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Jim Leman

Jim Leman Writing about dealer operations

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Don’t Just Sell, but also Retain CPO Buyers

By Ryan Williams, president, Fidelis PPM

Customer loyalty does not necessarily translate into repeat business for your auto dealership. What drives measurable business gains – repeatable business gains -- is customer retention.

A new study reported by Wards Dealer Business notes that 45% of respondents who defined themselves as loyal to an automotive service center go elsewhere for that service.  While loyalty has value, what benefits the dealership is more customers (and the same customers) visiting the service department more frequently.

Customers who develop a habit of servicing their vehicle at your store are 86 times more likely to purchase their next vehicle from you.

As one pundit noted, “A loyalty program can be a great way to bring more engagement with your customers. But it’s not a silver bullet for customer retention.”

Being clear about these distinctions and using the right ones at the right time can have help convert the growing CPO customer base into long-term service and repurchase customers of your dealership.

With CPO vehicle sales an increasing opportunity for new-car dealers, operators should plan to retain that new business beyond the immediate sale.

One very effective way to retain CPO buyers’ service business is to connect them to the dealership through their continued use of prepaid maintenance plans (PPM) provided or sold by the dealership.

A survey by DMEautomotive, part of AutoPoint and Solera Holdings since 2015, noted three of five customers who receive prepaid or complimentary maintenance plans from dealerships “are likely to continue servicing their cars at the dealership after their plans expire.” Retention is only 22-40% range without plan use. 

The study further noted that 86% of customers who kept returning to their dealership for routine maintenance services were 86% more likely to repurchase from that same dealer the next time.

PPMs’ Appeal to CPO Buyers

A recent CBT Automotive Network broadcast noted the following about CPO buyers that make PPMs attractive to them:

  1. They are risk-avoidance buyers who want peace of mind about future vehicle maintenance needs.  They have grown up watching OEMs give PPMs away with the purchase of new cars and come to expect it, just like the base warranty.
  2. They are cash flow-strapped consumers whom Bankrate.com notes cannot meet even a $500 emergency expenditure.
  3. They have increasingly busy lifestyles and have little tolerance for inconveniences like vehicle maintenance -- prepaid plans help smooth the bumps
  4. They are deal shoppers. Retailers report that 85% of consumers look for coupons before visiting. Discount-priced PPM packages convey value to these buyers.

Dealer-branded plan advantage

Every dealer hopes every customer will buy from them again when ready for a new or another vehicle. Car know the power of incentives to bring customers into their dealerships. These are not only cash and finance incentives, but programs like PPMs.

Mercedes-Benz, Lexus, Maserati, BMW, and Audi among many luxury brands and many domestics engage customers using PPM incentives to connect them to their brands.

Dealers appreciate these OEM-based PPM plans, but also recognize their weakness: they brand the OEM, and don’t require use at the selling dealership.

Dealers like their OEMs, but they love their own brand, which is why many opt for instead (or provide in addition to) a dealer-branded PPM.

Most of these discount-priced service packages include an oil and filter change, and often other service commodities such as tire rotations, key replacement services, or are bundled with other products such as road hazard insurance.

True retention marketing should create long-term retention that drives full retail customer-pay upsell repair order dollars.

Never assume your store’s retention is as good as it can be. A dealer-branded PPM programs will increase retention and customer-pay service dollars at most any dealership. Choose an automated plan that administers, monitors and manages program details for you – and provide the dealership web-based reporting and usage savings details for plan users.

On a national basis, prepaid maintenance programs like this average an 85% first-year retention rate, with retention at 65% through year three. As most of these plans encourage customers use them three to five times a year, they get into the buying habit at your dealership quickly. Plus, on average plan use nets a $70 per visit RO upsell.

Ryan Williams is president of Fidelis PPM and DRIV Technologies. Reach him at Ryan@getfidelis.com or visit www.getfidelis.com

 

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