Where your hard ROI doesn’t fit

Dennis Galbraith, director of DrivingSales Data, says that in some cases, dealers need to look beyond measurable financial returns when it comes to making investments.

digital-driveI keep hearing bold talk about hard ROI justifications for things like branding and even customer service improvements. The sayings generally go along the lines of, “if I can’t measure a hard, direct ROI from an investment I’m not going to make it.”

With this way of thinking, you’re pigeonholing the potential of your dealership: You can be the Dollar Store of car dealers, but you can’t be the Nordstrom or Tiffany & Co. of car dealers.

Over the years, clients of my customer satisfaction research included organizations like Ritz-Carlton, Four Seasons, Fairmont, Atlantis, and Disney. None of those companies got to the price points they command by getting a measurable return from every little thing they did. It just can’t be done.

If you make up your mind that your store or group is going to have a premium brand image (e.g. Carl Sewell, Sewell Automotive Companies), then you are going to do some things just because you can trace them back to improved satisfaction, even if you can’t quantify the exact amount of financial gain coming from that investment.

You never know who your customers are
Scott Stratten, author of the world-renowned book, “Unmarketing” and a keynote speaker at the 2012 DrivingSales Executive Summit, relayed one great example of this. A young dad frantically contacted the Ritz-Carlton after a weekend stay with his six year old son, desperately hoping that his son’s most loved stuffed animal had been found at the hotel. Not only did the hotel staff find the stuffed toy, but they shipped it back to the young boy with photos of the stuffed animal lounging around the hotel room, pool, and shopping areas to substantiate the wonderful few extra days of vacation the stuffed animal had after the dad and his young son had left the hotel. Did they need to do this? Absolutely not.

But was the son ecstatic and the young dad overly impressed with the customer service and friendly response? Absolutely. Perhaps they’ll get no financial return on that. The reality is you can’t expect one, at least right away. But unbeknownst to the Ritz-Carlton, this young dad was a writer for The Huffington Post, who immediately published the experience and his awe with the company’s customer service in his next weekly edition. What kind of ROI can an organization get from exposure like that? Well, it probably beats a one-time newspaper ad or radio spot.

Improved satisfaction can lead to higher loyalty and advocacy, but it takes time, often years.

Additionally, it is difficult to know what the rate of loyalty and advocacy would have been today if the actions to improve it had not been taken years ago. There are just too many other variables causing noise.

Let me be clear, it is okay to not make any investments in something you can’t directly and immediately measure results from. However, it doesn’t mean you’re a better businessperson for doing things that way. It means you are a different businessperson. I’ve made a very nice living measuring things so business people could make better decisions with the information, because it works. However, that doesn’t mean anything which doesn’t result in a quickly and directly traceable profit is not worth doing.

Staying the course
For those looking to provide extraordinary service, let me caution that you must be disciplined about it. Many of the over-the-top stories about customer service in fact were over the top. The classic story of Nordstrom refunding a customer for tires when they in fact never sold tires is an example. (note: Nordstrom doesn’t do this today but was reported to have done it once).

Fresh flowers in the restrooms may be nice, but may also be over the top. Let’s start with restrooms that are kept clean. Don’t use the some-things-cannot-be-measured card as an excuse to do whatever it is you feel like doing.

The core point of the hard-ROI people is that we need to become less reliant upon gut feel in our decision making. They are absolutely right about that, even if they (we) can sometimes be just a bit impractical about measuring every little thing. Remember my grandfather’s old saying, you don’t need a whole lot of research to know a donkey has two ears.

Dennis Galbraith leads research and business intelligence for dealers at DrivingSales. He delivers research and services to dealers and their vendors along with consulting and training. He can be reached at: dennis@drivingsales.com

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