HOW TO LESSEN THE DEFECTION RATE AT YOUR DEALERSHIP
For any dealership, the number one responsibility isn’t just selling or fixing cars — it’s fixing customers’ concerns. And in some cases it is much easier to fix a car’s concerns than to fix those of a customer.
Developing and maintaining a strong, satisfied and valued customer base via positive relationships is the best strategy to ensure long-term success for your dealership. This is because your customers become vocal advocates in your community.
LIFETIME VALUE OF A CUSTOMER
Before you understand and calculate the value of a lost customer, let’s first take a look at the lifetime value of the customer.
The lifetime value (LTV) of your customer is loosely defined as the net dollars a customer contributes over their life period as a customer. In other words, customer value equates to what the customer is worth to your dealership, or it’s a sum of the current and potential value of your customer. It’s important to consider because you will need to know this to properly assess what you are gaining or losing.
For example, it is estimated that an average automotive customer will buy seven vehicles during their lifetime. If the average car sells for $30,000, with F&I upgrades, interest on the lease or purchase, and service, the customer could spend upwards of about $45,000 per vehicle.
A recent news article in Dealer Digest Daily revealed as R. L. Polk, says “that the average dealer has a 52 per cent failure rate when it comes to customer attrition. When that number gets calculated with the average lifetime spending of a typical customer, we come up with a shocking statistic, the average dealer is losing approximately $208,000 per day!
THE HIGH COST OF CULTIVATING CUSTOMERS
You invest a lot of effort and expense to win new customers. But do you try equally hard to keep them? Prospecting for customers is so costly that your initial investment will be ruined unless satisfied customers remain loyal for the long term.
Randy Stuppard author of The Ugly Truth About Lost Customers notes that when you lose a customer because of a bad experience, the rule of thumb is that they will tell 11 people about their bad experience. The picture gets even worse when you add in the lost revenue and profit potential.
Based on my own experiences there is clear evidence to suggest that the longer a customer deals with your dealership and continues to have good experiences; the more likely they are to feel confident in spending more money on your products and services.
This type of loyalty is something that you must strive to attain. Even in today’s highly competitive automotive market, examples of strong customer loyalty still exists. In other words, it takes months to find a customer but seconds to lose one.
CUSTOMER VALUE SUPPORTS SATISFACTORY RESOLUTION
Once, I had a customer who was very upset. It was the third time they had brought their car in for a check engine light problem and they were now angry because the service advisor had explained to them that the vehicle’s warranty was over and they would likely have to pay for the cost of a replacement sensor.
After patiently listening to the customer, calming them down and analyzing their concern, I reviewed their value profile and found out that they had been a regular value service customer since they bought that same vehicle from us. Therefore, based on their service history, positive retention and loyalty, we did replace the defective sensor under our goodwill gesture customer care complimentary policy.
In conclusion, the customer was satisfied with our CRM process and I explained to them that we respected their retention and loyalty, and we had absorbed such over-warranty period repair charges to maintain our cordial relationship.
Customer retention is based on building relationships and keeping after sales commitments intact. There is no doubt that most customers do realize the importance of maintaining their vehicle at the dealership to enjoy quality customer care even after the warranty is over.
It is important to make a concerted effort to retain your current customers, and move them from being one-time customers to being repeat and loyal customers. When they have reached that level of positive relationship with your dealership you will begin to earn all of the long-term benefits of increased sales, trust, and word-of-mouth advertising — aspects that can really help your dealership develop a reputation as being a cut above your competition.
