Sept. 1, 2008: The ‘deep pool’ of returning powersports customers
September 1, 2008
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Without them, you’re toast.
That’s my conclusion after studying customer patterns year after year. If you don’t maintain your “deep pool” of repeat customers, you run the risk of losing two-thirds of your business.
Time and again, I see roughly two-thirds of your customers are long-time repeaters. They have been with you through thick and thin, and are committed to the sport of motorcycle riding. As long as you provide the service, remember their name once in a while, send them a card or two during the year and treat them as a friend when they walk in the door, they will stick with you. Year after year after year.
Here are the numbers.
I studied 140,000 parts sales that occurred in one store over two years time: from July 2006 to June 2008. Each named customer was classified by the date of their first purchase. Those who were active before July 2007 were grouped as “deep pool” customers. Customers who first show in the months after July 2007 were termed “new.” Both groups were followed through June 2008.
I found that deep pool customers drop off at a very slow rate. Of the 3,400 customers who were active in July 2007, 2,300 of them were still buying things in June 2008. That is 67 percent of that original group that are still walking in the door and pulling out cash a year or more after we first saw them. The loss rate is just under 3 percent of the group per month, and at the end of 12 months we see they have dropped from 56 percent to 40 percent of our current customer base. If we remove causes such as natural death, moving away and jail time, it looks like almost all of these folks hang with us.
And then we have the new customers. Each month delivers a new group of customers that has never been in the store before. For this store, that is about 1,900-2,600 people per month. That number dwindles over time, until at the end of 12 months we see a recurring 100 customers per month added to our deep pool.
So the repeaters among the new customers are adding into the deep pool at the rate of about 1 percent-3 percent of total customers in 12 months, and the deep pool itself is decreasing at about 3 percent per month from other natural causes. Inflow. Outflow. Over time, this creates a slow, steady growth in the deep pool.
The importance of the deep pool is obvious. But the part that concerns me is the steep dropoff of our new customers every month. Only 10-13 out of each hundred are returning in the second month after their first visit, and at the end of a year, we see only four out of each original 100 in a month.
“Was it something I said?” we might ask ourselves. How could we offend so many people? Did they lose interest in the sport, or is it something else?
Did we do all we could to integrate these new buyers into the sport? Did we introduce them to the service manager, walk them around and let them sit on a cool bike? Remember, this study is limited to parts counter customers, so there may not have been time to do all of this, but we should have done something! Even a little smile, a helpful suggestion or a simple “thank you” can go a long way. We want these people to come back. But we have to make it happen.
Study your own store (can you say CRM?). See just how many customers you attract with all your advertising and your going to races and your community goodwill efforts. And then see how many of them come back after their initial introduction to your operation. If your “deep pool” just isn’t that deep, you may find someday that the well has gone dry. And that just doesn’t sound like anyone’s plan for success.
Hal Ethington has been associated with the powersports industry for more than 30 years. Ethington is a senior analyst at ADP Lightspeed. He can be reached at Hal_ethington@adp.com.