Living from promotion to promotion to increase unit sales can be a tricky endeavor. In a typical promotion, you will increase your ad budget significantly for a short period of time in order to drive the traffic. You will then usually have some type of contest, drawing, or premium gift. Free food and drink is often involved, and sometimes entertainment of sorts. And of course, no promotion is complete without the sale prices, the discounts, the check mailers, dealership rebates, etc. All of this costs money to stage, while simultaneously reducing the gross margin per unit.
That's not to say that a good promotion is all bad, or should never be done. A well-executed promotion will clearly reduce inventory levels, reduce the floor plan overhead, generate new customers, create cash flow and create additional reach and frequency for greater awareness of your dealership. None of these are bad things. Promotions only become a detriment when we become addicted and dependent on them and we stop looking to other methods to supplement our need for increased revenue and profits every year.
One of the methods you should be seriously considering for increased revenue is a major push for customer retention in both sales and service, as well as increased prospect conversion. The hottest trends in marketing today are all about "one-to-one marketing," "database marketing," "relationship marketing," or "frequency marketing." Although they have different names, they all share some common denominators, such as:
$ Reward customers for their patronage
$ Keep in regular contact with customers
$ Survey customers
$ Build a file for each customer, containing likes and dislikes, past purchases, past problems, personal and family information
$ Sell to each individual customer, one at a time
$ Focus more on customer retention then on customer acquisition
$ Rely more on personalized one-to-one advertising vs. mass media
$ Concentrate on share-of-customer as well as share-of-market
All relationship marketing techniques look at the customer or prospect as an individual person, with unique needs. They all understand that sales do not take place to an aggregate group of people, but rather to one person at a time. They all use some sort of specific offer, targeted to specific people, using specific criteria. And most importantly, they all understand the need for customer retention, instead of the endless pursuit of new customer acquisitions. To put it another way, relationship marketing focuses on the need for increased share of customer, rather than increased share of market. This is a key point for modern marketers to embrace.
Sounds simple and it is, but it's far from easy. It's simple because it's just plain common sense. But it's not easy because of all the different expectations, values, standards, and perceptions that each individual customer or prospect has. Then you have salespeople, F&I people, lot porters, delivery people, service people, phone operators and cashiers, any one of whom is fully capable of rubbing a customer the wrong way at the wrong time, sending them spinning out of orbit, never to be seen again. Despite all of your training, processes, policies and procedures it happens in your store(s) every day.
However, most intelligent customers will forgive the occasional problem or misunderstanding if deep down they feel that you appreciate their business and that you have planted and nurtured this feeling from the beginning especially when you provide a tangible means of expressing your gratitude for their business.
You plant this seed of good will with a simple "thank-you" card and a gift showing your appreciation for their business from the very first time they purchase a vehicle or service from you. Then you remind them of your gratitude throughout the product life cycle, with holiday greeting cards, birthday cards and vehicle anniversary cards. These are not sales or promotional messages. These are just reminders that you appreciate them as a customer.
Then, at least on a quarterly basis, you should be sending them a newsletter, apprising them of the new specials, products, services, people, etc. Service coupons or seasonal service reminders are also a plus.
It's all about one-to-one personalized contact. As stated, it's simple, but it's not easy. To pull all of this off, you need a proven systematic process, motivated people with a variety of talents and skills, as well as the right equipment and a good deal of time. Doing it in-house can be difficult if not impossible to pull off with regularity, quality and affordability, which is why so many companies have sprung up over the last decade and recent years to fill this need such as Customer Satisfaction Improvement Corp. (now the OCT Group), Fresh Beginnings and CalPro.
In order to be effective at customer retention marketing, you must engage in regular, individualized and relevant communications with your customers on an ongoing basis. It means intercepting any problems early, before they fester into a negative feeling toward your dealership that affects your CSI. It also means making sure that each customer feels appreciated, with a timely gift of thanks for their business. It means creating more opportunities for your customers to provide you with feedback on how you are doing in all areas of your operation.
If you don't have a foolproof retention program in place, it's time to get serious. Customer loyalty is either being built or lost; it seldom remains static for long. Choose to build customer loyalty. If not, the alternative choice, lose customer loyalty, will be made for you.
Duane J. Sprague is an automotive marketing specialist with Sprague-Fanady, based in Huntington Beach, California. If you have specific questions or require more information about this subject, please check the appropriate box on the reader response form on page 3.