It’s a logical conclusion that customer retention and loyalty are important to the survival and growth of any dealership, yet many dealers focus on growth by intangible metrics, simply looking at numbers – 100 units last month vs. 125 this month, or $125,000 in service revenue last month vs. $175,000 this month – without knowing whether that growth was influenced by customer acquisition or retention.
Most dealers spend a lot of money on marketing every month and it’s very easy to attribute any growth to successful marketing campaigns, technology or vendors, when, in fact, it could very easily be coming from successful retention strategies.
An excellent article on Customer Think spells out precisely why loyalty in the automotive industry is incredibly important, and how you can better leverage retention, loyalty and acquisition strategies to increase growth, revenue and volume.
The article suggests the use of data to predict when sales are ripe as one way to help your dealership thrive. Your CRM has many data points which can help indicate that a customer is ripe for a new vehicle based on things such as marriage or kids, along with many others. Hopefully, these customers are coming to you for service, which gives you a running profile on what has changed in your customer’s lives. This allows for more targeted, personalized and relevant offers which ultimately will convert into sales.
Of course, service plans (pre-paid maintenance) are also huge retention drivers, with a retention rate of close to 60 percent, according to the article. Pre-paid maintenance keep customers visiting your dealership for years. Assuming they’re having a good experience, this also helps them decide to get their next vehicle from your dealership, rather than a competitor.
You can’t always rely on your customers to tell you when lifetime changes occur that could indicate they are ready for a new vehicle. Pro-active marketing and continual, relevant communication with your customers is imperative to retaining their business – for both service and sales. Without a continuous conversation, it’s very easy for the competition to conquest away your customers. This worst-case-scenario, when it happens, means it’s too late, in most cases, to continue the customer relationship. It may not even be that anything went wrong, simply that a customer was attracted by a competitor’s offer. However, it’s very hard to win them back. So, keeping in touch, being relevant and anticipating your customer’s needs, rather than reacting to them, is incredibly important.
Also, be sure that your dealership always offers a superior customer experience. It’s much harder to conquest a loyal customer than it is a satisfied one. Don’t mix the two up because they aren’t the same. A satisfied customer simply means that they are fine with the service they are receiving, but are still vulnerable to competing offers. A loyal customer, on the other hand, is much more likely to stick with your dealership.
In the end, it’s important to develop a way to measure, manage and cater to both new and existing customers. If you can’t differentiate between the two, growth is easily attributed to acquisition efforts, while retention gets ignored.
Remember that it’s much less expensive to keep an existing customer than acquire a new one.
Customer experience has become an industry “buzz term” of late when talking about customer acquisition and building loyalty. Most of the time, the focus is on the small things that turn a customer off — attitudes, inefficient processes, or other such actions. But what happens when, well, everything goes wrong?
Imagine if a couple visited a showroom where they were met by a salesperson. Before visiting the dealership they conducted some online research – as is the case for most customers nowadays. They had pretty much decided on which vehicle model they wanted – a Toyota Sienna, but had some trim level questions. They also, of course, wanted to touch and feel the vehicle. The couple proceeded to ask the salesperson questions and, to each one, received the answer “I don’t know.”
They went on a test drive and the salesperson was literally watching YouTube videos while on the test drive in order to answer the customer’s questions. Based on their own research, the customers decided they wanted a premium model loaded with features. The dealership only had one available and the salesperson went off to find it leaving the couple waiting in the showroom. While waiting they attempted to ask questions of other salespeople. Sadly, they were again met with blank stares and “I don’t knows.”
After about 20 minutes, the salesperson returned only to discover the vehicle sitting right on the sidewalk in front of the dealership. By then, the couple had figured out that they could build a car on Toyota’s website and informed the salesperson that they would just go home and do it themselves. In a panic, the salesperson begged the couple to stay and let the manager introduce himself (sound familiar?). After a long 25 minute wait, no manager had arrived and the salesperson couldn’t even find a business card to give them. The last interaction they had was a call later that evening from the manager apologizing that he had been busy and had not been able to service them.
Pretty much everything that could have gone wrong with that couple’s visit did. Well, I’m sad to say that it’s a true story.
So, what caused this whole chain reaction of bad experiences and misfortune?
- Lack of Product Knowledge: None of the salespeople had any product knowledge, which is imperative when selling vehicles that cost tens of thousands of dollars. Especially in the hyper-competitive retail automotive market.
- Lack of Organization: A habit of any successful salesperson is to walk their lot daily to see WHAT they have in stock and WHERE the vehicles are. Vehicles get moved all the time. Knowing what inventory is in stock and the location of any vehicle is key both when a customer is standing in front of you and for any customer enquiring about inventory over the phone – they may want to come right in for a test drive.
