Tag Archives: dealership for life

Retention 101

Every dealership in the United States wants to have greater retention. It is no secret that the car
business is easier, more profitable and a heck of a lot less stressful when working with repeat
customers.
 
There are really only two things a dealership needs to have a successful retention program; benefits and rewards. To get the customers involved you will need a brand and a means to deliver your message. And finally, you will need ongoing training and accountability. Sound too simple? It really can be broken down into these simple steps.
 
First the benefits. Benefits are something that the customer receives just for doing business with you. This can be lifetime engine or powertrain, oil changes, tire rotations, key replacement, car washes or any combination of these and more. The Program term can be anywhere from 1 month/1,000 miles to 10 year/250,000 miles. You decide on the Package of benefits you want to offer and for how long you want to offer them. Next the rewards. Rewards are what the customer receives for continuing to do business with you. It’s simple… the customer earns rewards when they spend money with you. The more they spend the greater their reward.
 
To get the customers involved and on-board with your program you will need a brand and a means to deliver this brand’s message. Decide on what you want customers to associate you with to start developing your brand. Do you want to be the Powertrain for Life store, the Oil Changes for Life store, or both? Your brand can include a slogan or just a story about who you are and what you do in the community and how you assist your customers with their automotive needs. Building a strong brand is an art form, and you may want to enlist the help of some professionals if you do not feel that you are able to absolutely nail this part. How you are perceived by your market goes a long way to success with your program.
 
How do you deliver your brand message? This is the fun part. There really is no wrong way other than not going all in. Be creative! Dealerships have had success with brochures, custom log-in and landing pages, desk mats, banners, posters, web graphics, addendums, service drive cards, custom email blasts, personalized enrollment mailers, direct mail, stickers, flyers, frisbees, postcards, glovebox enrollment cards, mobile apps…. The sky is the limit. If reaching out with your brand works when you do it timidly, imagine how well it will work when you are aggressive with it!
 
Your brand is who you are and you must include it in everything you do. Now for the training and accountability. There are dealerships that have done this internally and had some success. There are far more who have tried, failed, and abandoned the idea of a retention program. It’s not typically due to a lack of talent or knowledge; it normally just comes down to time. Very few people reading this article right now have the time to train and mentor every employee in the dealership through the metamorphosis that is required to have success with retention. Every customer interaction with every employee has to drive retention. Every phone call answered, every service appointment made, every sales follow-up call, every desked deal, and every service bill paid will have the whole interaction designed to drive retention.
 
Once you have trained everyone on everything, now you have to mentor and make sure it sticks. Sales managers have tried to get everyone up to date for decades, but how is that going? This is the place where the right partner can really help.
 
If you decide to look for a partner to help you achieve your retention goals, look for a company that is about process and not just product. Every company out there will offer some level of training. But remember; bad training is worse than no training at all. The company might lose you as a customer after a year. Think about how many customers you will lose during that year. Look for a partner that will stay with you and your people, and will help you every step of the way. You need someone that will not only set you up but also help you straighten things up when you start to go off track… before you derail. Ask any potential partners for references that you can speak with; furthermore, ask those references not only about successes but also about a time when things got tough and how the potential partner handled it. True character is shown in times of trouble. Good luck in undertaking your journey to retention.

Jack Garrity

Rewards, Rewards, Rewards!

I was waiting in the airport at Jacksonville, FL for a plane the other day and several passengers
were in a passionate discussion about various reward programs that they were members of.
One was discussing free lodging, another a free flight, another merchandise. One even got an
entire weeks vacation using their points. This conversation went on for at least half an hour! It
made me think about the importance consumers place on rewards programs and how it has
proliferated our retail environment. I am old enough to remember the early versions of
rewards. I used to stick the stamps my grandmother earned by shopping at our local A & P.
They were called S & H Green Stamps. Stores sold detergent in boxes that contained dishes and other Prizes. Gas stations used to have pyramids of dishes that they gave away with a fill-up. It was exciting to shop with my Mom and pick out the cereal I wanted just because It contained a free toy. There were others that I can’t remember because I am getting old. For a very long time, retailers have recognized the value of rewarding customers for their business and it continues today. Today’s version of rewards generally takes the form of assigning a point value based on how much a customer spends. You see this in almost every sector of the economy. I travel a lot so, I belong to Airline, Hotel and Rental Car Programs, which is a nice perk for the amount of travel I do for work. I can tell you that my loyalty to certain brands runs deep and I try to find ways to do business with the companies that reward me the most.

What can we in the Automobile Industry learn from these reward programs and what would be
the positive aspects of having a rewards program for our customers? The main objective of any
rewards program is to create repeat business and that is certainly what we struggle to do as
Dealers. Just providing “great service”, whether it is in Sales, Service or Parts, is just not good
enough to create a lifetime relationship with our customer. Let’s face the truth…everyone in
business thinks they are the best, so what we have is a level playing field. You are no different
than your competitors and that is a fact!

