I recently read an article about a recent Forrester Report titled “Banks and Retailers: You Cannot Price Your Way Out of Bad Customer Experiences.” It was quite fascinating but there was one part that really resonated with me.

In every instance, when a customer is making a decision on whether to be loyal to your business or not, any question they ask themselves can be boiled down to one simple question.

“Is this company making my life easier or harder?”

If the answer to that question is “easier”, they’ll continue to do business with you. If not, they will start looking for your replacement.

We are constantly analyzing data to try to solve the formula for customer retention. We’ve asked many questions and had many different results. However, boiling the overall question down into something that simple is something a manager can intuitively understand and apply.

Sure, there are still a lot of process changes, analysis, employee reviews and customer surveying to be done. However, if all of this is done with the goal of making the customer answer that your company is making their life easier, you’re already ahead of the game.

The Forrester report mentions that companies can no longer compete with each other on price. This is because, in the age of technology, consumers have access to real-time alternative pricing while standing in your store.  While not completely discounting the power of low prices (it works for Wal-Mart, right?), car dealers don’t have 20,000 products on shelves and stay open 24 hours per day. Even if you did, a low price may win you customers, but it won’t win you loyalty. If your customer is only your customer because you have the best price, then they will only be your customer until a better price comes along.

The report instead recommends that businesses compete for business based on experience, not just price. Of course your prices need to be competitive but they don’t have to be the lowest to win loyalty. That being said, the customer experience you offer better justify your prices and, ultimately, make the customer leave feeling as if you’ve made their life easier.

We’re fortunate that we have technology available in our industry to help facilitate better customer experiences. Many dealers go out of their way to ensure that the customer experience is top-notch, done quickly and provide every convenience possible for the customer. Dealers are constantly working on ways to quantify and stop (or reverse) defection, reward loyal customers through loyalty programs, and incentivize employees for great customer service. And all of this is while trying to win new customers through marketing efforts, word-of-mouth or new sales customers.

Just keep in mind that, consciously or not, the customer is asking: “Is this company giving me what I need, on fair or great terms, and making the interaction easy and enjoyable?”

Help the customer answer yes to that question every time, and you’ll have a loyal customer.

Creating a loyal customer is sort of like getting married. The introduction is followed by a period of courtship and, if all goes well, commitments are made. Loyalty in the automotive world is something that everyone battles from the OEM level to the dealership. Did you know, however, that the longer you’ve had a customer the harder it is to keep them?

Logic would dictate that you would need to focus more on creating customer loyalty in the beginning than after the marriage. However, according to R.L. Polk, “loyalty rates decline after the third year of ownership and continue to decline after the fourth year, and every year after that.” Polk attributes this fact to “boredom”. Their studies show that the longer a customer owns a car, the less exciting the ownership experience becomes.

Just as in marriage, there’s what is referred to as a “honeymoon” period. You’ve taken the vows and began your new life together, and everything is wonderful. Apparently, according to Polk, a similar period exists when it comes to customer loyalty and retention. As we consider ways to increase customer retention, it seems as if length of ownership is extremely important. It certainly makes sense that, no matter how long you’ve had a customer and no matter how great of a relationship you’ve had with them, if they get “bored” and switch to a new make, you’ve definitely lost a sale but chances are probably very good that you will lose them as a service customer.

The fight against “boredom” is something that OEMs take on by introducing fresh models with new features, more powerful engines, sleeker more modern looks and technological advances. They encourage leasing by offering low residuals and money factors with the hopes that the customer will stay loyal by returning to lease another vehicle.

How do you help buck this trend and insure that your customers stay loyal? One way is certainly by making the customer experience exceptional. People certainly love excellent customer service, and it is one of your greatest weapons in creating loyal customers. Another way is by implementing a dealership loyalty program that incentivizes customers to keep doing business with you.  There’s a reason that almost every major retailer in the US has a rewards program of one form or another. It allows you to track how your customers are spending money with you which then gives you the data to create offers better tailored to them. 

No matter what you do, make sure that you’re retention strategy isn’t focusing solely on creating loyalty in new customers. Analyze your sales history and shift some of your focus to customers who purchased 24-36 months ago and you’ll be well on your way to helping your OEM increase brand retention while insuring that you’re giving your dealership the opportunity to intervene with your loyal customers before they get bored.

Creating a loyal customer is sort of like getting married. The introduction is followed by a period of courtship and, if all goes well, commitments are made. Loyalty in the automotive world is something that everyone battles from the OEM level to the dealership. Did you know, however, that the longer you’ve had a customer the harder it is to keep them?

