We all want new customers. And it’s certainly mandatory to retain a customer to create a loyal one. But how we market our dealerships is increasingly important — as each form of marketing will deliver different results. The three terms: loyalty, retention and acquisition marketing, all have their own distinct meanings and should be used to satisfy different goals and objectives. While they are often not distinguished differently within most dealerships, they truly have different meanings, and will generate different results.
According to the experts at the Cambridge Dictionary, the definition of customer loyalty is as follows:
“The fact of a customer buying products or services from the same company over a long period of time.”
According to Wikipedia, customer retention is defined as follows:
“Customer retention is the activity that a selling organization undertakes in order to reduce customer defections.”
And acquisition marketing is defined as the act of bringing in new customers. Sounds similar, right? Which one is more important to your store? Isn’t it true that the less customers you retain the more you must acquire?
It can be a never ending battle. But, it doesn’t have to be. And the real point is that retention and loyalty marketing should drive how much acquisition marketing you will need to do. All three should be an equal focus, hand-in-hand, one complimenting the other. It could be said that they are all dependent on each other.
Customer retention is about preventing defections and the preservation of existing customers. You can’t generate customer loyalty without having some form of retention. And you can’t have retention without first acquiring them.
Retention marketing is different than loyalty marketing. It involves looking at past customer behaviors and analyzing the transactional histories to identify and get customers who have been potentially lost, back in the door. Retention marketing examples include such things as identifying customers who used to come in regularly for service, but have not been in for a few months. Or identifying services that a customer may have previously purchased, but no longer does. In short, it is the act of getting a customer to purchase again, without the cost of acquisition.
In growing your retention, it is critical to be aware of who these customers are; to make the effort to reach out to them; identify why they are no longer coming in and take steps to win back their business. If you fail to do so, the chances are great that you will never see them again.
Loyalty marketing, or relationship marketing strategies, are designed to continue to earn the business of your existing customers while making it personal. For example, a hand written thank you card from the General Manager after a new vehicle purchase. A special occasion recognition, birthday or purchase anniversary — again, hand written. Special offers, designed for a particular group or subset of customers, that are engaging and valuable enough for the customer to feel recognized. Whatever you choose, it should be engaging and have the purpose of making your customer feel valuable. Combine these actions with providing an excellent customer experience, each and every time, and you will watch your loyalty grow.
Loyalty and retention should go hand-in-hand. You cannot build loyalty without retention. And it’s nearly impossible to retain customers without creating loyalty.
Remember, your goal should be to keep your customers engaged and happy while spending and acting as advocates for your dealership. What more could you want?
When will I see you again? No, I am not talking about the 70’s pop song, although the lyrics just may fit the content here. I am talking about the continued trend in customer defections from our dealerships.
Customer’s defect for many reasons and the longer an individual owns a car, the harder it can be to keep that customer. It’s not necessarily because the dealer does a poor job of providing an acceptable level of customer experience. Let’s face it, everyone’s life changes. The college student who bought the entry-level economy vehicle graduates, gets married and, perhaps has children. And, while they may have been very happy with their vehicle, they may now need one that better fits their current lifestyle. Manufacturer lineups and vehicles also change. The simple fact that the customer chose a different brand vehicle doesn’t mean they were unhappy with you as a dealer.
A recent Automotive News article shared an Experian study concerning length of vehicle ownership and how it effects brand loyalty. According to the article, “consumers who owned their vehicles for 12 months would purchase their next vehicle in the same brand 57 percent of the time. But for consumers who owned a vehicle for 12 years, the loyalty to the brand dropped an additional 23 percent to only 34 percent.”
So, what can a dealer do about this trend? Well, according to Brad Smith, director of automotive market statistics for Experian Automotive, “the increase in time between dealer interactions, whether they are for sales or service, increases the probability of a consumer defecting to the competition.”
Mr. Smith hit the nail on the head with his simple statement. A consistent, ongoing relationship is vital to creating and retaining a loyal customer base. Absence doesn’t necessarily make the heart grow fonder. In fact, quite the opposite happens. A customer without continual, meaningful engagement is very likely to become an ex-customer.
The solution to keeping your defection rate as low as possible is quite simply quality, informative and timely communications. But not just any communication – and especially not those marketing communications that are sold to you as “retention tools.” In reality they are perceived by your customers as nothing more than advertisements. While they do serve a purpose in the marketplace, they are surely not going to engage and retain your current customers.