- Lack of Management Support – The salesperson was no doubt instructed to never let a customer leave without talking to a manager. That’s pretty standard in retail. But what happens when that salesperson tries to comply and no manager shows up? Frankly, I’m surprised that the couple waited 25 minutes before they left — I guess the Toyota website was keeping them busy in the Toyota showroom.
In the end, the dealership lost a sale. It’s a pretty good bet that the dealership was the closest Toyota dealership to the couple’s home. But they ended up buying the vehicle from a more distant competitor who delivered it to their house. What are the chances that this couple now uses the local dealership for service?
This story illustrates how important it is to ensure that everything is in place for an excellent customer experience: That the staff is knowledgeable; that resources are available and that managers are there to support them – for every customer that visits. Failure to do so is a slippery slope.
An associate of mine recently told me an interesting story about their 75-year-old father, who purchased an import, rather than a domestic vehicle, for the first time in over 60 years. This was sometime around 2010.
When it was time to replace his domestic minivan, the first thing my associate’s father did was to check the Sunday paper to see in any big sales were happening. His preferred domestic dealer had an ad that mentioned vehicles listed online. He then got on his computer to see their inventory. However, while online, the import dealer managed to conquest his business away from the domestic dealer, offering more detailed inventory and transparent pricing information.
While online he saw several detailed photos of new vehicles on the import site, but just a red-X-in-a-box next to most of the domestic dealer’s new inventory — the same domestic dealer that had drawn his attention to their website by bragging about their HUGE online inventory in their newspaper ad. He was impressed with the basic price break down on the import site, compared to the words: “CALL FOR PRICE” on the domestic dealer’s website. He chose to contact both dealers, and ended up at the import dealership in a matter of hours. By the time the domestic dealership called him, there was a brand-new crossover sitting in his drive way.
I’m not sure exactly what the import dealer did to get on his radar, but once they got him, they blew him away with such an impressive shopping, purchase, and follow up experience, that he never looked back.
He continued to be impressed with the import dealership during the two years he owned his first import model, due to the consistent level of contact, service and ownership guidance they provided. Once he acquired a bit of equity in his vehicle, he was even more impressed when offered a new model, at a comparable, if not lower, monthly payment. In fact, he ended up purchasing two more vehicles from that same import dealership.
He left the domestic dealer he had loyally conducted business with for decades, and is now fully and continuously engaged with the import dealer. He even managed to convert a few of his friends from die-hard domestic shoppers to at least visit the import dealer that treats him so well.
My associate was shocked the first time he saw his father behind the wheel of an import vehicle, so different to what he had been loyal to for his entire life. He had thought that his father would never in a million years even consider a “foreign” car, let alone transition from a minivan to a crossover.
That experience was a real wake up call for my associate. It taught him a valuable lesson about the importance of transparency when it comes to retention, not just for millennials, but also for non-millennial generations. Millennials, Generation X, and Baby Boomers all research purchases, and have the same appreciation for transparency.
The ease my friend’s father enjoyed with this import dealer is enjoyed just as much by every generation, just as every generation shops and researches online. Transparency is an important part of every generation’s decision making. It is in fact no more a marketing fad than the internet itself!
Consider this story the next time your dealership votes against advertising price, or chooses to do the whole “Get ‘em in” routine. Consumers know that game and simply choose not to play it any longer. Ignoring consumer demands erodes trust and could easily push loyal brand – or dealership – customers towards your brand competitors.
When it comes to customer loyalty programs, customers like to feel appreciated and recognized for their loyalty. And, if they are not, it doesn’t take much to turn them away from being loyal customers into brand advocates.
I recently came across an interesting story about an Uber customer who wrote an open letter concerning his experience with the company. He wasn’t just any old Uber customer. According to Uber’s leaderboard (yes, apparently they have one), he was the TOP customer in the world, as he had utilized Uber for more rides than anyone else.
In his letter, the customer shared that, while he still loved Uber’s service, he never felt special, recognized or even rewarded for being Uber’s top customer. He stated, “I’ve more rides in an Uber than anyone else on Earth. Has your company once thanked me for my undying loyalty? Not even once.” He went on to state that he feels as if Uber is “missing the boat when it comes to fostering great relationships with its customers…your faithful clients are your biggest potential evangelists… treating them with a special touch would turn them into brand advocates who would spread good cheer about the company on their social networks.”
According to this customer, when he tells friends that he is Uber’s top customer, they inevitably ask what perks he receives. However, he has none he can tell them about.
Let’s translate this into the automotive world. Think about that loyal, repeat customer. The one that has purchased the most vehicles, referred the most people and made the most repeat visits to your service department.
What if they were never thanked, recognized, or rewarded for their loyalty and support. I’m pretty sure that eventually that customer will go away. Sure, they may, if asked, still tell people that they’ve been doing business with you. But the real value lies in them proactively inserting themselves into conversations, encouraging their friends, relatives and networks to check you out first – whether that’s for sales or service.