Logic would dictate that you would need to focus more on creating customer loyalty in the beginning than after the marriage. However, according to R.L. Polk, “loyalty rates decline after the third year of ownership and continue to decline after the fourth year, and every year after that.” Polk attributes this fact to “boredom”. Their studies show that the longer a customer owns a car, the less exciting the ownership experience becomes.

Just as in marriage, there’s what is referred to as a “honeymoon” period. You’ve taken the vows and began your new life together, and everything is wonderful. Apparently, according to Polk, a similar period exists when it comes to customer loyalty and retention. As we consider ways to increase customer retention, it seems as if length of ownership is extremely important. It certainly makes sense that, no matter how long you’ve had a customer and no matter how great of a relationship you’ve had with them, if they get “bored” and switch to a new make, you’ve definitely lost a sale but chances are probably very good that you will lose them as a service customer.

The fight against “boredom” is something that OEMs take on by introducing fresh models with new features, more powerful engines, sleeker more modern looks and technological advances. They encourage leasing by offering low residuals and money factors with the hopes that the customer will stay loyal by returning to lease another vehicle.

How do you help buck this trend and insure that your customers stay loyal? One way is certainly by making the customer experience exceptional. People certainly love excellent customer service, and it is one of your greatest weapons in creating loyal customers. Another way is by implementing a dealership loyalty program that incentivizes customers to keep doing business with you.  There’s a reason that almost every major retailer in the US has a rewards program of one form or another. It allows you to track how your customers are spending money with you which then gives you the data to create offers better tailored to them. 

No matter what you do, make sure that you’re retention strategy isn’t focusing solely on creating loyalty in new customers. Analyze your sales history and shift some of your focus to customers who purchased 24-36 months ago and you’ll be well on your way to helping your OEM increase brand retention while insuring that you’re giving your dealership the opportunity to intervene with your loyal customers before they get bored.

It’s not a new idea to have one of your salespeople working the service drive. Opportunities and circumstances exist where it may be beneficial for the customer to trade-in their car that needs to be repaired. Having someone who can not only identify those opportunities but who also knows how to present it to the customer properly is rare.

That being said, have you ever considered having your F&I manager work the service drive? Most F&I managers have been in sales at one point in their career, so they are well equipped and have the skills to take advantage of every opportunity.

An F&I manager can see opportunities everywhere. If he and the service advisors work as a team, there are many more circumstances, which could lead to additional revenue for the store.

Consider this:

1. An F&I manager can present pre-paid maintenance plans and extended warranties to customers with the knowledge and sales ability to explain the features and benefits.
2. An F&I manager also has the ability to determine when it may be beneficial for both the store and the customer to investigate whether it makes sense to trade-in the current vehicle for a new one rather than make costly repairs.
    

Except for the most ambitious salespeople, most consider having to work the service drive as being sent to work in the Arctic Circle. They aren’t able to watch for or help any walk-in customers and they aren’t able to take any incoming phone calls; both of which are what they would consider their bread & butter that leads to a sale.

Don’t get me wrong, your F&I manager is busy (hopefully), and likely will not be too pleased at the idea of working the service drive. However, he may be not only one of your BEST people to put into the service drive but he also has the most to gain from it as he would get the commission and penetration from the sale of any maintenance plan or warranty. If he were to convert a service customer into a sale, he would have the opportunity to make more money by being able to type the deal and present the whole F&I menu to the client. In this situation, the F&I manager would benefit from additional income.

There are many opportunities that exist in the service drive to increase revenue for your store, and having someone looking for these opportunities is a great plan of action. I’m not talking about having them all day – try it for an hour or two. I’ve heard of a couple of F&I managers that picked up 2-3 additional deals a day by doing this.

It’s not a new idea to have one of your salespeople working the service drive. Opportunities and circumstances exist where it may be beneficial for the customer to trade-in their car that needs to be repaired. Having someone who can not only identify those opportunities but who also knows how to present it to the customer properly is rare.

That being said, have you ever considered having your F&I manager work the service drive? Most F&I managers have been in sales at one point in their career, so they are well equipped and have the skills to take advantage of every opportunity.

An F&I manager can see opportunities everywhere. If he and the service advisors work as a team, there are many more circumstances, which could lead to additional revenue for the store.

Consider this:

1. An F&I manager can present pre-paid maintenance plans and extended warranties to customers with the knowledge and sales ability to explain the features and benefits.
2. An F&I manager also has the ability to determine when it may be beneficial for both the store and the customer to investigate whether it makes sense to trade-in the current vehicle for a new one rather than make costly repairs.
    

