Creating a loyal customer is sort of like getting married. The introduction is followed by a period of courtship and, if all goes well, commitments are made. Loyalty in the automotive world is something that everyone battles from the OEM level to the dealership. Did you know, however, that the longer you’ve had a customer the harder it is to keep them?
Logic would dictate that you would need to focus more on creating customer loyalty in the beginning than after the marriage. However, according to R.L. Polk, “loyalty rates decline after the third year of ownership and continue to decline after the fourth year, and every year after that.” Polk attributes this fact to “boredom”. Their studies show that the longer a customer owns a car, the less exciting the ownership experience becomes.
Just as in marriage, there’s what is referred to as a “honeymoon” period. You’ve taken the vows and began your new life together, and everything is wonderful. Apparently, according to Polk, a similar period exists when it comes to customer loyalty and retention. As we consider ways to increase customer retention, it seems as if length of ownership is extremely important. It certainly makes sense that, no matter how long you’ve had a customer and no matter how great of a relationship you’ve had with them, if they get “bored” and switch to a new make, you’ve definitely lost a sale but chances are probably very good that you will lose them as a service customer.
The fight against “boredom” is something that OEMs take on by introducing fresh models with new features, more powerful engines, sleeker more modern looks and technological advances. They encourage leasing by offering low residuals and money factors with the hopes that the customer will stay loyal by returning to lease another vehicle.
How do you help buck this trend and insure that your customers stay loyal? One way is certainly by making the customer experience exceptional. People certainly love excellent customer service, and it is one of your greatest weapons in creating loyal customers. Another way is by implementing a dealership loyalty program that incentivizes customers to keep doing business with you. There’s a reason that almost every major retailer in the US has a rewards program of one form or another. It allows you to track how your customers are spending money with you which then gives you the data to create offers better tailored to them.
No matter what you do, make sure that you’re retention strategy isn’t focusing solely on creating loyalty in new customers. Analyze your sales history and shift some of your focus to customers who purchased 24-36 months ago and you’ll be well on your way to helping your OEM increase brand retention while insuring that you’re giving your dealership the opportunity to intervene with your loyal customers before they get bored.
What techniques are your business using to keep customers loyal?
Are you currently using a loyalty program at your business? Why or why not?
It’s not a new idea to have one of your salespeople working the service drive. Opportunities and circumstances exist where it may be beneficial for the customer to trade-in their car that needs to be repaired. Having someone who can not only identify those opportunities but who also knows how to present it to the customer properly is rare.
That being said, have you ever considered having your F&I manager work the service drive? Most F&I managers have been in sales at one point in their career, so they are well equipped and have the skills to take advantage of every opportunity.
An F&I manager can see opportunities everywhere. If he and the service advisors work as a team, there are many more circumstances, which could lead to additional revenue for the store.
- An F&I manager can present pre-paid maintenance plans and extended warranties to customers with the knowledge and sales ability to explain the features and benefits.
- An F&I manager also has the ability to determine when it may be beneficial for both the store and the customer to investigate whether it makes sense to trade-in the current vehicle for a new one rather than make costly repairs.
Except for the most ambitious salespeople, most consider having to work the service drive as being sent to work in theArctic Circle. They aren’t able to watch for or help any walk-in customers and they aren’t able to take any incoming phone calls; both of which are what they would consider their bread & butter that leads to a sale.
Don’t get me wrong, your F&I manager is busy (hopefully), and likely will not be too pleased at the idea of working the service drive. However, he may be not only one of your BEST people to put into the service drive but he also has the most to gain from it as he would get the commission and penetration from the sale of any maintenance plan or warranty. If he were to convert a service customer into a sale, he would have the opportunity to make more money by being able to type the deal and present the whole F&I menu to the client. In this situation, the F&I manager would benefit from additional income.
There are many opportunities that exist in the service drive to increase revenue for your store, and having someone looking for these opportunities is a great plan of action. I’m not talking about having them all day – try it for an hour or two. I’ve heard of a couple of F&I managers that picked up 2-3 additional deals a day by doing this.
Does your dealership have salespeople working the service drive? What about an F&I manager?
What other tactics are you using to increase service revenue?
