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Is Your Customer Retention Costing You Opportunity?

It’s time for you to get committed and start holding everyone accountable for their individual performance to get on track for making this your best year ever in fixed operations.

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Don Reed is the CEO of DealerPRO Training

“A critical performance indicator of customer retention is your RO Count. If you are like far too many dealerships whose customer pay RO count this year is about equal to or below last year’s, then you have to ask: ‘Why is your retail traffic is stagnant or declining?” — Don Reed, CEO, DealerPRO Training

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If You’re Not Growing, You’re Not Keeping
As part of the fixed operations profit potential analysis that we conduct for our dealers, we prepare a trend analysis for the customer pay operations to track sales, gross profits, margins and RO counts. This data is then downloaded into line graphs so the dealers can see at a glance where their retail service and parts operations are improving, holding steady or declining. One of the critical performance indicators in this exercise is of course the RO counts. For far too many dealerships’ retail traffic is stagnant or declining. Why?

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Treading Water?
To begin with, many dealers and managers are of the opinion that if their retail traffic is holding steady year over year they are doing a good job in “owner retention,” when in reality they are simply replacing the customers they are losing each month with the new customers they are selling new and used vehicles to each month.

Consider the following scenario for a dealer selling 150 new and used per month and producing 1,000 retail ROs per month, on average, for last year:

  1. 150 units sold per month last year produces 1,800 service customers for this year.
  2. Assuming this dealer has a repeat customer retention rate of 33 percent, the dealer has a net increase of 1,200 new customers into their service department.
  3. This dealer writing 1,000 CP ROs per month would have a total of 12,000 CP ROs for last year.
  4. If this dealer retains their customers from last year, then the net increase in traffic this year should be no less than 1,200 new customers for an increase of 100 per month.
  5. This year’s traffic count should now be averaging 1,100 per month, right?

Unfortunately this dealer is still averaging about 1,000 ROs per month or fewer. Why? Because he is losing existing customers at about the same rate as he is adding new ones. Owner replacement!

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Do the math in your store and compare last year’s RO performance to this year’s RO performance. Is your traffic going up going down or is it stagnant?

Stop Replacing Owners
If the answer is going down or stagnant then it is imperative that you determine why. Let’s take a look at some of the possible conditions that may be causing your lack of retail customer growth:

  1. Poor appointment process for incoming calls. Eighty percent of your ROs start with a phone call while only about 20 percent are from walk-ins and the internet. Have you had any phone training lately on how to sell appointments?
  2. Advisors are not training your customers on preventive maintenance. Every warranty and retail customer should be trained on the manufacturer’s maintenance requirements and recommendations for both severe and normal driving conditions. AAA survey shows that over 60 percent of customers are driving in severe conditions.
  3. Advisors do not conduct an active delivery with the customer at their vehicle. Customers must be informed of the Three C’s for each service and repair made to build value in the cost of the RO. A thorough review of the features and benefits will go a long way toward building trust.
  4. Advisors do not set the next appointment for each customer at time of delivery. We do this based on time and mileage. Ever been to a dentist?
  5. All “no shows” are not being called for a new appointment. People forget and/or get busy with other commitments but they still need the service or repair. Again, have you had any phone training lately?
  6. Your CRM strategy — or lack thereof — is not working. Why do dealers consistently spend 25-30 percent of their front-end gross in advertising to sell a car to a stranger but won’t spend 10 percent of back-end gross to retain a customer who already owns their product and will eventually buy another one?
  7. Dealer or GM has a lack of appreciation and/or understanding of how to lead and build their fixed operations to work toward achieving 100-percent fixed absorption. If working toward achieving 100-percent fixed absorption is not on your radar then the next recession might be your last.

NEWS FLASH!
There is nothing profound in what I’ve covered here and for many of you, you might be thinking “Nothing new here!”

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Well here’s a news flash — I agree so why are these seven processes not being followed? I believe the answers are quite simple: Lack of commitment and lack of accountability.

Your commitment starts with defining the primary mission of a service department, which is: “To ensure that every customer leaves your dealership driving a safe and reliable vehicle.”

In addition, you must ensure that you communicate effectively with every customer what is required to keep their vehicle in a safe and reliable condition. This is easily accomplished through complete and thorough multi-point inspections and professionally prepared maintenance menus along with an advisor who can communicate the benefits of following the technicians’ recommendations as well as those of the OEM.

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In other words, your advisors must advise. Once your advisors know how to properly advise, your sales will increase, your CSI will go up and you will start growing owner retention versus treading water with owner replacement.

Commit To Success
Once you get this commitment in place you now must be willing to make this your company policy and as such it is not “optional.” Policy is policy and should not be ignored by anyone. Those who do must be held accountable for their unfortunate decision to ignore the dealer’s policy. For some strange reason many of you have a difficult time with holding your fixed operations team accountable for their performance or lack thereof in the same way you do for your sales team.

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Example: If you won’t tolerate a salesperson selling four cars a month then why would you tolerate an advisor selling an hour per RO? If your sales manager can only close 10 percent of the “Ups,” I’m guessing you hope he goes to work for your competitor across town after you fire him. OK, so how about a service director who averages 60 percent one-item ROs month after month? Most likely he isn’t going anywhere any time soon.

Remember this very simple premise when you’re trying to make a decision with your heart as opposed to your brain regarding an underachieving employee: “If an employee cannot perform at the level of a top performer, there are only two reasons for that 1) They don’t know how to or 2) They don’t want to. If they don’t know how to we can cure that with professional training but if they just don’t want to then wouldn’t you agree they have made the decision to “de-hire” themselves?

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It’s time for you to get committed and start holding everyone accountable for their individual performance to get on track for making this your best ever in fixed operations.

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