A new benchmark report published last month by RSR Research, provides some interesting information about retailers and the shifts in focus and importance from 2012 to 2013.
According to the study, 61 percent of retailers feel customer retention has become more difficult, and building loyalty has become more challenging. This is a 10 percent increase from 2012. The study advised “if retailers are going to have collective leadership and responsibility for the customer experience, then they need to ensure that everyone is working off of the same vision for what the customer experience should be.”
In many businesses, there exists a general expectation that all employees proactively ensure that customers have a great experience. The problem is that there is typically not a single person charged with being responsible for it. You cannot have a goal of providing a great customer experience if you aren’t tracking whether or not you are providing it. You can’t rely solely on CSI scores and surveys from your OEM. You must have a process in place that surveys your customers and an employee in charge of analyzing the results and making process changes as needed. According to the study, “leaders identify – at an inordinate rate – that an executive tasked with managing and improving the overall customer experience is key to ensuring new marketing techniques have relevance.”
The study further found that 61 percent of business leaders believe that there needs to be a greater focus on customer experience and less on the product. At the same time, 44 percent responded that their marketing departments don’t spend enough time building customer loyalty.
And, while 52 percent of businesses with above average sales growth say that their marketing department is not spending enough time acquiring new customers; surprisingly this number rises to 100% for businesses with below average sales growth.
Dealerships have always spent the majority of their marketing budget on new customer acquisition. As the customer base grows, they may then shift some of their budget to customer retention. The problem is that while focusing on acquiring new customers, many dealerships fail to also pay attention to customer defection. The result is that they end up simply replacing defecting customers with new ones. And, rather than achieving growth, simply maintain the status quo.
According to the study, any growth strategy of acquiring new customers “may actually mean you can’t afford to take your eye off the target when it comes to keeping existing customers happy – because they can so easily share their dissatisfaction in social spheres and thereby chase new customers away.”
Business leaders increasingly recognize that the key to a successful growth strategy is to recognize that new customer acquisition must include a strategy for customer retention. It does not work to simply keep refocusing your efforts from one to the other. There has to be a symbiotic relationship between them.
Don’t try to plug the dam by running around sticking your finger in one hole to just to have another leak appear. A strategy that combines acquisition with retention along with successful execution will allow you to plug all of the holes at the same time.
How does your business retain customers?
Which do you think is more important: acquiring new customers or retaining your current customers? Why?
One challenge all businesses face is creating loyal customers. As business owners, we try to analyze our customers to figure out what methods we can use to build that base of customers which is so important to future growth. Without loyal customers, your efforts at customer acquisition quickly go from growing your business to replacing defecting customers.
James Kane is a behavioral scientist that has advised top businesses about customer loyalty. He studies the brain and what triggers loyalty in people. According to Mr. Kane, there are three triggers that influence loyalty in a person.
A Sense of Trust – According to Mr. Kane, “…trust is obtained by doing the things that people expect you to do anyway…” This is especially important for car dealerships. While people are hoping to be treated fairly and honestly, there is a stereotype that has instilled distrust in car dealerships. This is why it’s especially important to ensure that you treat every customer just as you would expect to be treated in a transaction where you are buying something from Nordstrom’s that costs $30k. You would expect to be treated in a professional manner and to be appreciated for your business. Make all your customers – sales, service and parts – feel appreciated for their patronage and live up to their expectations.
A Sense of Belonging – Businesses build a sense of belonging in their customers “by showing that a business empathizes with the worries that make customers lose sleep at night,” says Kane. Just like you, customers have a lot going on in their lives. They have bills to pay, have kids to take to soccer practice and work long, stressful days. The last thing they want is a business adding to those worries. Whether your service customers arrive for regular maintenance or come in because something is wrong, they want you to help alleviate their worries. Don’t add to them by failing to live up to any promises you’ve made or failing to solve their problem correctly. Your sales customers worry that they aren’t going to get a good deal and that they will spend too much time at your dealership. If they’re at your dealership, they’re obviously in market for a vehicle. Be an actual advisor and help them find a vehicle that fits their needs. Then facilitate an efficient transaction in a friendly manner that is mutually beneficial.
A Sense of Purpose – Show your customers a sense of purpose by operating in a manner that says, “We stand for something beyond just the exchange of money…” Don’t focus solely on what a customer brings to your business. Examine what you can give back to your customers. If you don’t already have one, create a mission statement and display it in your showroom and in your service waiting area. Show your customers that you are committed to them by sharing your organizational beliefs; (they should include customer-centric ideals). Ensure that your customers know that they are more than just dollar signs to you. Demonstrate how you appreciate their business and will do everything in your power to make sure they leave satisfied. Then live up to your promises.
In this industry, we use psychology all of the time without knowing it. We listen to a customer’s needs and help them down the path of the sale. We have sales processes designed to encourage the customer to buy… and buy now… and we have service processes designed to better assist our customers to make choices that keep their vehicles operating at optimum levels. Customer loyalty is imperative in our hyper-competitive industry. Many companies are advising businesses to shift their focus from customer acquisition to customer retention. Not only is it less expensive, but it also ensures that money spent on acquiring new customers is actually leading to growth, rather than the status quo.
What are some of the challenges that you face when trying to keep customers loyal?
How do you create a sense of trust and belonging with your customers?
