Tag Archives: dealership for life

Loyalty Versus Retention

Every business wants a loyal customer. Who doesn’t want a customer who is unswerving in their dedication to your business? Who doesn’t want to do business with someone who is as faithful to you as a customer that they would never think of purchasing something from anyone else? If only our customers were like our dogs, loyal to the end regardless of the circumstances. Well, we are never going to find customers as faithful as our dogs, but you get the point. Creating devoted customers does not happen overnight, nor does it always last a lifetime, but staunch allies can grow our business faster than any other factor we have. Their steadfast devotion to us is not only good for our business but they become advocates in the community that extends our message far better than any advertising campaign.

The question then becomes, how do you create loyalty? Here is where the quandary comes in. Before you can have any degree of loyalty, you need to design something that will keep the person engaged until they become a strong supporter of your business. What type of retention tools are you developing to create a steadfast customer whose loyalty will be contagious in your community? These tools are where retention comes into play.

In the automotive business, you see many different programs popping up designed to create retention. Unfortunately, not all of these are designed to create loyalty. Loyalty comes from a great customer experience. This customer experience needs to occur over and over again. Let me give you a few examples. One dealer gives away the first two oil changes free and one has lifetime oil changes. Which retention program creates more loyalty? One dealer gives a free tire rotation when you purchase a vehicle, and another gives you a rewards card that earns point toward free service for the life of the car.

Starting to get the picture?

Customers become loyal when they think you have gone the extra mile. The days of saying, “We’ll treat them right and they’ll come back” are pretty much over. Everyonetreats their customers right in this market.

Retention programs are not the answer to the problem but the tool for solving the problem. Picking the correct method of retention can go a long way toward developing a strong loyal following. The branding message that develops your loyal customer will, in time, create that raving customer.

Keep in mind that choosing your retention method is not a one-size-fits-all decision. A good CRM program is not necessarily a good retention tool — unless it combines a series of messages throughout your business. A factory rewards card isn’t branding you as someone different in the market place; every dealer has the same program. You don’t necessarily want loyalty to the brand — you want loyalty to your business. What is your message? How do you communicate that message to your customer? A combination of retention tools designed to deliver a unique message that your customer sees value in is always the best step.

That fact that loyalty is not created overnight can be perplexing to the average business. We all want instant gratification and, when we spend money, we want to see it go immediately to the bottom line. That’s why the rush to just grab the first thing that comes down the line is so enticing. That is also why it usually doesn’t work, and we wind up throwing good money after bad. Think of the things you are most loyal to — your school, your church, your favorite sports team, etc. Did it happen overnight? They all provided you with a great experience, a great memory and, over time, a dedication that is hard to shake.

So, where should we focus our retention efforts? In my experience, when trying to develop loyalty and retain your customers, it’s best to focus first on the service drive.

I see a lot of stores offering lifetime powertrain and they are calling it a retention program. Yes, there might be some form of retention in having the customer call to get an authorization number for service, but overall most of these programs will let the customer go anywhere for their oil changes and maintenance. The problem with this is retention begins and ends in the service lane. Lifetime powertrain as a stand-alone retention tool is not enough. It mostly helps us sell more cars — that’s not a bad thing, but to have people talking about our business like they do Amazon Prime it’s going to take a lot more than this to move your numbers to the next level.

To start the process of developing loyal customers for your business, you need to lay out a comprehensive plan that is ongoing and develops a branding message that separates you from your competition. It might not be one retention tool but several. Lay out the plan in advance and make sure you have total buy in from your management team. Look at each department and see what type of retention tool you are using to create loyalty. It is very important to have a way to measure your results, but the best measurement is say to yourself, “If I was the customer, is this program so special that I can’t imagine ever wanting to shop any place else for my automotive needs?”

Jack Garrity

INSANITY

Insanity: Doing the same things and expecting different results.
 
Over the years there has been a slow evolution of how we do business in the Automobile Industry.  Essentially, not much changes and if it does it is so slow that it is imperceptible.  The good news that comes from this phenomenon is that we know what works and what doesn’t.  In some cases, we keep doing the same things just because our competition does it and we go along thinking that we will suffer if we don’t follow along.
 
