sister, daughters and friend also refer you to their friends and family, soon there's potential of hundreds of thousands of dollars.

So if Mrs. Jones “sneaks out the back door” and never calls on you again, that intangible expense just became your most expensive cost of doing business.

This gets many car dealers in trouble. Every day they lose clients to competitors because they don't have a plan to minimize this costly expense.

Analyze why clients leave in the first place: 1% die, 3 % move away, 5 % switch to friends in the business, 14 % are dissatisfied with the way you or your staff handled them and 68 % quit because of a perceived attitude of indifference. (This includes not staying in contact with them.)

Let's see what you can do about the 82% lost because of dissatisfaction or indifference.

To hang onto your clients in this flooded market, you must establish a higher level of quality and service. Treat your clients like they have a $100,000 bill taped across their foreheads. Teach your managers, office staff and sales people to value each client this way.

The number of auto dealers who don't keep a database and never contact their clients is appalling. Tens of thousands of dollars are sitting in their file cabinets as they wonder how to increase their number of “ups”!

Jeff Bull is vice president of the Automobile Dealer's Marketing Association. For a free copy of his report, “Million Dollar Marketing Secrets Of The World's Most Successful Car Dealers,” call 1-800-969-6995.

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