There’s an old saying that a satisfied customer is more likely to be a loyal customer. A new Maritz Research study has revealed tangible proof to back that saying, and proves that dealerships that make a committed investment in improving the customer experience, drive
away with higher profits.
According to the study, Maritz Research found the average auto retailer could generate an additional $106,315 U.S. per year in gross profit by making their customer’s experience a top priority.
“It’s always been assumed that happy customers are good for business, but this study provides hard data to back up that theory,” said Chris Travell, vice president of strategic consulting for Maritz Research. “For many dealerships, when it comes to improving the customer experience, they say — what’s in it for me? Now, customer service can be seen as a profit-generating endeavor, and we can actually calculate the payoff.”
To determine the financial impact, the study examined two key areas that drive profit for
dealerships — vehicle sales and service revenues — to determine the potential incremental profits. Models were created estimating the impact on an average dealership’s sales and service gross profits due to an increase or decrease in customer satisfaction scores by one level. For example, people moving from feeling “very satisfied” to “completely satisfied” with the car-buying experience.
According to the study, when in the market for a new car, satisfied customers were much
more likely to return to the dealership where they bought their previous car compared to less
satisfied customers. The study also went a step further by calculating the financial benefit,
determining that a dealership could earn more than $64,000 U.S. each year in additional sales
profits if the dealer was able to increase their customers’ satisfaction over the lifetime of their vehicle by one level.
The study also revealed how customers’ satisfaction with their car-buying experience affected their likelihood of visiting the dealership for future maintenance and repairs. A similar analysis found an estimated increase in service profits for the average dealership of $41,646 per year. Combining additional sales profits with service profits revealed a potential incremental gross profit of $106,315 per year for the average dealership.
A similar analysis was performed to model the possible effects of customer satisfaction decreasing one level and found a potential decrease in gross profit of $191,624 U.S. per year. “When dealerships consider investing in improvements to their customers’ car-buying experience, this model will help them understand exactly what financial benefit they can expect. This is essential in justifying the cost of customer experience improvement initiatives,” said Travell. “It also shows what’s possible, if dealers choose to ignore this reality and change the mindset that customer service doesn’t matter that much.”
