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5 reasons why loyal customers can be more profitable
5 reasons why loyal customers can be more profitable

5 reasons why loyal customers can be more profitableIt’s all too easy to get carried away with attracting new customers – after all, the more customers you have the more profit you’re going to make, right? Well, not necessarily. Rather than chasing new prospects, holding on to the customers you already have is one of the smartest business decisions you can make, ensuring long-term profitability. Not only will that person do business with you in the future, it’s more likely that they’ll recommended you to their family and friends, too. With that in mind, here are five reasons why it pays to encourage customer loyalty:

1.     It costs less to market to them

70% of companies believe it’s cheaper to retain existing customers than try to win new ones (econsultancy). Using the data in your DMS, you can identify how engaged your customers are, helping you decide who to market to and when.

You can also learn their repurchasing plans, and market to them accordingly.

Your current customers will be more engaged than any cold lead. And because they’re engaged from the offset, existing customers need to receive fewer marketing communications. Instead, focus on creating a nurturing communications programme using data from your DMS; send follow-up emails to current leads with compelling offers, to ensure you’re at the forefront of their mind.

Customers who are truly loyal will contact you themselves when they need something, whether that’s a service, repair, MOT, extended warranty or even a new car. They’ll also need less persuasion when it comes to those little extras such as sat nav and heated seats.

2.     They have a higher lifetime value

With loyal customers, you can reduce customer churn and ensure that communication lines remain open. Using DMS data, you can work out who is most likely to buy from you and plan your marketing approach to suit. Thankfully, loyal customers are more likely to repurchase (with a 60-70% chance of converting, Marketing Metrics), meaning they require less chasing from you when their lease or F&I come to an end.

Another bonus is that loyal customers tend to buy more add-ons and additional services than new ones, and will buy higher margin products the longer they do business with you, boosting their overall lifetime value.

3.     They give higher CSI scores

We shouldn’t have to tell you how important CSI scores are for business… but we will anyway. CSI scores show other people how well your dealership is doing, and because they often have to be displayed on dealer websites, not to mention social media pages, they can really impact whether or not a prospect decides to come and visit your showroom.

As well as that, of course, they also help you get your manufacturer bonus.

The more satisfied your customers are, the higher your CSI scores will be; and the more profitable your dealership will be overall. When we look at the bigger picture, it makes sense to maintain that customer satisfaction over an extended period of time, so that you obtain consistently high CSI scores well into the future.

4.     They’re happy to spend more

It’s the long-term customers who tend to be the biggest spenders. Because loyal, satisfied customers are used to dealing with you and have already experienced the quality of the products and services you provide, they are less sensitive when it comes to pricing. In fact your top 10% customers will spend 3 times more, and your top 1% will spend 5 times more than first time buyers (RJMetrics). And once you have built up a trusting relationship with your customer over time, you will find they become increasingly more willing to spend, whether it’s upgrading their next vehicle or saying “yes” to those extras that soon add up.

5.     It’s easier to turn them into advocates

We’re said to be living in ‘the age of the review.’ This essentially means that prospective customers will do a lot of research before choosing which dealership to get their next car from, including online reviews, discussions on social media and good old-fashioned Word of Mouth (WOM) recommendations. In fact, according to research by the McKinsey Institute, WOM is the primary factor for up to 50% of all purchasing decisions.

This is where your most loyal customers can help. Just as people are quick to discuss a negative experience they’ve had with a business, many are happy to share their positive experiences too. By treating loyal customers well, they will return the favour by leaving positive reviews about your dealership and spreading the word about your high standards of service – and if they need a little incentive, well that’s perfectly acceptable.

As well as boosting your online image, long-term customers are more likely to bring family and friend referrals with them. You may even find that you start serving two or three generations of one family, proving that short-term efforts really can pay off in the long-term!


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70% of companies believe it’s cheaper to retain existing customers than try to win new ones.

Loyal customers are more profitable because they:

  • Need less marketing efforts
  • Have a higher lifetime value
  • Give higher CSI scores
  • Spend more
  • Bring others into your dealership