Customer Acquisition Cost or CAC is the amount spent to acquire one new customer. As an old advertising guy, I prefer to refer to it as an investment rather than a cost. In a dealership setting, this investment comes primarily in two forms – people and advertising. Whether in your BDC or call center, these are people you’ve invested in, both in training (time) and in payroll (treasure). Effective advertising is an investment to be sure and, if it is feeling more like an expense, you may be doing something wrong. Branding, in all its many forms, requires a consistent message over time.
In the retail automotive industry, the advertising portion in the CAC equation is typically between $500 and $600 per unit. Add BDC payroll and the number likely exceeds $700 to add a single new customer. Can we agree that is an investment worth protecting? Obviously, the dealer should do everything in his/her power to make sure the customer has a quality experience so the likelihood she returns for service and additional purchases (LTV or Life Time Value of a customer is a topic for another blog).
There is, however, another important way to protect the customer acquisition investment; insure you are maximizing each opportunity. In an age of severely compressed profit margins a dealer cannot afford to do anything less. To spend $600 to acquire a customer only to sell them a vehicle at little or no gross profit simply isn’t sustainable, but it is happening everywhere.
Dealers, if asked what their average sales gross or F&I gross per unit is, may not be able to provide an accurate answer. Even fewer could tell you who their most profitable individuals are on their sales floor. They’ll be quick to say, “that guy does 30 units a month – he’s my guy.” It is very unlikely he knows which manager this salesman is more profitable with or whether the F&I department has room to profit on his deals.
There are software platforms on the market that track the F&I component of the dealer’s variable operations profit, but there are precious few that provide actionable data for the entire variable operation. Dealers would be wise to consider protecting their customer acquisition investment with one of these platforms. VisionAST is a DMS bolt-on that provides this data–and more–in real time and at a monthly subscription rate of less than 2% of a dealer’s total monthly acquisition cost.
If protecting your $500 or $600 investment per customer sounds like a good idea, schedule a quick product demo today. We’ll show you how it works.