In what ways do you demonstrate that you appreciate customers’ business?
Life lessons typically come when you least expect them as software coder, Ted Dziuba, discovered. He and his friend went to a bar that served Pappy Winkle’s Family Reserve Bourbon Whiskey that is widely regarded as the world’s best bourbon. While drinking, they talked to the bartender who explained to them it’s origins and other interesting information about it. He then told them about other drinks that were interesting and they were enthralled with his creativity and mastery at his craft.
Around that time, a man approached the bar and said, “Lemme get a Captain and Coke, brah.” After the gentlemen left, they asked the bartender whether it bothered him to make such a common drink when he quite clearly had demonstrated his expertise. His response was:
“No, it doesn’t bother me. If the customer orders Pappy and can talk about fine whiskey, I’ll pour Pappy and talk about fine whiskey. But if the customer orders a Captain and Coke, I’ll make the best Captain and Coke I can.”
Mr. Dzubia learned a life lesson that we could all benefit from. In his words, what he learned was “that barcraft is fundamentally about giving the customer what they want…[and that] the true master obliges both.”
How does this apply to car dealerships? Think about the many different types of customers you see every day come through your dealership in all departments. Dealerships see a wide spectrum of customers from “gear heads” to those who don’t know how to turn on their headlights. Dealerships have certified mechanics that are highly trained, service advisors that know vehicles intricately, salespeople that know every detail of their product and a leadership team in place that, typically, encompasses it all.
I think the lesson learned is applicable to not only “barcraft” but to all crafts. Every position in your dealership should be viewed as a craft. You expect your porters to know how to make a new vehicle immaculate when it’s sold to pass even the most discriminating customer’s inspection because you know a CSI survey is going to ask that question. Your mechanics are trained to do it right the first time and have the knowledge and ability to accomplish that. Your salespeople are infused with the knowledge about your product as well as the ability to assist customers in selecting one that’s appropriate and right for their needs.
Ultimately, all of these positions have exactly the same fundamental purpose, to give the customer what they want.
When a service advisor gets a customer in service that’s a “gear head”, he has the ability to talk the language with them. If their customer knows nothing about cars, he should change his language to speak in a way that the customer understands. In addition, a big part of a service advisor’s job is identifying and recommending additional services to each customer. They can be much more successful doing that if they can adjust their language to match each customer’s.
Great salespeople know to mimic their customers. Not only will they copy their language and speak to that specific customer’s knowledge level but they’ll go as far as mimicking body language. If a customer is interested in a high-performance sports car, the salesperson will sell the vehicle by pointing out all the performance features: how fast it is, how much torque it has, horsepower and speed. If their customer is looking for a family vehicle, the salesperson will focus on the safety, comfort and practical features of the vehicle.
Too often, dealership personnel don’t give the customers what they want. Maybe the service advisor is talking in a language above the customer’s knowledge level or a salesperson is trying to sell a vehicle that’s not matched to the customer’s needs and wants.
Learning to give the customer what they want is a craft in itself. Learn how to listen to your customers. Make sure that you’re speaking in a language they can understand. You’ll offer a superior customer experience while increasing customer loyalty and retention.
Have you trained your service advisors how to talk to different types of customers?
How does your business ensure that you give the customer what they want?
There are many benefits to having an automotive loyalty program at your dealership to increase business and customer retention. You must be mindful, however, of some dangers that exist if the program is not implemented and administered properly.
Loyalty programs seek to reward behaviors. For dealerships, automotive loyalty programs exist to reward customers for spending money at your dealership whether that’s in your sales, service or parts department.
In the behavioral theory of operant conditioning, the negative contrast effect exists. This effect happens when a customer is rewarded for certain behaviors and then those rewards are reduced or withdrawn. Customers are, in turn, less likely to exhibit the reinforced behavior in the future than if they had never been rewarded at all. The theory explains that the customer starts to view the desired behavior as work where they were only temporarily rewarded. In the long run, this could even make the customer feel like the behavior is a chore. For example, if you reward a child for washing the dishes for a period of time, then withdraw the reward, the child starts to view washing the dishes as a chore. This would decrease their desire to wash dishes, as there is no longer a reward to be achieved as a result of successfully completing the behavior.
If we extend this theory into the world of retail business and loyalty programs, the goal of the program is to incentivize your customers for being loyal. By implementing these rewards, you’re instilling in your customers an expectation of reward for a behavior. Let’s say you offer your customers a free oil change after every 3 purchased as part of a loyalty program. In the past, I’ve shared with you the “Endowed Progress Effect” which states that customers are more likely to increase the effort they put forth to achieve a goal if the goal seems more achievable. Conversely, the negative contrast effect would say that not only would removing this reward make your customers less likely to be motivated to complete it, they would make less effort to come in to your dealership.
The important thing to remember is that when implementing a loyalty program at your dealership, consistency and a commitment are required. By removing a reward system after your customers get acclimated to it, you could actually diminish the business you encouraged and achieved when you rewarded your customers.
It has been proven by countless businesses of all sizes that loyalty programs can increase service and sales revenue and customer loyalty. A loyalty program is a long-term commitment. If you aren’t consistent, your customers won’t be either.
How is your loyalty program providing long-term benefits for your customers?
What types of rewards does your business offer to keep customers coming back?