Customer Retention & Customer Acquisition

Becoming a car owner means you’re also about to become an auto shop customer. The two go hand-in-hand: car owners understand that before too long, their car is going to need maintenance. It’s only normal for someone to want a reliable repair shop to service their car for regular maintenance when needed. Through the years, repair shops have developed a bad reputation for being untrustworthy and taking advantage of customers.

 The shop owners who are trying to change these negative perceptions are also the ones who are investing in marketing efforts to help increase business. One of the biggest questions for auto shop owners is, “Should my shop be focused on getting new customers or keeping existing customers?” Businesses are always trying to do both, but is one better than the other?

Well, one will cost you considerably less than the other. The money spent on customer acquisition is about five times higher then the cost of retaining one customer. The strange thing is that while customer retention is cheaper, only 18% of businesses focus on customer retention. Most people think new business is the only business. However, customer retention has continued to be the most cost-effective solution to achieving profit goals. Once you have established customers, they will spend more with your business and try new products because they trust your shop. It’s similar to when you find a tool company you prefer. From that point forward, you will most likely purchase tools from that brand. Your auto shop customers are the same. They will listen to your input and trust their money with your shop.

Understand The Value Of One Customer

To help understand the importance of customer retention, consider your Customer’s Lifetime Value (CLV). This is the predicted profit from a customer over time after becoming your customer. Take a look at the equation below to see how to calculate your CLV:

(Avg. Service Value) x (# of Repeat Transactions) x (Avg. Retention of a Customer in Years)

= Customer Lifetime Value (CLV)

Example: $300 (Avg. Service Value) x 2 (transactions/year) x 5 (Avg. Retention)

CLV = $3,000

Calculating your Customer’s Lifetime Value is an incredibly useful tool to see the potential of every customer that visits your auto shop. This way, you can predict how much your shop will bring in yearly if every current customer returns when their car needs a repair. This will also help you understand your Return On Investment (ROI) with your marketing efforts. Once you know these values, you’ll be more able to decide where to invest your money in different parts of your business.

Okay, So Focus On Returning Customers?

Does this mean you should only focus on returning customers? Not quite. For any business, getting new customers is essential for growth and development. New customers means new business. While this is true, you should also want those customers to come back – which means you need to provide a positive experience. Give your customers a reason to come back instead of just completing their service and hoping for the best. Some companies implement loyalty programs to help provide an incentive for customers to return to their shop. For small businesses, loyalty programs have continued to improve year by year. Customers are reaching the point of expecting these reward programs when paying for services.

Customers are increasingly wanting a positive customer experience when they visit a business. They don’t want to feel like just another car owner needing an oil change. Who better to focus on providing that positive experience than your employees? They are the ones on the front lines talking with customers and handling vehicles. Make sure they have the knowledge and persona to represent your auto shop. Once you have the best employees for your team, give them the support they need to do their job to the best of their abilities. Auto repair shops can have long hours, so be sure your team is taken care of before they get overwhelmed and exhausted. If employees are exhausted, they’re more likely to be impatient with customers.

Customers who have overwhelmingly great experiences or bad experiences with employees can be the biggest voices for your shop. By providing your employees with the proper training, they’ll be more likely to have positive interactions with your customers – meaning those customers will be more likely to return to your shop the next time they need a repair.

Help Customers Find Your Shop

First and foremost, make sure you have a website. If your auto shop hasn’t ever had a website, it should be at the top of your list as your next investment. Marketing online is affordable and worthwhile. According to a Yelp survey, 85% of people use online search to find local businesses. If your business isn’t listed online, you’re most likely losing tons of potential customers in your area. A website also helps build your credibility online through reviews and consistent business information. With so many people searching for local businesses, a website is a wise investment to attract more customers, both new and old. Websites are your way of updating business information, shop hours, promotions, appointment forms, etc. Even established customers will need to look up your shop’s phone number on your website, a website makes this simple.

Create Your Strategy & Test Drive It

If you don’t know how well your current marketing efforts are going, it can be difficult to know where to invest next. For newer auto shops, it may be beneficial to first focus on getting new customers. For established shops, focus on retention and the best ways to keep your current customers coming back to your shop. Take a look at your past marketing efforts. Was there something in particular that brought you more customers and more revenue?

Maybe this is a good opportunity to invest in new marketing resources for your shop. Every business is different and certain marketing techniques that work for one shop may not be the best avenue for your shop. That’s why it’s important that you keep an eye on what efforts work for your shop and attract the most customers.