A well thought-out and professionally executed rewards program will give you the edge against
your completion. You are thinking that it is difficult to administer and that it is going to cost
you a lot of money. Let me assure you that you would be wrong on both counts! Let’s discuss
the administration. It is probably the easiest motivational program you could possibly install,
requiring very little hands-on by your staff. The key to making it easy is to have an
administrator that has both software and data exchange with your DMS. The rest is simple and
customer/employee friendly. But, what about the cost? Your customers only earn rewards
when they spend money with you. Isn’t that what you try to get them to do every day you
open your doors? The beauty and magic in any rewards program is that the customer can only
redeem them at your store, and only to buy more stuff from you! You can even set the value of
the redemption to your tolerance level. Most dealers I see are fully agreeable to set it at about
a 5% rebate on dollars your customer has already spent with you. The only cost is a miniscule
administration fee from your rewards partner.

Side benefits of a points type rewards program is that you can use the points to motivate your
customers to do the things you want them to. Offering points for purchases is just one way.
How about if you offer them for events like attending your New Owner Clinic, liking you on
Social Media, giving you a review on Dealer Rater, a surprise gift on their birthday, returning your on-line surveys, coming in on an “off” day in service just to receive bonus points, thanking them for community service such as military, fireman, policeman, paramedic, etc. Most Dealers pay cash for a customer referral purchase which the receiving customer most likely spend somewhere else. How about if you reward them with points instead of cash so they can only redeem them with you to buy something you are selling?

So, if you are serious about creating lifetime customers, motivating those customers to do what
you want them to do, and therefore creating more sales, then you need to consider installing
and providing a rewards program that has value to your customers.

– Roy Olive

Add a little Magic to the Experience

I find it fascinating that everyone in the automobile business doesn’t use a rewards card to thank their customers for their loyalty. I don’t know the exact numbers who do but in the course of visiting over 200 dealerships per year it is a very low percentage.

Every industry wants to keep their customer engaged and coming back. How many people fly and don’t sign up for the airline rewards card? The same goes for hotels, grocery stores, and gas station. When you think about it, most of us have multiple rewards programs we belong to and get rewarded by.

The psychology of these programs is pretty simple to grasp. I’m going to spend my money with you and in return you will invest in me to get future business. This is a true win, win for both the customer and the business. How many people have stopped using cash all together so they can put their purchases on a credit card that is connected to a rewards program? The entire loyalty equation is changing. People don’t buy from you because their parents did. The prices on most products are already bare bones so they don’t just buy because it cost less. They don’t always come back because we treat them right. Customers know if you don’t appreciate their business, someone else will.

In the cost conscious world of the automotive industry some may look on reward cards as an extravagance. This does not have to be the case. A small percentage back can add up quickly for the customer and over time all of these visits will create numerous RO’s. Think of it this way, a coupon for a 9.95 oil change will cost the service department twenty or thirty dollars or more. Mostly like this will bring us a price buyer who spends money just for the oil change and we never see them again. That same money credited to a rewards card might bring us two or three RO’s and over time a loyal customer who continues to use the dealership for all of their automotive needs.

The difference between a rewards card and coupons or discounts are pretty significant. The latter is a bribe. We are spending money to gain business and hoping it leads to more business. With a loyalty card it is just the opposite, the customer gives us business and then we give them the thank you. The best part about this method is we have thanked the customer but he needs to do more business with us to reap the reward. Let me go over that one more time, when you use a discount or coupon the cost is up front and final. When you use a loyalty card the recognition is up front but the cost is down the road and is developing future customers not one time buyers.

The synonym for reward is award. Isn’t that what it is really about? We all want to receive an award for what we do. We give awards to our top athletes, our top writers, actors, and scholars. The same principle must apply to our customer base. How are you awarding the customer for doing the performance you want?

Reward cards are an intricate part growing your business. It is easy for the customer to understand and very cost effective. It answers two of our most important questions, why buy here, why service here. If we are not reinvesting back into our customers we are wasting a golden opportunity.

The Realistic Expectations

You are thinking that you need a retention program to move your business model to the next
plateau but you are not sure of what to expect? I have been training and installing retention
programs for dealers for close to 10 years and here is what I know.

A Golden Rule in the creation of a Loyalty Program is to never start a retention program unless
you are 100% committed to it. What I mean is that you are going into it with realistic expectations, you are looking at it as a long-term program and that you will work to ensure it
becomes a culture in your business. When you open the doors each day it will be a priority and
the way you conduct your business!

Let’s talk about the realistic expectations. There are immediate short-term gains, but you must
be patient to realize the long-term success of your program. I will break down into 3 categories
what you should be looking for. These categories are Sales, Service and Repeat Buyers.

