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The vital importance of Customer Lifetime Value

2K views 9 replies 7 participants last post by  davethecardboardbox 
#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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#3 ·
thanks Maurice
The info you provided was good BUT despite the heroic endevours of some dealers - the overall problem appears to be in most cases the poor service by Nissan themselves.

Even with dealers providing 100% efficient and professional service - you are only as good as the product you provide and if the product is good but poor from a distribution/ordering point - deaers are fighting an uphill battle!!!

Fee x
 
#5 ·
To be fair, its not only Nissan and their dealers that forget the basics of what Maurice has said, which is in effect who to run a business! There aren't many companies out there these days who look after customers - most just want a quick buck
 
#6 ·
I got my customer service - after sales call from Nissan today....

After at least 25 minutes on the phone - the girl said "Thank you for your honest answers!"

I think she was relieved to get me off the phone

Fee x

PS - meant to say calls are recorded and I also advertised the "juke owners club" and power to the internet forumsa couple of times.....Edited by: feefeeglasgow
 
#8 ·
feefeeglasgow said:
I got my customer service - after sales call from Nissan today....

After at least 25 minutes on the phone - the girl said "Thank you for your honest answers!"

I think she was relieved to get me off the phone

Fee x

Had my Juke since september and Ive not had this call!!

Have to say - I realise that things go wrong when buying cars, especially a new model like the Juke.
However, I will accept this if I get one thing from my Dealer - HONESTY.

Im not singling out Nissan here - I ordered a Kuga before buying the Juke, but cancelled the order as the Ford salesmanCONTINUALLY lied to me about delivery and once it arrived he then fed me some rubbish about taking 5 weeks to transfer the private plate. Ive owned over 40 cars in the past 25yrs and this idiot thought he could string me along? I cancelled there and then - the Dealership principle wasnt at all happy - voices became very raised! but a quick call to Ford UK telling them what I had gone through soon ended any arguments and got me my deposit back!

Andy
 
#9 ·
Andy, I totally agree with that statement, that is all we ask is truth and honesty, I swear some car salesmen just can't help themselves, its an old attitude to the customer that has no place in modern life the sooner some dealers realise it the better for all
 
#10 ·
Maurice, what a brilliant explanation of Sales and Loyalty. feefeglasgow, I also have mentioned the Juke Owners Club whilst talking to my dealer, and said it was bizarre that I "relied" on the forum to get information on delivery times etc. I thinkmy understanding of the problem that dealers faced, and therefore the calm way I dealt with my delay (albeit small compared to some), contributed to my full tank of petrol that I will have tomorrow when I pick the Juke up! I also pointed out that we own a Nissan Note, so would be looking at the Juke dealer to service both cars, IF we get good customer service!
 
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