I will use a common practice to demonstrate what I am talking about and that is direct mail.  We hire a direct mail company with the intent of driving business to our doors.  They acquire ‘lists’ that are generally geographical or demographical and prepare an offer (incentive) and they use the United States Postal Service to reach out to these potential customers.  What happens next is that the mail hits the mailbox and the potential customers might respond to the offer.  The truth is that Consumers are opposed to this type of marketing and for the majority, they simply discard the offer as “junk mail.”  The small percentage of customers that do respond amounts to less than 3%.  So, let’s break this down.  A Direct Mail company will charge a fee per consumer including mail costs.  A typical mailing could easily include 20,000 pieces. The offer is generally a below cost service that the dealer will lose money on, with the hope of being able to up-sell the customer when they respond.  Industry results tell us that you might get a 1.5% response, so you can readily see that this is not cost-effective.  Add to this the loss you are taking on whatever incentive you have put together and you end up with a net cost that just doesn’t make sense (INSANITY). These customers are not advocates of your brand.  History tells us that only about 10% of those responding will buy the up-sell.  Here is the sad part of this form of marketing, you just spent all your advertising dollars to get a customer to come in for the loss leader incentive, and they typically do not return for a second visit unless you send them another mailing!
 
Now let’s contrast that with a simple rewards program that gives your customers an incentive to return to you to cash in rewards that they earned on their last visit.  A simple rewards program that awards points for dollars spent that can then be redeemed upon the next visit is both cost-effective and results in multiple visits to your store.  The big difference is that you have a program that keeps your customers involved by rebating a small percentage of what they have already spent with you, and they keep coming back!  These programs generally cost you nothing, as the return-on-investment greatly overrides any expense.  The beauty of this concept is that your customer will respond to the up-sell at a higher percentage because they have “found money” they can apply to these services. Additionally, they keep returning because they know you appreciate their business and you keep rewarding them.
 
There are additional benefits to your business with this marketing approach in that you can award points for events that you now spend dollars for.  Examples are referral programs, compensation for a mistake, motivating your customer to like you on social media, respond to an offer to purchase whatever you are selling.
 
A rewards program does not have to be complex or hard to administer.  If you partner with an established rewards company, they will make the process so simple that your staff will not be encumbered by having to add to their workload.
 
Rewards programs have been around for a while and customers are familiar with them and generally respond positively to the incentives at a much higher percentage.  The one notable point in this comparison is that one marketing concept creates a one-time event at a high cost and the latter creates a lifetime of loyalty creating additional profits.  In putting together your marketing budget you must always consider return-on-investment and, as you can readily see, one is astronomically expensive while the other is cost-effective.
 
Take the time to explore this more effective marketing and profit generating program by contacting a professional company that can make it all very simple.
 
Stop the INSANITY!

– Jack Garrity

Focus on How Your Customer Can Get More, Not How They Can Pay Less

Is it even possible for customer to get more and not pay less? I’m not talking about the services most dealerships offer to their customers, such as shuttle service, complementary beverages, Wi-Fi and snacks. I’m talking about offering something unique — something that stands out and that every vehicle owner needs. Having all the right people, processes and training has always been an essential part of creating a successful business; today, though, that has become the base expectation of every business. We’ve always focused on creating a great customer experience. Great customer experiences, however, are defined by the individual.

A New Direction

Nine years ago, I accepted a service director position at a dealership in Maryland. This dealership had been in business 40 years, was family owned and well-established in the community. During my research, I had discovered the fixed operations department was operating at what we might call ”Industry standards.” With the staff of three service advisors and 12 technicians, it produced an average 40 repair orders per day at 1.6 hours per RO. The average gross profit in a month was just over $90,000, and sales to service new car retention was at a “comfortable” 30 percent. Used car retention was not measured other than by brand; the industry standard at that time was between 18 to 25 percent.

