We are all aware and understand the saying “it is cheaper to keep a customer than to attract them”, yet we would all acknowledge that we generally do not have a high enough percentage of repeat purchasing occurring in our businesses.
As an industry, we still appear to have too much focus on attaining the new customer, and not enough effort on the retention process. Why is this?
Unfortunately, there are a number of factors which work against us here. In this article, we will discuss them and also identify what we believe to be the number one negative factor impacting our customer retention figure.
The number one enemy of customer retention in a dealership, which links into all the others, is a focus on the transaction rather than the relationship.
There is often a focus in the business on the next sale and the next service. By our history as an industry, we are very transactional in nature. This is one of the reasons why there is a drop-off by customers between the delivery point and having their vehicle serviced in our aftersales area. This is then followed by the increasing drop in service retention annually and that is followed by the general insufficient level of customers repurchasing from the same dealership.
The transaction is important!
But we need to make sure the business and staff are focusing on the relationship during and after the transaction. Consider all the ways we can work the relationship during the transaction and maintain the relationship between transactions:
Introduction to Service
Everyone talks about it but not everyone does it; and if they do undertake this process, often it is not consistent. Many studies around the world have consistently shown that the introduction to the sales customer during the delivery process increases the percentage of customers that come back to the dealership for their first service.
So, if we believe in customer retention and repeat purchases, we should be able to do a better job here.
Dealerships are broken into their individual departments; by the profit/loss statement, by division structure, by benchmarks, and by consultants. Whilst this makes sense, there also needs to be important measurements and policies that look at them together. This can help lift the dealership focus above just the transactional space.
There are many ways that this can be done, the simplest of which could be to add a component to commissions that reflects on the interaction between departments or whole-of-dealership KPIs.
From the highest level of management in the dealership down, there needs to be a focus on relationship management in addition to the transactional component.
How can we manage the customer relationship for the benefit of all, including the customer? Remember, happy staff leads to happy customers; and happy customers lead to a higher repurchase level as well as a higher number of products and services sold per customer.
We remember reading the annual report of a bank a number of years ago, where the bank only wanted to increase the number of products on average that each customer had with them by approximately 0.2 products per customer.
A small but important number to them! Why? Because, on pretty much the same cost base, they would generate more revenue and profitability. Our dealerships are no different. If we can get another couple of finance contracts, or aftermarket, or more services out of each customer then we would achieve a similar effect.
Understand the Customer Lifecycle
An interesting fact. People are generally creatures of habit! And this seems to be reflected to a degree in customers and their vehicle purchase cycles. Some customers purchase a new vehicle every three years, some every six to seven years, but the point is they generally have a cycle they work towards.
If we understand their cycle, we can design a better contact and customer relationship system for them. Technology exists to help focus attention on individual customers instead of the “mass” focus we have traditionally had. With Business Development Centres and technology available, our businesses should be able to achieve this.
There are tools and concepts available that, combined with an understanding of a customer’s purchase lifecycle, can be powerful allies in the customer retention and repurchase area.
You can use these concepts and programs to start to approach customers when their purchase lifecycle suggests they will soon be in the market. You can keep them with your business by making the purchase of the new car seamless. It could involve being able to take their trade and put them in a new model for the same repayment levels. How many customers do you know would say no to that?
Retention programs such as this have proven to be effective and profitable avenues for dealerships; yet what we find is that they are not applied consistently. The reason for that is the number two enemy of customer retention – discipline!
Discipline is the number two enemy of good customer retention. We have seen many examples where a dealership or dealer group, in trying to address the issues of our traditional transactional model, put in place various actions. But it often comes apart because of the lack of discipline of all involved to implement and make new processes and policies “stick”.
Discipline is the silent killer of best practice, and is something that must be addressed continually.
Customer retention and good long-term dealership profitability are normally an outcome of dealerships being able to elevate their business above the transactional nature of the industry and starting to work more in the relationship zone.
To improve customer retention as an industry, we need to address its main enemies, particularly the transactional nature of our business and the discipline to go the distance with processes and policies that support a relationship focus.
First and foremost we must remember the link between employee satisfaction, customer satisfaction, and retention.
Authors: Matt Barry from Chrysalis Loyalty and Rohan Meyer from AdTorque Edge Advisory
By Neil Dowling