Except for the most ambitious salespeople, most consider having to work the service drive as being sent to work in the Arctic Circle. They aren’t able to watch for or help any walk-in customers and they aren’t able to take any incoming phone calls; both of which are what they would consider their bread & butter that leads to a sale.

Don’t get me wrong, your F&I manager is busy (hopefully), and likely will not be too pleased at the idea of working the service drive. However, he may be not only one of your BEST people to put into the service drive but he also has the most to gain from it as he would get the commission and penetration from the sale of any maintenance plan or warranty. If he were to convert a service customer into a sale, he would have the opportunity to make more money by being able to type the deal and present the whole F&I menu to the client. In this situation, the F&I manager would benefit from additional income.

There are many opportunities that exist in the service drive to increase revenue for your store, and having someone looking for these opportunities is a great plan of action. I’m not talking about having them all day – try it for an hour or two. I’ve heard of a couple of F&I managers that picked up 2-3 additional deals a day by doing this.

Dealerships today spend most of their marketing budgets on acquiring new customers. Those ads in the newspapers aren’t really meant for current of past customers, they are meant to attract new customers. The cost of customer acquisition ranges from 6 to 10 times more than the cost of customer retention, so what can your dealership do to increase customer retention?

Here are five great places to start.

1. Processes –Are your processes customer-friendly or are they focused on efficiency? What parts of your processes are your customers complaining about? Examine your processes and put yourself in their shoes. If this were a process you had to go through, would you like it? No matter what the process is for, make sure that your customers know what it is in advance and listen to them when they tell you which parts they don’t like, then make changes accordingly.
2. Reciprocity – The law of reciprocity states that people “respond to a positive action with another positive action”.  In business, reciprocity as related to customer retention usually refers to going above and beyond for your customer. In return, they will reward you with repeat business. Positive actions don’t have to cost money. They can be anything from a kind word to opening the car door for them when they arrive. Have crayons & coloring books handy for the parents bringing their children in with them. Small things sometimes make big impressions. Use this to your advantage in all departments of your store.
3. Exceptional customer service – Ensure that your customer’s experience is world-class customer service from the moment they become your customer throughout the entire relationship. This will keep your customers loyal. Emphasize customer service in all your processes, in every department and to every employee. Make no mistake; the smallest error can cost you a customer. Train your staff the importance of providing exceptional customer service and hold them accountable. There is no easier way to increasing customer retention than providing an experience that customers cannot get anywhere else.
4. Quality Is Better Than Speed – Many businesses assume that the faster the service, the better the customer perceives it. According to an article by Gallup, “If the goal is to create strong bonds that ensure customer retention, companies must focus on activities that create and sustain the customer relationships, not just on those that enhance company efficiency.” Slow down and take time to really listen to your customers. They will be the ones that inevitably decide whether your business thrives or not. Make sure that your work is top-quality.
5. Know Your Customers – As simple as this sounds, it’s the one area where many businesses fail. There is nothing more impressive than going into a business and being greeted by your name. People like to be remembered. It makes them feel special. There is no easier way to prove to a customer that you value their business than by knowing who they are. Encourage your employees to take the time to get to know your customers. Make them more than just a name in your computer. They will notice and will be impressed. In today’s busy world, everyone is in a hurry. Be the business that’s more interested in getting to know them than the one looking to get rid of them the fastest.

There are other ways to increase customer retention including customer loyalty programs, customer appreciation events and special offers. However, by focusing on these five areas, you will improve your customer retention rate simply by being a place customers want to visit, rather than a place they need to go.

Dealerships today spend most of their marketing budgets on acquiring new customers. Those ads in the newspapers aren’t really meant for current of past customers, they are meant to attract new customers. The cost of customer acquisition ranges from 6 to 10 times more than the cost of customer retention, so what can your dealership do to increase customer retention?

Here are five great places to start.

