Recent Automotive News: What Every Car Dealer Should Know

What is Your Customer Acquisition Cost?

Do you know how much it costs you to acquire a customer using the traditional "shotgun" media such as TV, radio, newspaper and magazine? You may find the answer in Automotive News, but if not, it's really easy to figure out. Simply calculate all money spent on advertising, marketing, PR and any other external prospect communication last year and divide that by the number of NEW customers you attracted last year. Shocking, isn't it?

Figures tossed around for customer acquisition cost range from $85-$100. But that number is an average, which has nothing to do with YOUR BUSINESS because the cost to acquire a customer varies greatly not only by industry but also by company. Auto dealers have an acquisition cost of hundreds of dollars per customer when you add up the money spent by the manufacturer and the dealer.

If you did the exercise above for your business, you came up with the number of new customers you acquired which means the remaining customers in your database must be "repeat" purchasers.

How much did you spend on your repeat customers?

A mistake many businesses make is they spend all their marketing dollars trying to gain new customers and allocate little if any money to retain existing customers. According to management guru and author Peter Drucker, it costs you five times as much to get a new customer as it does to hold an existing one. I think that's a conservative estimate, based on an industry average. Can you calculate retention vs. acquisition cost for your business? How much would you need to spend on a program to retain your current customers? I bet it's less than 20% of your cost to acquire a new customer. more...