Have you noticed how “customer retention” is the new buzzword? For many years,
it was “improved CSI” that manufacturers pushed for via incentives. Dealers quickly complied and, after a while, realized that improved CSI scores were good for the manufacturer (which is why they are willing to pay incentives), great for the customer (thanks to improved processes), and led to cleaner facilities and more amenities. They were not, however, a game changer for the dealer. The truth is that CSI really hasn’t done much to grow the dealer’s business. Since all manufacturers have a CSI program, the bar of expectation has been raised and all dealers have arrived at the same plateau of customer service.
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So, let’s talk about customer retention. A program to retain the customer after the sale makes so much more sense on many levels. However, many dealers are in denial about this important aspect of their business as most think they are doing a good job of keeping their customers coming back. They believe that all you have to do provide a good experience and they will return. They are led to this belief by their past performance of retaining approximately 35 percent of their sales customers. Now, the manufacturer is getting into the game of retention and has set goals of approximately 50 percent. The truth is, if you are not retaining a minimum of 75 percent of your customers, your retention program is not working efficiently.
I am always amazed by how many dealers believe a good CRM is all they need to ensure customer retention. They believe giving the customer a free oil change will work. I often hear, “We treat them right and they always come back.” The truth is, I have not found a single dealer who does not have a goal of providing great service. This is what I call a “1970’s” mentality. Customer retention is not doing some things right; it is doing everything right in every department. Start by examining what you are doing for the customer in each department — and then examine if it is working. Do you have a process? You must establish a culture of customer retention that encompasses your entire business.
Once you have a program, do you measure it? All dealers can tell you daily where they are in sales, service, parts and F&I. These results are measured monthly and can be compared against previous months and years. But do you measure your retention? Most will answer “yes” to this question and base it on what the manufacturer tells them it is. The problem with using this method is you are only measuring approximately 50 percent of your business. Isn’t your pre-owned buyer even more important than new-vehicle buyer? Gross profit is typically higher and the need for service and maintenance is certainly much greater. What else should you measure? How about email and mobile phone capture rates? These are absolutely essential to be successful in today’s business environment. Without the proper tools in place to track these metrics, you are flying blind.
Most customers have already shopped you online before entering your business. Communication with this medium in today’s digital world is a must for your success. Smartphones are now the acceptable norm, so you should plan on a mobile application to represent your business and communicate information to your customer. There are many tools you must employ to have a successful retention program. A “benefits and rewards” program, customer-specific Websites, membership cards, a standard email communications program and social media use are but just a few of the components you need. Whatever program you design should take into consideration all of your customers — whether they are paying cash, financing, leasing, servicing or purchasing parts.
Hand-in-hand with your retention program should be dealer branding. This should be your program to enhance your business, not the manufacturer. As with any program, training is essential and must be an ongoing endeavor. Also, you should be reviewing reports that tell you how well your program is working and sharing these results with every manager.
As you can readily see, putting a customer retention program together is not just “treating the customer right and providing good service.” You must have a comprehensive plan that, when implemented, changes your mindset towards how you conduct your business on a daily basis. I do not mean to imply that it is easy — it is not. But, it is worth the effort and will pay off in the long term by returning your customer back to your business for all their automotive needs.
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