A bit more on this: Having just walked the NADA show a few weeks ago, I could not help but notice how many of the exhibitors claimed their products and services were now focused on providing the dealership with loyalty and customer retention solutions. While this may be a good marketing claim for companies that obviously feel the need to jump on the retention bandwagon, many of them have little, or possibly even a negative influence on your customer retention and long term customer loyalty. Why is that? Simply put, many of the products and services being peddled really don’t offer the retail customer any true value. And without real value, you can’t have meaningful customer engagement. Without engagement, you are only adding to the clutter already being received by the customer from the many marketing companies and OEM programs. The result? The customer becomes numb to your marketing efforts and your communications become more and more insignificant as time goes on.
So what is the answer? If we want to grow a customer’s loyalty and elongate their lifespan as a revenue producing customer, we must interact and communicate with them differently than we do when trying to attract a new customer to a weekend sales event. That’s where the engagement factor is a key and crucial element to keeping those customers on your team. Try connecting with your existing customers through different styles and types of communications. For example, this past Holiday Season, a Honda dealership created a Holiday cookie recipe contest that generated hundreds of entries. They then sent a dealership branded cookbook to each of the participants, which contained all their favorite recipes. From this point forward, every Holiday Season, hundreds of the dealership’s customers will get a subtle reminder of the dealership every time they use their cookbook. Now, that is real customer engagement!
Another effective tactic is from a from an Ohio Chrysler store that sends out a Thanksgiving recipe every year to its customers. Imagine sitting around the Thanksgiving table and your customer tells everyone that the sweet potato recipe came from her local dealer. Customers actually ask the dealership year after year when the recipe is coming out. They look for it with anticipation — you can’t buy that type of ongoing positive connection to your store.
There are many other communication components that can build a tremendous following. And they don’t all have to be expensive phone apps, or video text messages –they just have to be engaging and meaningful to your customer.
The largest complaint that consumers have when considering a vehicle purchase is the fact that the process takes too long. Even with all the new technology processes that dealerships have employed over the past few years, the purchase process is still as long and cumbersome as it was twenty years ago.
AutoNation recently started to roll out a vehicle purchase program, transferring much of the buying process online. It promises consumers a 30-minute in-store automobile purchase transaction. It would seem that AutoNation listened to the auto buying public and may well transform how cars are purchased in the future. They certainly don’t have a shortage of locations available to consumers.
I’m sure the entire industry is watching to see whether they can accomplish this and if car shoppers will embrace it. If their program is successful, and consumers start to realize that they can buy a vehicle almost as swiftly as buying something on Amazon, AutoNation could hold a serious competitive advantage. Given the option to buy a vehicle in 30-minutes, or spend all day at a dealership, my guess is that many consumers would choose the former. They may, in fact, be willing to pay a small premium for the vehicle in exchange for the time they will have saved. If the process is successful and other dealerships are slow to adopt something similar, it could also result in an increase in customer loyalty to AutoNation.
When Henry Ford began building his automobiles, while cars existed, they were out of the reach of many consumer’s budgets. At that point in history, consumers asked for faster horses because they never dreamed that they would actually be able to afford an automobile. His vision was to make vehicle transportation affordable to the masses. And he accomplished that.
Just as the public in Henry Ford’s time didn’t believe they would ever own a vehicle, consumers, in general, don’t believe that they can purchase a vehicle so efficiently. Henry Ford proved them wrong and AutoNation may just accomplish the same thing.
Forget for a moment whether a sales consultant’s work area is messy, or if there are smudges on the windows. Let’s look a little closer at what a customer could see, hear or feel when they interact with your dealership in any department. What’s really taking place behind the doors may be a real surprise to you. Taken from a customer’s perspective, you just might be failing to meet their most basic expectations. As a result, you could be damaging your dealership simply by being unaware of what happens on a daily basis down in the trenches.
Have you made an anonymous phone call to your dealership lately? Almost every store now utilizes some form of inbound call tracking. These systems all provide the ability to record and playback your customer’s inbound calls. When was the last time you actually listened to some of the recorded calls these systems provide? Imagine a customer that calls your store, the receptionist gives a warm and friendly greeting but puts them through to the wrong department. Or worse, blindly transfers the customer to an employee’s voice mail (without giving them the opportunity to speak with another person that could assist them). Worse yet, many of the calls we have listened to clearly indicate the need for ongoing product training, as many times the sales consultant fails to answer even the most basic product questions. Would this be acceptable customer service? How often is it happening in your dealership? The answer just might surprise you.