Three months prior to my coming on board, upper management had decided to move in the direction of branding the company through a loyalty program that would benefit all customers who purchased from the dealer. This program offered an array of benefits to the customers. When they revealed these benefits to me, I found them to be quite aggressive. They included complimentary oil changes, tire rotations, multi-point inspections, car washes and a lifetime engine guarantee (on the condition the customer performed all recommended preventative maintenance at our store). This was all included with the complimentary services already supplied, such as shuttle service and towing. The program also offered rewards points for purchases. When this program was explained to me, several things came to mind, mainly cost and manageability.

Train the Staff, Educate the Customer

With this program, we were building our own brand, and creating a culture of who we were and what we would do for our customers. It was a unique culture because we were providing services in such a way that others were not.

This required the staff to fully understand the value customers would receive from our brand, and utilizing word tracks and proper body language to deliver the same message to every customer is critical.

My daily activities as a director quickly shifted from mostly office work and minding numbers to actively listening to and guiding service lane staff. It was managing from the sidelines versus the locker room. Based on the services offered complementary to all customers who purchased a vehicle, growth of fixed operations happened very quickly. With the number of cars we were selling per month, I knew I had to think ahead on how I would handle the volume in three months, in six months and even a year into the future.

The next step was to help my staff understand that customers spent three to five hours with the sales staff purchasing that vehicle, and they would spend the next three to seven years as a service customer. In transforming them from sales customer to service customer, it was now the service staff’s responsibility to fully explain the way we did business through our value-added loyalty program. Every employee had to learn and explain the program in the exact same way to every customer. Once again, training and listening everyday was the key to the successful building our brand. Our training sessions were held bi-weekly as a group and based on the events and numbers generated during that time. That training was continuous.

One Year Later…

Our sales to service retention had climbed from 30 percent to 85 percent with an overall customer service retention of 74 percent. Email capture rates had increased dramatically because this is how we were now marketing ourselves. Outside advertising expenses had dropped more than 80 percent. CSI scores were rising fast due to happy customers feeling good about how we were “investing” in them. And where last year CSI average score was 78, we were now tracking in the mid 90s.

Word of mouth was on the move throughout the community about our new way of doing business — and business was much better.

Our average hours per RO was now trending at 2.2. We now had four service advisors and three more techs. Repair order count climbed to an average 65 per day.

In planning for future increased service business, we were installing an express service team along with changing to a synthetic blend oil to spread out the rapidly increasing demand of oil change services that lead to heavy maintenance services. The service department added and retained an additional 1,350 customers over the past year — now that’s called growing the business.

By the third year, more change was needed because of the increase in traffic and change in workflow. While maintenance work was climbing, warranty work was decreasing and heavy repair customer pay work stayed flat. It was time to re-evaluate technician pay plans due to the changing world of service.

The selling of maintenance-related services had nearly doubled over the past year. Before we started the program, the store was generating a bit more than 30 percent in maintenance-related up-sold services. By year two, it had climbed to just  over 52 percent. Our brand and new culture was now at full speed! It was now time for our organization to prospect “the garage” by inviting our retained customers’ family and friends to become part of our “Family Plan.” This invitation granted these new customers half-price oil changes, tire rotations and car washes along with points accumulation with money spent in the service department. Talk about driving retention.

The Progress of Retention

This dealership started a branded loyalty program that made an investment in their customers. This meant investing in a “loss leader” that every vehicle owner needs and building relationships with people in the community who had absolutely no reason to take their business elsewhere. The investment paid off big for branding the dealership and produced a culture within the dealership and the community.

Think about investing in your customer — for life. Make certain that your investment is something every vehicle owner needs, and then build a relationship off of that investment. Utilize the loyalty program that will brand your company, set you apart from the rest and perform turn-key results in every aspect of marketing, customer and dealer phone apps, follow up, customer reminders, full ongoing service and sales training, along with reports custom designed to track all progress.

There are quite a few companies that can provide some or most of the elements needed to produce results — make sure to utilize the company that can do it all. Super-boost your retention and, more important, capitalize from it.

Jack Garrity