As the 21st century approaches, the industry leaders in the new millennium will be those whose primary focus is on customer retention, not on manufacturer's CSI scores.
In the 80's, the industry focus was on car quality. During the 90's, the focus has been on Customer Satisfaction and CSI scores. However, manufacturers are now learning what dealers have always suspected: high CSI scores alone are not accurate predictors of dealer success. The saying "You don't take CSI scores to the bank" has never been more true. Customer retention, customer loyalty, and customer advocacy have a much greater impact on dealer success, profitability, and longevity.
So what is the tangible value of customer retention?
Industry leaders, successful dealers, and consultants have attempted to answer this question. Carl Sewell, a highly-successful Cadillac dealer and author, calculated that each customer was worth $332,000 over their lifetime in terms of gross revenue in sales, service, and parts. Mr. Jack Pohanka of the Pohanka Automotive Group said each customer represents $325,000 to his dealer group. Consequently, both of these legendary dealers have set up all their dealership systems and processes to maximize customer retention.
Although the tangible value of each customer will vary from dealership to dealership, based on product, volume and gross margins, one truth remains constant: an increase in customer retention translates into an increase in profit!
So what are the tools and methodology to achieve increased customer retention?
INFORMATION! It is extremely important to have a system that allows you to communicate with prospects and customers in a two-way dialog. You need to know what your customers think about your salespeople and staff, before the deal is lost. The CSI report is too little too late.
LOVE YOUR CUSTOMERS! You should always make your customers feel appreciated. Thank your customer adequately. Your customer retention and loyalty are directly affected by how good your customers feel about doing business with you.
TIMING IS EVERYTHING! As soon as possible, you should find out how your customers were treated first during the shopping and also during the delivery process. Taken as a two-step process, you will convert more shoppers to customers and more customers to advocates.
You can only fix that which you are aware is broken. The CSI survey is not enough, because the rate of returns on the survey is very small and the turnaround time is very slow, which prevents you from solving problems that exist today. In addition, the CSI survey does nothing to identify problems that are preventing shoppers from becoming customers.
BE PROACTIVE WITH CUSTOMERS! You need to maintain a consistent level of communication after the purchase to keep customers from feeling abandoned. At the very least, contact customers on special occasions such as the anniversary of their car purchase, holidays, and birthdays.
Changes in consumer behavior, technology, and automotive distribution will dictate the rules of marketing in the 21st century. Success in the new millennium will be based on the successful execution of the three main components of building customer relationships and loyalty as outlined here: expressing tangible appreciation for their business, gathering information about them and their experience in doing business with you, and communicating with them one-to-one on a regular basis. Dealers who incorporate these elements of relationship marketing to existing customers will enjoy a major competitive advantage in the years to come.
Grant Dunning is President of the OCT Group, a relationship marketing company working with dealerships in all 50 states and Canada since 1986. 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 .