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There was an article yesterday in USA Today regarding small businesses not renewing their agreements with Groupon because the customers the owners are getting from the daily deals are not returning. According to a survey by Manta in October, only 3% of retailers get repeat customers out of daily deal promotions. This should come as no surprise at all. You give a customer 50-75% off and then wonder why they won’t come back at full price? I get the idea – the product and service are so great that people will come back at full price, but there is a key marketing concept here that these businesses are missing, and it is one auto dealers should pay attention to as well.
The reason, or factor that influences a customer to come to your business the very first time, is likely going to be the strongest influencing factor to get them to return the second time. In other words, what made them buy the first time? That is why they will buy the second time.
In the case of these small businesses on Groupon, the factor that influenced consumers on Groupon to buy was a discounted price…the price was the strong influence in the purchase decision. Therefore, it will be difficult to influence a purchase from these customers the second time based on a different factor, such as service. The fact that these customers subscribe to Groupon and come to your business for a 50% off coupon tells you that a good price and saving money matters to them. Customers that shop for discounts will typically keep looking for discounts for repeat purchases, they don’t change their stripes and suddenly not care about price at all and instead look for service or product quality..
So dealers that grab new customers based on large price discounts will most likely have to give another price discount to get them to come back, even years later. Otherwise these buyers will move on to another dealer for a lower price. The point here is not that it’s a bad practice for dealerships to use price discounts to influence customers, as long as the dealership understands that the customers will always buy based on price. Compare that to a customer who comes and buys from your dealership based on your strong reputation and great service. That is what they will return for – that same great service, which means they could end up regularly paying more money for the cars they buy, and ultimately, be more profitable customers. Sales discounting is very addictive in the retail business, regular sales and discounts teaches consumers to wait for the next sale before buying, in effect guaranteeing they will never pay full price. When you focus on bringing in customers using your Reputation by offering outstanding customer service, dealers should see a higher return rate and a higher average price per vehicle then relying on price point alone.