Today’s customers are fickle creatures — one misstep and they never return. So, how is a dealership supposed to identify true customer loyalty if it can’t simply be judged by repeat business?
According to an article in Inc., the Disney Institute’s opinion is that businesses today need much more than a simple repeat customer. What they need is a brand promise. This is similar to a unique selling proposition, just more comprehensive. Disney states that a brand promise is “a succinct statement of the tangible and intangible benefits provided by the ideal brand experience… in other words, a brand promise is a statement of how you want the customer to feel when they interact with your product or service.” The company further states that there are four main things customers want from a brand promise: They want to feel important, the promise must be credible (i.e. the customer must believe the promise is possible), it should be exclusive and it should be differentiating.
Customers are constantly bombarded with generic overly broad marketing messages. When every marketer yells the same thing, the message gets tuned out. Wal-Mart advertises low prices. What makes one Wal-Mart any different from the next? Nothing. Consumers will simply go to the one that’s the closest, or most convenient. Car dealerships that promise the same things are in danger of potentially losing a customer simply because they are all perceived as the same.
Auto dealerships today use all sorts of unique selling propositions in their marketing efforts. Free car washes or oil changes for life, guaranteed low prices and great customer experiences, to name a few. If you really look at your unique selling proposition, how different is it compared to the dealership across the street, or your nearest competitor? Almost every dealership will claim they’ll beat a competitor’s price apples to apples. Many have perks for buying at their dealership. According to Disney, these broad selling propositions just don’t cut it. Successful dealership marketers tend to understand that each person has their own individual “hot” button. Some consumers are price shoppers. Some look for great experiences — which could mean anything from transaction time, to customer service, to ease of buying experience, to amount of inventory, to convenience in service.
In order to emotionally connect with your customer and create a brand loyalist, rather than simply a repeat customer, you must find your niche and stop trying to be everything to everybody. Research what your competition is offering, what their message is, and make sure you have something else.
A dealer in Washington state has taken a highly unusual – and unheard of – path to customer retention and loyalty. According to Automotive News, Denver Morford, dealer principal at Barry Chrysler-Dodge-Jeep-Ram in Ephrata, Wash., doesn’t believe in dealer reserve. Not only does he not believe in it but he also educates his customers during the buying process that he is legally allowed to mark up the buy-rate (the wholesale rate the bank has approved the customer for) by as much as 2 percent…and chooses not to. He allows each customer to view the responses from the banks and see the buy-rate that is offered. In his opinion, this transparency on the financing side of his business – and the loss of dealer reserve profit – contributes to his high level of customer retention and brings additional sales via word of mouth. He has no finance department, or used car managers, as he trains all of his sales staff to handle customer transactions from start to finish.
It’s certainly an interesting philosophy. The dealership’s combined sales in 2014 between the 3 stores were 160 new and 390 used vehicles, averaging roughly 46 units per store. Transparency in the buying process has been increasingly demanded by consumers, but I’m not aware of anyone else that has connected the dots between transparency and customer loyalty in this way until now. While we don’t have any numbers to compare (gross vs net profit per vehicle), one would have to assume that they are lower than average, as there’s little doubt that this dealership’s competitors are participating in dealer reserve, and offering other back-end products. Of course, the easy way to balance the loss of back-end profit is to increase front-end profit. But, those same consumers seeking transparency, along with the many forms of information available on the internet, would probably dictate the vehicle prices.
Another theory to consider is that – just maybe – it’s his unusual sales process that’s helping him win customer loyalty and retention. Consumers traditionally don’t like the whole back-and-forth part of the sales process. Training all of his salespeople to assist a customer from the beginning of the transaction to the end may be the differentiator that is really bringing people back and leading to more referrals.
Whether the key to this dealership’s high customer loyalty and retention originates from the “no dealer reserve,” or from the entire customer experience itself is something that should be closely considered. It could be that empowering his employees to smooth out the sales transaction for his customers is all that was needed to raise customer retention, and it’s not just a matter of leaving money on the table.
With brand loyalty at its highest point ever, it’s time to take a new look at customer loyalty within your own dealership. According to IHS Automotive, as of the first quarter 2015, the automotive industry is sitting on a ten-year high of 52.8 percent in brand loyalty – mostly attributed to an increased diversity in model offerings and an increased popularity in leasing. While this is great news, it is important not to confuse brand loyalty with customer loyalty.
If a consumer is interested in buying or leasing another vehicle of the same brand, that doesn’t necessarily mean they will do so from YOUR dealership. So, the question then becomes what is your dealership doing to stand out from the crowd? Customers expect great customer experiences – especially if they are already loyal customers.
Customer retention and loyalty are key to the profitability and growth of a dealership. Yet far too often I see dealers that dismiss rewards programs as “too expensive.” Offering perks, incentives and rewards does not have to be this hugely expensive proposition. Yes, there are some incredibly successful dealers that have gone to amazing measures – even installing such items as movie theaters, or other luxury amenities, to entice customers and make their time at the dealership more enjoyable — less a “waiting in the service lounge” type of experience. Some of these high ticket amenities are making huge returns for these dealers. But, what can you do if you don’t have the budget or space to replicate them?
Consider offering low cost perks of high perceived value to your customers. Perhaps offer to fix that first ding in their new vehicle free of charge. For many new vehicle owners there’s nothing worse than that first minor blemish — and it can be very inexpensive to bring the customer into the service department and restore their vehicle to “as good as new.” It’s an excellent way to introduce your customers to your service offerings and can be the start of building a loyal customer.
On the opposite end of the buying spectrum, how about offering a free detail to those customers that haven’t visited your service department for some time. This is a service that has high perceived value to many customers – I have seen it successfully attract lost customers back into the service department. And it gives the opportunity to rekindle that relationship and win the customer back.
Customer loyalty and retention continue to rise in importance as vehicle loan terms increase — consumers are choosing to hang on to their vehicles longer than ever before. If you rely on repeat purchases, you will have a longer wait period between visits. Take the time to analyze what your dealership is doing to offer value to your customers and give them a reason to keep coming back. Consider adding some sort of low cost perks, discounts and rewards. You’ll find that the customers feel appreciated and become more loyal to you without breaking the bank.