Measuring Customer Retention

Would you agree that customer retention is an important goal?

Designed to retain customers — to keep them from drifting to other dealerships or the aftermarket — do the retention programs that dealers actually use do that?

I wonder if we sometimes talk about retention too broadly. In other words, if we were to talk about retention efforts more narrowly, would the expenditures to retain customers and to reap additional business be more measureable?

How measurable is retention?

The truth is that without analysis of its customers, can a dealer be certain the money spent to retain their loyalty is a worthwhile investment? Whether the dealership attempts to drive retention through use of customer-relationship management (CRM) systems, loyalty programs or store branding investments, are customers being retained and do they then continue to buy from and have their vehicles serviced by the dealership?

A case in point: many CRMs become closets for storing customer names that associates sweep into them from working the showroom floor. Therefore, the potential of these names is simply allowed to languish there, unproductive. Couponing and discounting programs may keep traffic moving through the showroom and service drive, but price-shoppers rarely make profitable lifetime customers. Some individuals’ natures simply will not respond to retention efforts.

Targeted retention sells.

Consider this alternative: Targeting technologies that identify the right customers in the dealership database who are at the right point in their vehicle ownership cycle to respond affirmatively to offers to buy from the dealership again, often that day.

By analyzing this pool of existing customers through the lens of opportunity potential, those having high potential to buy again, soon should emerge. This analysis methodology will also tell the sales or service associate how to reengage these customers and set appointments for them to revisit the dealership

This narrowly focused retention effort provides a tangible, measurable, and manageable way to retain customers by creating opportunities to sell them a new vehicle and/or new vehicle services. When properly executed, such a targeted retention program results in these customers thanking the dealership for being proactive about their vehicle needs.

Such targeted retention identifies existing customers who are:

• Driving vehicles of the wrong color, model, or type, and wish they had made a different original purchase decision
• Struggling with monthly payments, as job or family situation has changed since they originally bought
• At risk of incurring mileage penalties before their car lease expires, and unaware that these additional penalty costs await them at lease-end
• Wanting a new vehicle, if ‘upgrade economics’ would work in their favor
• Inactive service customers who need encouragement to bring scheduled maintenance services current
• Experiencing high repair costs and would like to buy a new or newer vehicle, if the economics would work in their favor
• In danger of becoming ‘self-insured’, or driving without the benefit of warranty protection

Call me if customer retention is a goal at your dealership. Dealers using this described retention strategy are gaining from five to 50 or more additional monthly vehicle sales by targeting their retention efforts on solving customer-ownership issues. Not only do these customers remain engaged with the dealership longer, their retention experience is talked about and shared with their friends, families, and social networks.

Boyd Warner is CEO of AutoAlert®, Inc. (www.autoalert.com), the most advanced lead generation solution available on the market today. Contact him at bwarner@dealermark.com.