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Discussion Starter · #1 ·
As a few on the forum have encountered poor customer service I thought I would explain why we as dealers need to look after our customers, as it would appear that some have lost sight of what effect poor CRM has to the bottom line, I have excluded any income generated from the sale of the new vehicles and part exchange sales

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It is always preferable to develop an ongoing relationship with repeat clients rather than depend on costly promotions to attract fresh custom. You should calculate your Customer Lifetime Value to highlight just how important this factor is.
To calculate your Customer Lifetime Value, take the average transaction size that you deal with. Multiply this by the number of purchases an average customer makes from you each year to calculate the average annual sales volume of each customer you have.
e.g. I determine that an average transaction is £200, and that an average customer buys from me just once each year, so the average annual sales volume per customer is (20 x 1) £200.
How many years does your average customer keep buying from you? Multiply the annual sales volume per customer by that number of years to calculate their direct lifetime value.
I have determined from looking at billing details that my average customer keeps buying from my company for around 3 years, so their direct lifetime value is 3 yrs multiplied by £200/yr = £600
How many additional clients are referred to you each year by your average customer? Multiply that number by the number of years that your average customer keeps buying from you.
I've ascertained that an average customer refers 2 new clients to me each year, so in the 3 years that they are clients, they refer (2 x 3) 6 additional clients.
Finally multiply the direct lifetime value of the customer by the number of total referrals that your average customer brings, and add the direct lifetime value to the result. This is the total customer lifetime value.
Since an average customer has a direct lifetime value of £600, the 6 referrals bring (£600x 6) £3600 and then adding the customer's own lifetime value of £600 means an average customer is worth a total of £3000 (and more when you consider that the six referrals they brought may each in turn bring six more).
This shows precisely why some companies will choose to use loss-leaders - a deal they actually lose money on - in order to open up a new customer relationship. Losing a little on that first transaction can easily be made up over the course of the lifetime relationship with each customer
If that doesn't show you exactly why gaining customer loyalty and building ongoing customer relationships is so incredibly important, then you are probably not cut out for business. Customer relationships are absolutely vital to any business
 
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