Here’s some real world facts about selling car audio and winning 12 volt customers.
It costs an average 12 volt retailer $17.50 to get a customer to walk through the door (customer acquisition). That is what the average dealer spends on marketing per new customer based on results from dozens of retailers according to Ben Vollmer of BusinessWorx (Avidworx) speaking at Spring KnowledgeFest this weekend.
BusinessWorx surveys customers as they leave 12 volt stores. It found that 55 percent of customers heard about the store through a friend or a past customer. Sixteen percent heard about the store from online advertising and 17 percent by driving by.
Now here’s an amazing number for 12 volt shop owners—90 percent. Ninety percent of your business on average is from repeat customers. Yup, even Businessworx didn’t believe it. The data comes from tracking 40 stores from January through June last year. Vollmer thought the numbers must be wrong and called back the retailers to double check.
If you still don’t think your business is based mainly on returning customers, here’s another finding. New car audio customers spend on average about $100 while repeat customers spend closer to $450.
So, to review, most new customers reach your store by hearing about your shop from your past customers. Ninety percent of your business is in sales from repeat customers and these returning customers spend more than 4X what new customers spend.
What this adds up to is that it’s important to market to your existing customers for the best return on your investment. And the most effective means of doing that is an email blast to your customers.
And that means that gathering the email addresses of anyone who walks in your store is no longer optional, but is, in fact, a critical part of your business. Remember, you pay $17.50 to get that customer in the door, so at least, get his email address.
BusinessWorx suggests sending out one newsletter a month plus an additional 2 or 3 notices on a special sale.
The number one newsletter BusinessWorx offers in its library of pre-written email newsletters is “The 11 Best Apps for Driving.” Vollmer said, “It doesn’t have a single thing to do with amplifiers and speakers, but it’s educational and I’m making myself an expert in the customers’ eyes.”
He added, “If you have 5 people on your email list you start with that. I include everyone I know. If you are my dry cleaner I get your email and you are on the list.”
Vollmer doesn’t let anyone leave his store without getting their email address. Here’s how to do that:
Get an Android tablet and buy a small display case for it, which are widely available and inexpensive. Put a sign on the tablet that says “Enter to Win…..” and ask people to enter their email address.
For your paying customers, when you input their phone number and address for an install, also ask if they want an email reminder for their appointment and take their email. And incentivize salesmen to make sure they get the email addresses. Also, at the check out counter ask customers if they want their receipt emailed to them. Then, again, when you are finished with the car and about it to retrieve it for the customer, ask would he mind filling out this form, while he waits. Again, one of the questions should include asking for his email address.
I find this fascinating. It appears that the problem may not be in the simple cost of acquiring customers, but in the VALUE of the acquisition. Targeted marketing is often a pretty good hedge against low value in acquiring customers. That’s intimated in the indicated difference between what first time buyers spend and what repeat customers spend.
Andy –
The value part is interesting. Existing customers spend four times more than existing clients. Targeting existing clients and new clients will do wonders to boost a retailers revenue.
I emailed you the full deck as well. 🙂
Ben
Right, Ben. You are suggesting TARGETING existing customers and you have data to back up your suggestion. The next segmentation ought to be “what did they purchase and what might they be likely to purchase next time?”
I’d be willing to hazard a guess that the reason new customers are not as valuable as existing ones is because the acquisition methods for new ones aren’t targeted well enough and that’s the point I’ve been trying to make. Setting up a booth at the local home improvement show might get you a bunch of tire kickers, but how many of them will buy? This has been my argument with the CEA regarding floor space at CES. Spend a fortune to chat with someone who’s really there to buy phone cases from the booth next door? Naaaaah…I’d prefer to be in a location where we can focus on people who are already inclined to buy and have proven that by getting in a taxi and coming to some remote location. Is it optimum? No. Is there a higher value in the money spent on acquiring a new customer for AF? Absolutely. Would we be willing to spend more to be on the floor? Yes, but only if it’s MORE EFFECTIVE.
Don’t tell me how you can reduce my cost to do something less effective. MAKE ME DIVERT MONEY FROM ANOTHER INITIATIVE BECAUSE YOURS IS SO MUCH BETTER.
Ben,
Spam is never good. Education is always good. A competent specialty retailer can always create and deliver educational content that adds value to a consumer’s life.
On the CAC… I suspect you just divided the “marketing & advertising” expense by the new customer count. That does not necessarily mean the “advertising & marketing” costs were effective or at all representative of the genuine acquisition cost of a consumer in an effective campaign typical of the business category in the local market. What I mean is if the campaign generates only 10% new customers I am not certain it could be or should be called effective…
That said the research is a great place to begin an analysis of opportunities.
Ray –
I would put forth that many retailers don’t have the time to create their own content. That is what we have found is the number one reason why retailers don’t do monthly mailings. And that is the reason why businessWORX has writers on staff to write newsletters that the retailers can customize for their needs.
For CAC, the Marketing Industry normally uses the total marketing expense in the month. For individual campaigns and activities, you normally would use ROMI, which allows you to see if you have gotten any benefit from your marketing expense.
Return on Marketing Investment (ROMI) =
[Incremental Revenue Attributable to Marketing ($) * Contribution Margin (%) – Marketing Spending ($)] /
Marketing Spending ($)
We showed ROMI Numbers for email campaigns, but didn’t spent a ton of time going through the methodology required to calculate that as I doubt many retailers have a full enough picture like businessWORX provides to make those numbers meaningful or accurate.
I am actually giddy that this has sparked a conversation. Unless we start talking about it and make it part of the conversation with our retailers, we can’t help all of us to improve.
Ben
There is good news and disturbing news here. The good news is that specialty retailers gain a significant portion of their business from word of mouth and repeat business. All good stuff. The disturbing part is the apparent fact that only 10% of the consumers are “new” consumers.
Most of the time when I speak with industry types often brick & mortar specialty retailers, a significant lament is that the suppliers aren’t doing enough to drive “new’ consumers through the front door.
Cipher on this for a moment… If a retailer is in a primary, secondary or tertiary market the typical cost of “new” customer acquisition is between $80 and $270. If that is correct than I contend that spending $17.50 on “new” customer acquisition is the reason that only 10% of our customers are “new”. That might also be the reason that “new” customers spend less than 23% of what the returning customer spends.
Returning customers are the best source of business. They even provide referral customers. BUT if we are to grow, we gotta find a way to be more attractive to “new” customers.
Ray –
It all varies by store, location and other factors. My stores personal CAC is about 26.50. Other stores are much higher. Some stores are much lower. What will be interesting will be trending this out over a couple of years to see what happens up or down.
Ben
So in other words, trick them into giving up their email address so you can spam them later. lol
Bill –
I would never spam or suggest retailers spam any clients. Education and Spam are two very different items. Enter to Win isn’t a method we use at my store. But we do use other methods and using them keeps our unsubscribe rates very low. Your clients are looking for good content and information from you. Spam should be killed.
Ben