Dealerships today spend most of their marketing budgets on acquiring new customers. Those ads in the newspapers aren’t really meant for current of past customers, they are meant to attract new customers. The cost of customer acquisition ranges from 6 to 10 times more than the cost of customer retention, so what can your dealership do to increase customer retention?
Here are five great places to start.
- Processes –Are your processes customer-friendly or are they focused on efficiency? What parts of your processes are your customers complaining about? Examine your processes and put yourself in their shoes. If this were a process you had to go through, would you like it? No matter what the process is for, make sure that your customers know what it is in advance and listen to them when they tell you which parts they don’t like, then make changes accordingly.
- Reciprocity – The law of reciprocity states that people “respond to a positive action with another positive action”. In business, reciprocity as related to customer retention usually refers to going above and beyond for your customer. In return, they will reward you with repeat business. Positive actions don’t have to cost money. They can be anything from a kind word to opening the car door for them when they arrive. Have crayons & coloring books handy for the parents bringing their children in with them. Small things sometimes make big impressions. Use this to your advantage in all departments of your store.
- Exceptional customer service – Ensure that your customer’s experience is world-class customer service from the moment they become your customer throughout the entire relationship. This will keep your customers loyal. Emphasize customer service in all your processes, in every department and to every employee. Make no mistake; the smallest error can cost you a customer. Train your staff the importance of providing exceptional customer service and hold them accountable. There is no easier way to increasing customer retention than providing an experience that customers cannot get anywhere else.
- Quality Is Better Than Speed – Many businesses assume that the faster the service, the better the customer perceives it. According to an article byGallup, “If the goal is to create strong bonds that ensure customer retention, companies must focus on activities that create and sustain the customer relationships, not just on those that enhance company efficiency.” Slow down and take time to really listen to your customers. They will be the ones that inevitably decide whether your business thrives or not. Make sure that your work is top-quality.
- Know Your Customers – As simple as this may sound, it’s the one area where many businesses fail. There is nothing more impressive than going into a business and being greeted by your name. People like to be remembered. It makes them feel special. There is no easier way to prove to a customer that you value their business than by knowing who they are. Encourage your employees to take the time to get to know your customers. Make them more than just a name in your computer. They will notice and will be impressed. In today’s busy world, everyone is in a hurry. Be the business that’s more interested in getting to know them than the one looking to get rid of them the fastest.
There are other ways to increase customer retention including customer loyalty programs, customer appreciation events and special offers. However, by focusing on these five areas, you will improve your customer retention rate simply by being a place customers want to visit, rather than a place they need to go.
What is your dealership doing to increase customer retention?
How well do you know your customers? Do you train employees to get to know them?
Have you ever had a customer appreciation event at your dealership? If yes, what did you do for customers?
In today’s world of constant noise, it’s more difficult than ever to market your dealership. Dealers are constantly trying to guess where the best ROI is when considering how to spend marketing dollars. How much money do I invest in traditional marketing? Online marketing? Direct mail marketing? The rep from each medium will tell you that their media is the best to use for your dealership marketing. Dealerships are in competition with their competitors within their DMA for airtime and attention, and even their OEM.
With the cost to acquire a new customer increasing each year, how you choose to spend your dealership marketing budget becomes even more important. I know dealers that have chosen very different routes. Some chose to have no traditional marketing and are all digital. While others are at the opposite end of the spectrum with no digital marketing at all and insist on “old school” methods of marketing. I’ve actually heard stories of a dealership that seriously debated whether they should get rid of their website and buy an inflatable gorilla for the building. And I am not joking; I really did hear this.
Marketing your dealership is always going to be tough. The key thing is to know what method is getting results and returning the best ROI for your dealership. With a little investigation, and with proper tracking, it is possible to zero in and be much more accurate about what’s working for your dealership.
By utilizing your own reporting and learning some easy tricks, the process is actually quite easy to manage.
Here are three things that you can do to get a more accurate idea of what’s working for you.
- Use call tracking. I’ve yet to see a dealership that does not have a pretty busy switchboard. There are still many consumers who opt to pick up the phone rather than submit a lead online. Many advertising sources will provide some tracking statistics for you. However, even if they do, have your own service. Rely on the statistics that your own service provides you.