1. Processes –Are your processes customer-friendly or are they focused on efficiency? What parts of your processes are your customers complaining about? Examine your processes and put yourself in their shoes. If this were a process you had to go through, would you like it? No matter what the process is for, make sure that your customers know what it is in advance and listen to them when they tell you which parts they don’t like, then make changes accordingly.
2. Reciprocity – The law of reciprocity states that people “respond to a positive action with another positive action”.  In business, reciprocity as related to customer retention usually refers to going above and beyond for your customer. In return, they will reward you with repeat business. Positive actions don’t have to cost money. They can be anything from a kind word to opening the car door for them when they arrive. Have crayons & coloring books handy for the parents bringing their children in with them. Small things sometimes make big impressions. Use this to your advantage in all departments of your store.
3. Exceptional customer service – Ensure that your customer’s experience is world-class customer service from the moment they become your customer throughout the entire relationship. This will keep your customers loyal. Emphasize customer service in all your processes, in every department and to every employee. Make no mistake; the smallest error can cost you a customer. Train your staff the importance of providing exceptional customer service and hold them accountable. There is no easier way to increasing customer retention than providing an experience that customers cannot get anywhere else.
4. Quality Is Better Than Speed – Many businesses assume that the faster the service, the better the customer perceives it. According to an article by Gallup, “If the goal is to create strong bonds that ensure customer retention, companies must focus on activities that create and sustain the customer relationships, not just on those that enhance company efficiency.” Slow down and take time to really listen to your customers. They will be the ones that inevitably decide whether your business thrives or not. Make sure that your work is top-quality.
5. Know Your Customers – As simple as this sounds, it’s the one area where many businesses fail. There is nothing more impressive than going into a business and being greeted by your name. People like to be remembered. It makes them feel special. There is no easier way to prove to a customer that you value their business than by knowing who they are. Encourage your employees to take the time to get to know your customers. Make them more than just a name in your computer. They will notice and will be impressed. In today’s busy world, everyone is in a hurry. Be the business that’s more interested in getting to know them than the one looking to get rid of them the fastest.

There are other ways to increase customer retention including customer loyalty programs, customer appreciation events and special offers. However, by focusing on these five areas, you will improve your customer retention rate simply by being a place customers want to visit, rather than a place they need to go.

Can efforts to capture customer loyalty be thwarted by employee loyalty?

Evidence gathered from top retail groups, including auto dealerships, indicates that employee loyalty directly affects customer loyalty and thus business results.

Dealer operators and their managers do their business, their stakeholders and their shareholders disservice when they fail to foster, develop and reward employee engagement. Get this loyalty driver fixed first. Then watch the ROI on customer loyalty improve.

According to customer experience researchers Temkin Group, engaged employees are key to engaged and loyal customers.

“Engaged employees deliver a better customer experience; a better customer experience creates customer loyalty; puts employee engagement; and, customer loyalty leads to more profitable business results,” Bruce Temkin, managing partner, told Direct Marketing News.

Among auto dealership franchises, Toyota does the best job at this, according to Temkin’s Experience Ratings report, just released.

Is employee loyalty killing your dealership?

When employees are taken for granted, not given clear direction, rarely cheered on and viewed as utilities, don’t expect them to engage customers in positive ways.

Absenteeism, water cooler huddles and high turnover are signs employee loyalty is in bad shape.

The good news is that developing employee loyalty is not rocket science, but a good dose of the Golden Rule, treating others as one would like to be treated.

Here are some ideas for engaging employees so they can deliver better customer experience:

• Hire the right people. Look for those possessing the required job skills – as well as having the heart and desire to serve others.
• Lead with vision. Employees who can articulate the dealership’s guiding principles and reflect them in their engagement with others have bought into leadership’s vision. Wall plaques cannot adequately convey this vision. Ongoing cheerleading sessions and desk side chats will.
• Equip staff to master and own their jobs. Only when employees know their jobs and are comfortable performing them will their attitude and actions allow them to focus more on others and their needs than their own. Provide training on both hard job skills and soft attitude skills.
• Care for their families. This is a tough business, given the hours, competitiveness and personality types it attracts. Nothing tells employees you care about them like paying attention to their personal life and family. Include families in company events. Send flowers or other forms of condolence when an employee’s family member is ill or otherwise struggling. Can the dealership fund a scholarship program for employees’ children or sponsor a kids’ day program during summer months? Might a letter to a spouse of a hard-working member of the team encourage both employee and spouse?
• Link their loyalty to customer loyalty: Some people get it naturally, that warmth, helpfulness and personal interest in others, that sparks social interaction. Most of us need a few clues. Consider an all-staff event to talk about the link between customer loyalty and employee loyalty. Help them see clearly that their behavior and attitude on the job (as well as off) either bolsters or undermines efforts to build customer loyalty long-term. If you need outside expert help, make the call and the investment.

“Most industries earn their reputations,” Temkin told Direct Marketing News.  “What happens is industries end up cultivating their mediocrity.”

