Maybe not. Let's say you start with 1,000 owners, and 700 of them buy a Ford next time. What about the time after that? Seventy percent of 700 is 490—less than half your original owner base. To replace them, you'd have to dig up 510 new buyers. That's difficult.
So, we worked on the loyalty rate. We wanted to get it up to 80 percent. What a difference that made. Eighty percent of 1,000 is 800, and 80 percent of 800 is 640. That meant we'd sell 150 more cars during two cycles (per 1,000 owners) that Ford wouldn't have sold otherwise. The retention program would cover about 30 percent of the potential shortfall in sales when the loyalty rate was at 70 percent.
How much do you think Ford spends to get 150 new customers? Probably more than $25,000.
Retention is Cheaper
Contacting current owners is much less expensive for many reasons. There are fewer owners than prospects. You don't need TV, radio or dealer programs. Owners come in to the dealership. They call and write with questions, comments and complaints. Plus, Ford writes its owners all the time for maintenance notices, recalls, installment payment invoices, etc. Somewhere in there is a great retention program.
It's also measurable. Retention's cousin is customer recovery. I'm flabbergasted by how many companies don't realize they're losing customers. We once had a client who insistently wanted creative for a new customer-acquisition program. We stalled him while we merged his customer files into a rudimentary database. We discovered he'd been losing customers at the rate of about 600 a year for the past three years—and the average annual purchase was more than $500!
That's $300,000 in one year; $1.5 million spanning five years if you track lifetime value.
We suggested a customer-recovery program, and we got about 900 of his 1,800 defectors back. Most of them told us they thought the client had lost interest in them and/or taken them for granted.