Sales: Immediately, you will be offering a greater value-add to your customer in the buying
experience which, if properly implemented, should result in higher front-end gross profits,
added sales volume, higher CSI scores, more referrals and additional tools to make it easier to
close more deals. You want to think of the benefits you offer as a “Why buy here instead of
from my competition?” Most importantly, it will set you apart from your competition. They
simply will not be able to compete with you on VALUE. Some common components that make
up the benefits that you could offer each sales customer are Engine Guarantee, oil changes, tire
rotations and car washes. These each have a high perceived value and help to overcome price
objections. You couple these benefits with what you already are providing, such as Gourmet
Coffee and Snacks, Children’s play area, shuttle service, pick-up and delivery service, etc. and
you have just moved to a new plateau in how you value your customer. It is like the verse in the
bible, Luke 6:38,and I am paraphrasing, “Give and you shall receive”.

Service: If you are like most Dealers you probably fall somewhere in the range of 30 to 40%
retention currently (as measured only by NEW vehicle sales and reported by your OEM based
on 2 service visits within the first year after purchase). A properly designed, value-add,
retention program will double your current percentage of sales customers that are using your
service department. Rewarding your customer each time he services with you gives you a great
opportunity to up-sale at the next visit through “found money”. It is a more honest way of
conducting business in that the customer begins to feel that you have a vested interest in taking
care of them by keeping them safe and operational. Each visit is an opportunity to prepare for
the next visit and set realistic expectations on what services will be needed. You can expect
your absorption rate to move closer to the gold standard of 100%, an increase in the number of
repair orders daily and more customer dollars spent per RO. In every case where we have
conducted an audit of who spends more, we find that the customer that is a member of your
retention program spends anywhere from $12 to $226 more per visit than a non-member
customer. An increase in repair orders results in more labor hours and more parts being sold.

Repeat Buyers: A customer that bought from you and serviced with you during their ownership
cycle will return to you for their next vehicle approximately 86% of the time vs. a customer you sold and who never serviced with you returns to repurchase less than 25% of the time. It is a
reality that it is much easier to resale a vehicle that you originally sold new and serviced. You
want this trade-in as it is much more valuable than an auction vehicle! The typical time this
type vehicle stays on your lot is approximately 2 weeks. By installing a well thought out
retention program you are guaranteeing that you will increase your % of resales and receive a
highly valuable trade-in as a part of the deal. You have created a “Pre-Owned Vehicle Factory”.

-Roy Olive

Keep Customers Engaged and Motivated for the Long Term

 

Retention is great for every business, and no one has better retention than the National Football League. Teams like the New York Giants have a 10-year waiting list for season tickets. We can probably never achieve that level of retention in the automobile business, but we can do much better than we have been.

Automotive business has been strong for a long time. Can’t we forget about retaining customers when so many people are just wanting to buy a car? Th e best way to grow our industry is not to sell more cars, but to retain more customers. Anyone who has been in this business for any length of time knows how cyclical it can be. Sales will go up and down, but a good service department never has to deal with down cycles.

We can talk all day long about all the things dealers think they are doing to build retention. Most programs, however, are just like throwing darts against the wall. If you don’t have a way to track it, a comprehensive program that works for every department and a plan for long-term success, you are probably wasting your money.

Customers want to be engaged. Easier said than done. We need to give them reasons to come back. How do we get them excited about doing business with us long term? Let’s lay out a program that will keep your customer engaged and motivated year after year.

First, we need to provide customers with reasons not only to buy here but to service here. A valid lifetime engine program can accomplish this and, in many cases, can be reinsured to offset potential liability. Next, couple this with an oil change program sold in F&I. Unlike prepaid maintenance, an inexpensive oil change program can double retention for three to five years.

Next, look at the digital side. Dealer Websites are generally good, and so are dealer mobile apps. From a retention standpoint, though, a personalized Website for each customer and a customer-centric mobile app are more successful in engaging the customer. This allows you to customize your message to each person in your database. Blanket CRM reminders work, but a better method is to create customized graphics with service specials, birthday greetings, service reminders, announcements of community events and all other direct communication you want to have with each customer.

How do you thank a customer for doing business with you? A nice note from the dealership? A call? A picture of them in the showroom? Th e airline and hotel industry have shown us for years what works. Copy this type of program and you can’t go wrong. Everyone wants to be rewarded. A customer likes it when they think, “I spent some money with you, but you are reinvesting some of it back to me as a thank you.” What keeps a customer more engaged: $100 off a set of tires or a box of cookies?

Retention is often overlooked on the service drive. Why not take the same oil change program you developed for F&I and sell it to everyone who uses your service department? Approximately 80 percent of customers who buy a car do not buy prepaid maintenance. Here is a great second chance to capture them again — and when you do, they will be loyal for up to three to five years. Finally, use your database to keep customers. More and more people want to shop from the comfort of their own home. Develop an online store to keep your customer always thinking of you for their automotive needs. Offer the oil change program and service contracts. Allow them to shop for tires, batteries and anything else they might need, but often buy elsewhere.

This is the path to successful retention. A program like this will create a retention rate of 75 to 85 percent. It is cost effective and, in most cases, highly profitable. More important, you can track it, see what is working, where it is breaking down and tweak it each month to get the best results. Most dealerships have a lot on their plate and the meat and potatoes of the business consumes most of the day. Retention is easy to overlook, but in some cases you are picking up dimes as you walk over dollars.

– Jack Garrity