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Wednesday, 21 November 2012 17:30

What’s the Value of a Lifetime Customer

Written by Tom Franklin

What is the value of a lifetime customer? Let’s just take 15 years.

A typical driver has some sort of vehicle damage once every three to five years. If we count little parking lot scrapes and minor dents, three years may be just about right. That means a good customer might visit the shop five times in 15 years, but at least three times. How important is it that this customer becomes a repeat customer? Of course that depends on the size of the shop, the referral sources the shop relies on, and the number of repeat customers the shop relies on to maintain a steady, profitable business. A shop with many DRPs providing a steady flow of new customers may not be as concerned with repeat customers as a small to medium sized shop that needs at least half of all customers to come back again—and hopefully again and again.


In just those 15 years, a repeat customer might generate $5,000 worth of business, and possibly much more. In his unique book on marketing, “Getting Everything You Can Out of All You’ve Got,” author Jay Abraham says: “Until you identify and understand exactly how much combined profit a client represents to your business for the life of that relationship, you can’t begin to know how much time, effort and ... expense you can afford to invest to acquire that client in the first place.” Cable, phone and other similar companies offer a low rate for the first year to gain new users. It’s well known that repeat buyers and users become far more profitable as time goes on. How can this approach apply to a body shop?

Visiting many shops over the years, I’ve often heard the viewpoint that fixing dings and small dents is a losing proposition. They say the time and effort just generating the paper work costs more than the small profit made for the repair. Obviously this viewpoint is not taking into account the lifetime value of a customer. It also overlooks the habit principle that says the number of repeat experiences determines how deeply a habit is ingrained in an individual. Just getting someone to come to the shop multiple times (without having a bad experience) will accustom that person to having a repetitive relationship with the shop. How deeply the habit is ingrained will also determine how resistive the customer will be to being pressed by his or her insurance company to go to their selected DRP shop. For many people, a strong, personal relationship is necessary to be willing to reject their insurer’s insistence on using a different shop than yours.

So, how far would you go to get many, if not most, customers to become lifetime friends and customers? Jay Abraham says it starts with viewing the person as a ‘client’ rather than as a ‘customer.’ A customer is one who purchases a product or service, but Jay notes that a client is defined as “a person who is under the protection of another.” He advises becoming a trusted adviser who they can look to for protection—in our case from predatory shops seeking obscene profits or making fraudulent claims, or insurance companies directing them to a shop that is more to the advantage of the insurance company than to the customer/client.

I’ve seen the length some shops will go to, to find a less costly part or to provide service above and beyond what is generally expected. The customer/client loyalty to these shops is quite remarkable. But is there something more a shop can do to cement a lifetime relationship during that first visit to the shop? Many businesses now provide customers with a ‘reward’ card and department stores provide customers with a credit card only good at their store. Most reward cards just accumulate points for gifts or to apply credit against a future purchase. I’ve heard of a few shops that were in the process of creating a similar card to give to first time repair job customers. But the card could also be used for car washes, detailing, pin-striping and other vehicle related services.

A completely different approach is providing an estimator with special incentives to build a more personal relationship with first time customers. If a shop has a long-term estimator who can be counted on to stay with the shop far into the future, the personal touch is often key to getting people to come back. Letting the estimator be the good guy, cutting some costs or speeding up repair time, can endear him or her to the customer. Many people come back simply because they like and trust a specific person at a place of business. When future business is taken into account, a shop is always wise to calculate profits in the long run.

Read 2303 times Last modified on Wednesday, 14 December 2016 19:13