What reputation is employee loyalty cultivating for your dealership and your customers?

Can efforts to capture customer loyalty be thwarted by employee loyalty?

Evidence gathered from top retail groups, including auto dealerships, indicates that employee loyalty directly affects customer loyalty and thus business results.

Dealer operators and their managers do their business, their stakeholders and their shareholders disservice when they fail to foster, develop and reward employee engagement. Get this loyalty driver fixed first. Then watch the ROI on customer loyalty improve.

According to customer experience researchers Temkin Group, engaged employees are key to engaged and loyal customers.

“Engaged employees deliver a better customer experience; a better customer experience creates customer loyalty; puts employee engagement; and, customer loyalty leads to more profitable business results,” Bruce Temkin, managing partner, told Direct Marketing News.

Among auto dealership franchises, Toyota does the best job at this, according to Temkin’s Experience Ratings report, just released.

Is employee loyalty killing your dealership?

When employees are taken for granted, not given clear direction, rarely cheered on and viewed as utilities, don’t expect them to engage customers in positive ways.

Absenteeism, water cooler huddles and high turnover are signs employee loyalty is in bad shape.

The good news is that developing employee loyalty is not rocket science, but a good dose of the Golden Rule, treating others as one would like to be treated.

Here are some ideas for engaging employees so they can deliver better customer experience:

• Hire the right people. Look for those possessing the required job skills – as well as having the heart and desire to serve others.
• Lead with vision. Employees who can articulate the dealership’s guiding principles and reflect them in their engagement with others have bought into leadership’s vision. Wall plaques cannot adequately convey this vision. Ongoing cheerleading sessions and desk side chats will.
• Equip staff to master and own their jobs. Only when employees know their jobs and are comfortable performing them will their attitude and actions allow them to focus more on others and their needs than their own. Provide training on both hard job skills and soft attitude skills.
• Care for their families. This is a tough business, given the hours, competitiveness and personality types it attracts. Nothing tells employees you care about them like paying attention to their personal life and family. Include families in company events. Send flowers or other forms of condolence when an employee’s family member is ill or otherwise struggling. Can the dealership fund a scholarship program for employees’ children or sponsor a kids’ day program during summer months? Might a letter to a spouse of a hard-working member of the team encourage both employee and spouse?
• Link their loyalty to customer loyalty: Some people get it naturally, that warmth, helpfulness and personal interest in others, that sparks social interaction. Most of us need a few clues. Consider an all-staff event to talk about the link between customer loyalty and employee loyalty. Help them see clearly that their behavior and attitude on the job (as well as off) either bolsters or undermines efforts to build customer loyalty long-term. If you need outside expert help, make the call and the investment.

“Most industries earn their reputations,” Temkin told Direct Marketing News.  “What happens is industries end up cultivating their mediocrity.”

What reputation is employee loyalty cultivating for your dealership and your customers?

98% of Customers Who Join a Rewards Program Provide an Email Address

Email Open Rates for Reward Members are 300% Higher Than Non-Members

Dealerships That Provide an Incentive for Customers to RETURN After a Visit Have a 20% Increase In Sales

Statistics Show a 35% Service Visit Increase with Rewards Members

Members Spend 11% More Annually on Service When Participating in a Rewards Program

I think it’s pretty obvious after seeing those numbers that having a Rewards Program in place can more than triple the overall profit for your dealership.

Customers are always looking for the best deal and the best ways to save money. When you offer a rewards program, you are giving your customers what they want. The upside for you? You create loyal, repeat customers that will return to your dealership time and time again and spend more money while doing it. What’s not to love? By contacting a third-party provider, like LoyaltyTrac to help you setup a successful rewards program, you can increase your customer base and profit.

Also, there is a huge marketing potential for your rewards members. With statistics showing a 300% increase in email open rates, you better have a marketing strategy in place to reach your rewards customers.

Offer special incentives to only your rewards members – like an extra 15% off their next service visit or double their reward points for that entire month.

It is important not to SPAM your reward members. Each customer’s email address is like gold, so don’t blow it by dumping ten or more emails a month into their mailbox. They won’t appreciate it and neither will your bank account. Instead, offer thought-out marketing campaigns each month that have a specific focus and offer real value to your rewards members. Take time to sit down and plan out your marketing strategy for the next two months, or even the whole year and craft engaging content.

By utilizing your rewards members through your email marketing, you will more than triple the ROI for your efforts.

What are some of the successes you have had with your rewards program? How are you utilizing your rewards program to grow your dealership?