And what about your phone system itself — Do you have a recording that customers hear when they are on hold? Is the message current and relevant? Imagine the embarrassment if you were still advertising a new car lease special for a 2012 model vehicle with the 2015 models sitting on the showroom floor. Or the “winterize your car today” message still running on July first. While obtaining current and relevant messaging may sound like a core, it’s really not. Visit the website Fiverr.com and you can have a year’s worth of professional messaging done at one time very inexpensively, and simply upload the recordings when the time is appropriate.
What about your Internet/BDC department and those individuals creating emails for marketing campaigns? If a customer “enters” your dealership electronically, are you making sure that those emails and marketing pieces are addressed in a friendly and personal way? It happens more frequently than you may think that an e-mail template is filled with the words “first name” and your message is literally addressed “Dear [First_Name].” It’s these little things that can make the customer turn right around and defect to another dealership. When was the last time you actually took the time to read the correspondence that is sent from you with your name on it? Who is responsible for checking the grammar and sentence structure of the thousands of pieces of correspondence your store sends out each month?
Pretend you are a customer and walk through your front door. Call your own dealership, both day and night, and listen to how you are greeted and what happens when a call is transferred, or put on hold. Is it perhaps terminated unexpectedly?
Send yourself a test Internet lead from your website, or a third party site, and let the flow of emails find their way to your inbox for a month or two. Do any of these communications surprise, disturb or shock you?
Taking a little time to “walk through all the doors and peer through the windows of your dealership” could help erase mistakes, improve employee awareness, and reveal unnoticed problems. Take a different department each week of the month. Your employees will welcome the added attention and your customers will only benefit from it. No matter what actions are found to be needed, if done in the name of making business better and improving customer satisfaction, you’ll reap the rewards. Customers will feel more comfortable and have a more enjoyable experience at your dealership. Encourage all of your employees to pretend that they are customers and to keep their eyes wide open – to take a better look at what is happening in their dealership. You’ll be amazed how different things look.
Competition in business is usually a good thing. Sure, we’d all like to have the market cornered, but without a little competition we would perhaps never figure out ways to improve our products or services and keep our customers coming back.
In an interesting article on Infusionsoft’s “Big Ideas Blog,” a few examples of businesses thinking outside the box were shared. 3Tees is a Singapore based company that prints T-shirts for companies “promoting events with a social cause.” It has a slogan of “You price it. We print it.” The company allows customers to determine the price of the shirts and their pricing strategy has proven successful. According to the article, the vast majority of customers make genuine offers that both fit within budget and provide an acceptable profit margin. In fact, while the company is willing to reject extreme low-ball offers, they have discovered that only 5% of total bids fit within this category.
One of the biggest reasons 3Tees is successful in their pricing strategy is their belief that, “given enough information and trust,” customers will make fair offers. Allowing customers to make offers for a vehicle purchase is a common practice in sales departments for dealerships. However, the challenges of educating customers on the technical aspects of a given service repair might prove a bit more challenging. In the automobile industry a “You price it. We repair it” pricing model probably wouldn’t go over well, and far be it that anyone would suggest such a thing!
My point here is that, if the name of the game is customer loyalty, then ultimately, every dealership will have to do something different than what has been done before. Everything changes, especially in our fast-paced world: from implementing new marketing strategies, to offering superior products, or an evolving customer experience. Finding new and creative ways to retain your customers, while still building new business, is an ongoing project, not a one-day or static invention. Dealerships have a mindset of being notoriously complacent and are often discouraged by management from trying anything that is outside the norm. How many times do you still see inflated gorillas hawking a weekend sale on the roof of a dealership? Taking a “safe” approach is generally expected and often encouraged in dealerships today. But with overuse of the safe approach, eventually will come diminished results. You should be thinking about how you can market differently than your competitor down the street. Ask yourself how you can set yourself apart as Cal Worthington did with his stores years ago. While Cal’s approach may have been a bit gimmicky, it worked at the time, and is actually documented in many marketing text books.
So just think about it. Every so often, it’s perhaps time take a trip up to 10,000 feet, open the doors and look at the landscape of your competition. Try and encourage creative thinking from both your staff and vendors. Unless you are the already the king of the hill when it comes to retaining and acquiring customers, there will come a day when you have to do something just a little different to keep your customers, or lure new ones into your dealership. As a dealer principal or manager, are you willing to take a chance and try a few out of the ordinary ideas to expand your business?