The Consequences of Doing Nothing to Fix Your Retention Problem
The Consequences of Doing Nothing to Fix Your Retention Problem
Every dealership watches their expenses. You have to. Margins are tighter than ever and customer acquisition costs are going through the roof as it gets harder to lure new car shoppers into the dealership. We’re leaning more heavily on fixed operations to bridge the gap from lost vehicle sales and dismal F&I revenue. Not so fast, clever dealers. Even the service department is under assault from low-price independent shops and same-day-service retail auto repair centers. These are the conditions causing headaches for dealer principals, while also opening up opportunity for stores that are getting aggressive with their customer retention effort.
Everyone wants better customer retention and the documented outcomes are clearly desirable. On average, repeat customers spend 67% more than new customers. Increasing customer retention rates by just 5% can increase profits by 25% to 95%, according to research by Bain & Company. Better retention also leads to better cost efficiency. It costs five times more to acquire a new customer than to retain an existing one. We’ll spend less money on marketing and other promotions that require deep price discounting. Satisfied, loyal customers are also more likely to refer new customers, which can result in up to 16% more profitability, according to Wharton School of Business.
So, what’s holding us back as leaders and why do I suggest that a vast majority of customer retention efforts are woeful? Let me circle back to the current economic climate. Sales slow, revenue tightens and then we’re paralyzed to make sizeable investments, even for those activities that could significantly move the revenue needle. We’re trapped in a box that also limits our ability to get out of the box. We don’t want to make new investments when revenues are low and we forget to make those investments when we’re way ahead. So when do we ever make those investments to truly stand out in a sea of competition? Ask yourself, “Why do consumers service here?”
Free coffee, free wi-fi, a comfortable lounge, express services – maybe those are clear differentiators in your market, but is it appealing enough for the average consumer? I don’t think I’m going out on a limb when I suggest that most services at a dealership cost more than going to an independent shop. We don’t need to apologize for this. I think we need to be aware of it and not price ourselves out of the market, especially times like this when the average vehicle owner is struggling with high inflation, prospective job loss and mounting debt. While price is important, it is convenience that matters most. Dealers can win back lost and lapsed customers and those that purchased their vehicles, yet never service with our store. But only if we can get those customers back in to the store.
Your comfortable lounge, your tasty coffee, the promptness of your express service – consumers can’t see that from the street, so how do they ever experience those differentiators and establish loyalty for servicing at your store? Don’t get me wrong – tactics like express service, mobile repair, tire promotions, car washes, collision centers and detailing services have done wonders in expanding the consumer footprint on the consumer’s wallet and top of mind. As service intervals get further and further spaced out, dealerships will need to continue to capitalize on any event that builds the relationship with the consumer. Recalls are just that.
In the early days of Recall Masters, a lot of dealers (and OEMs) feared being so transparent with recalls. Not that they didn’t want to comply with federal regulation, but rather, communicate on a local level with owners in order to drive more awareness. Want to know how consumer’s view recalls? In a recent survey of vehicle owners, approximately 88.8% of all consumers had a positive or neutral view of recalls, describing them an effort to be more transparent about manufacturing defects that are a natural offset to the process. No OEM wants recalls. But they’re going to happen, more and more these days as vehicles become more dependent on software and electronics. No OEM is immune from recalls. Just about every brand has issued a recall. Instead of viewing them as a blemish on the brand, we need to leverage them to promote safety, protect the brand’s reputation, remove the barriers to recall compliance and to deliver an exceptional servicing experience when those vehicle owners engage the repair process.
Recalls also give consumers to experience servicing at your dealership without having to open their wallet in order to receive a critical repair. It doesn’t mean they won’t spend money. In fact, 54% of the consumers that come into the store for a recall repair, also opt in for additional CP (customer pay) work. Once that vehicle comes into the store and is on a lift, your technicians are going to find other ways to support better vehicle performance or to protect the vehicle asset. That’s good service.
What are you going to do at your store to drive better retention? It doesn’t have to be recalls, but your answer can’t be “nothing.” There are massive consequences to sitting on the sidelines waiting for your customer retention problem to repair itself. I get it – it’s hard to invest when times are tight. But there’s a hole in your bucket and it’s not going away without a piece of tape big enough to plug all the holes. Better yet, a tactic like recalls that open the spigot up and pump in new opportunities, resurrecting old relationships and solidifying your existing relationships.
About the Author
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Sean Reyes oversees all marketing efforts at Recall Masters as Chief Marketing Officer. Sean also serves as the host of the FixedOps UX, a “minicast” that revolves around the fixed operations ecosystem and the tactics that build a better user experience for customers, dealership staff and other stakeholders. Sean’s experience spans more than 35 years of business development and strategic marketing experience, having developed go-to-market products and solutions for the automotive, healthcare, insurance, finance and technology industries to serve Fortune 1000 clients like American Express, Toshiba, Western Digital, Cox Communications, Novartis, Microsoft, IBM, Compaq, HP, National General Insurance, MyCustomer Data, DigniFi and several automotive affiliates and dealerships. Sean lives in Napa, CA with his wife Kathryn and spends his free time hiking, kayaking, playing guitar, going to concerts, rebuilding project cars and helping his kids embark on adulthood. |