- Have different offers on each medium. It’s okay to have an oil change coupon included in your dealership marketing plan. However, don’t fall into the trap that many dealers do and have the same offer on every media. Change up the offer. By having different offers, you can better track which offers are working and which of your advertising mediums are actually generating business.
- Make the coupon printable and required. Too many dealerships that have offers, either online or in traditional print, are not requiring the customer to present the coupon. In addition, I’ve seen many service advisors who will actually offer the coupon to the customer who doesn’t even know it exists. By allowing this, you completely negate your ability to track which offers from which ads are actually working. You may also be unnecessarily costing yourself money. If you want an “offer” specifically available to that service customer who inquires about one in the service drive or over the phone, create some specifically for those people. Make your advisors and cashiers accountable for the redeemed offers during the end of day cash reconciliation.
By implementing these three items into your dealership marketing plan, you’ll be able to easily monitor the results. This includes not only tracking your offers; but also the mediums in which those offers were delivered to the customer. With this information, you’ll be able to make better decisions and be able to shift money to the offers and mediums that deliver the best ROI.
How is your business tracking ROI on marketing dollars?
What mediums seem to work best for your dealership?
Gaining long-term customer loyalty is a process and it takes time. Some results are not apparent for months. Many times it requires process changes – and sometimes complete culture changes – initiated at the highest leadership levels.
A recent study by the Temkin Group shows that many executives mistakenly see good, quality customer service as an afterthought. Bruce Temkin, Managing Partner of the Temkin Group, states that “many executives think of customer experience management as the icing on the cake of their business, believing they can slap on some good experience and everything will get better.” In reality, “customer experience improvement requires broad cultural and operational changes as part of a multi-year journey.”
If you’re ready to improve your customer loyalty, but aren’t sure where to begin, here are a few cultural and/or operational changes you can try:
Put Employees First. Before a company can have loyal customers, it must first have loyal employees who feel they are making vital contributions to the company’s overall success. When they feel like a valued part of a team, instead of simply “one of the grunts,” their positive attitude will be contagious and your customers will be infected most.
Ask Customers What They Think. You don’t know where you’re going until you know where you stand. The results can sometimes be alarming, but can give you a foundation of understanding that you can build on. Once you’re on the path to loyalty, keep asking! Getting “progress reports” from regular customers can help you gauge the success of each loyalty initiative.
Don’t Ignore Dissatisfied Customers. Customers who have a negative experience that is turned around and handled positively will often be more loyal than customers who are merely satisfied with each visit.
Remember the Human Factor. You are, after all, dealing with people here, and loyalty is as much an emotion as a behavior. A business relationship is a fine balance between the personal and the professional. Build solid relationships, but don’t take advantage of their trust. The customer may not always be right, but they should always be treated with respect.
Implement A Loyalty Rewards Program. A good loyalty program will help you understand your customers better – the who, what, when, where, why and how of their shopping habits. The benefit comes in enabling you to reward and incentivize your customers individually, encouraging them to keep coming back.
If you’ve already implemented a loyalty program, or are just getting one started, here are a few things you might want to consider:
Assign one employee with marketing responsibility and empower them to “own” the Rewards Program and oversee its ongoing implementation.
Hold regular trainings and reviews for every employee at every level. Ensure each one understands why the program is in place and what they can do to help it succeed.
Review the program initiatives and results with key management at a minimum of twice per month (initially it should be weekly).
Be flexible. Evaluate what elements are working best and be willing to make changes to those that are failing. Loyalty programs should be dynamic, adjusting to changes in their customers’ needs, the economy, etc.
According to the Temkin report, companies that achieved the highest levels of customer loyalty in 2010 include Kohl’s, Costco, eBay, Southwest Airlines and Vanguard, with Amazon.com topping the list (see image). These are big brands with positive images that most of us will recognize without any effort. They have built their corporate culture and processes around principles of customer service and have, in turn, earned our loyalty.
Which of Temkin’s “Top 20” companies have earned your loyalty? What sets them apart?
What other customer relationship practices do you see in these successful loyalty earners? How can you apply this in your own store or office?