Customers nowadays may be used to loyalty programs – and some retailers think that the mere fact that they are used to them makes them less valuable. But think about this for a minute: the loyalty program may be why they came to you in the first place. However, that experience quickly fades if you do not look after them and maintain an exceptional customer experience with each visit. If that customer is not acknowledged and appreciated for their loyalty, they may still leave satisfied, but don’t necessarily feel like their business is appreciated, valued or rewarded.
And that’s where loyalty programs come in.
Loyalty programs offer your dealership a way to recognize and reward those customers who have supported – and continue to support you — through sales, service or both.
Dealerships have no problem offering coupons and discounts for customer acquisition efforts — low price offers with disclaimers that state “for first time customers only.” How do you think that makes your loyal customers feel?
Loyalty programs can incentivize future visits, increase the volume of visits per customer and the amount of money spent per visit.
Consider the argument by Uber’s top customer: Even though he’s a loyal customer and continues to love the service, he wrote a letter and published it online simply to share with Uber how unappreciated he feels.
Lack of customer recognition and a less than exceptional customer experience will certainly fail to attract new customers or increase the loyalty and frequency of visit of existing customers. It only serves to show that no matter how often they spend money with you, they’ll continue to be treated like any other customer.
One of the advantages of Pre-Paid Maintenance Programs (PPM) is that they span the generational gaps. Regardless of which generation consumers happen to be in, none of them like surprise repairs, or other expenses. That’s why dealers focus on payments – and not price – when selling cars.
Consumers want fixed expenses. When it comes to millennials, they tend to be saddled with all sorts of debt including those credit cards they eagerly accepted while in college, and the student loans they end up with in order to launch their careers. Older generations are at, or close to, the point of fixed incomes from retirement plans or social security. Peace of mind that their vehicle is covered, and they are protected against any unexpected repairs, is perhaps more valuable to these consumers than ever before. That’s why many service industries have navigated to fixed price service plans.
Consider cell phones. The big rage nowadays is the “All-inclusive price” plan. Consumers simply choose a carrier and have all the service they need for a fixed amount. I’m sure you’ve seen the advertisements and commercials. Why are these plans so attractive? I would argue that it’s the fact that consumers don’t like surprises or variables in their monthly expenses.
PPM programs are attractive for exactly the same reason. They provide car buyers with peace of mind that their monthly vehicle expenses will remain the same and that their vehicle will be reliable.
However, while these items may be missed (or declined) in the finance office, there is a perfect opportunity that many dealerships miss to pursue them later in the service drive. Just because someone said “No” in your finance department, doesn’t mean that they will say the same thing later. Lots of factors are in play when buying a car – emotions are high, anxieties over payment could be in play, and exhaustion from being at the dealership for several hour could also be part of the problem. Once the sun comes up and all of those factors settle down, a consumer could perhaps have a clearer view of the advantages of a PPM.
Recent research suggests that almost 65 percent of dealers are ignoring the opportunity to offer dealer-branded PPM plans to current customers that visit their service lanes. While many offer OEM branded plans in the F&I department, the service lane is generally overlooked, not only as a selling opportunity, but as a chance to reengage hundreds of customers for a guaranteed period of time. Dealers are in fact losing two thirds of their possible customer service affinity as well as potential missed revenue measured in millions of dollars.
Really? Millions of dollars left on the service drive floor? Yes. It is so simple.
There is no argument that PPMs significantly raise dealer service retention. It is in fact documented that many dealers experience a retention rate of over eighty percent among those customers who purchase a PPM. So, why are so many dealers’ service retention numbers so much lower than that — anywhere from thirty, to, in rare cases, maybe sixty percent? That’s a huge loss in retention and potential profit.
In my thirty-five years in the automotive business dealers have shared many different rationalizations as to why they choose to overlook the potential of PPMs in service. While many of the reasons are beyond sensible business logic, such as “I can’t handle anymore service business,” or “My advisors are too busy to sell anything else,” they all escape the fact that, as a dealer, they likely see more customers in the service department in two months then they sell in new vehicles in an entire year! Yet only about 35 percent of franchise dealers offer service drive PPMs today.
It really is simple, but it takes a good eye on both new and used vehicle buyers in your service drive. Just like any other service lane up-sell, it should be positioned as an additional customer advantage on top of what the dealership is already doing, and should be included on all service product menus. By including it on your service menu it serves as a tool for your advisor to sell other services by utilizing any discount the plan may offer on the service the customer is contemplating purchasing during that visit.
Don’t be afraid to keep discussing the benefits of pre-paid maintenance with your customers – whether you sold them the vehicle or not – as it only serves to benefit both your dealership (by maintaining a customer relationship) and the customer.