Leveraging Automotive Customer Retention for Growth

If your dealership is looking to improve your customer retention strategy, this will come as good news: the best solutions aren’t always the hardest to implement. While you’d hope to retain every single customer who comes through your door, this is a near-impossible task. And (let’s face it) some of those people simply make life difficult for your team.

So what if you had a group of loyal customers, who treat you like an old friend and consistently return for service? Odds are, you already do, and these quietly happy customers are one of your best assets.

Not only is it easier to get loyal customers coming back more often (for services they may not have considered getting from you), but they’re also the first people to start referring you to their friends and family, sometimes without encouragement. This is not something to ignore.

This article explains a useful lens to look at your business decisions through, and uses key industry statistics from a DriveSure study to help focus on growing your business through your best customers.

Avoid Losing Time and Profits with the Pareto Principle

The Pareto Principle is a powerful rule of thumb that makes most business decisions a lot easier. Also known as the 80-20 rule, the Pareto Principle states that 80% of outcomes (or outputs) result from 20% of all causes (or inputs). 

It’s not an exact science of course, but the general idea is this: the majority of your results come from one small area of your efforts, and the rest of your efforts have a relatively small impact.

At a dealership, you can see some clear examples of the 80-20 rule. For instance, the new-vehicle department of a car dealership typically accounts for about 58% of a dealership’s total sales but less than 26% of a dealership’s total gross profit (according to the National Automobile Dealers Association). Meanwhile, the service department makes up less than half as much of those sales, but accounts for 25% of profits.

So what does this mean for dealerships? How can you actually apply this idea? It starts with focusing on the right customers.

A Smaller Yet Profitable Group: the Quietly Happy Customers

Your most valuable customers aren’t necessarily those who bought your highest-margin services. Your most valuable customers are those who come back to your dealership, again and again, year after year. 

You probably understand this already, so how can you increase your overall retention, and get more out of the ones you have?

How to Turn Loyalty into Growth

We did a study of retention trends in the industry as part of our Dealership Service Retention Report, and found some powerful statistics. For starters, a quarter of customers who said they were “extremely loyal” to their servicing dealership said that “nothing” would make them consider going elsewhere. Nearly half, however, said they would consider leaving if they had a bad experience at the dealership.

What does this tell us? It shows that dealerships should spend less time trying to win over the customers that constantly complain about factors like price, and more time on delighting those customers who keep coming back.

This can be tricky, because the customers who keep coming back are often the ones that don’t make a fuss. They’re not the ones writing angry Yelp reviews or calling the dealership to complain — in other words, they’re not demanding your attention.

Have a system in place to track customer visits

Most dealerships will already have this, so we won’t linger on it, but before anything that follows you will need a reliable way to track your business. Collect phone numbers and emails of each customer, and make sure to tie that info to their purchase history. A good system will let you sort through your database to quickly find the information on the customers who return most frequently.

When you leverage this data, you’ll have a much easier time seeing which customers will be most appreciative when you create a memorable experience for them. It also provides an easy way to reach out to customers and build a customer feedback loop.

Focus on improving quality of work to improve overall customer loyalty

If you want to improve revenue from referrals, you need to have a business worth referring people to. This seems painfully obvious, of course: “if you want to be more profitable, become a better business.” But you need to think of this more in terms of priorities.

In the study mentioned above, we asked participants to rank six factors in order of importance to them when deciding where to take their vehicle for service. Quality of work was a clear winner, followed by the price, then the quality of customer service. Of those that told us they are “extremely loyal” to the dealership where they service their vehicle, quality of customer service overtook price as the second most important factor. 

Perhaps you’re considering cutting costs on some of your services, in order to increase margins. Maybe you weighed the costs and benefits, and decided the choice won’t drastically reduce your quality of work. But while this may boost your profitability in the short term, over time you’re going to see a percentage of customers deciding your services are “just not quite good enough” anymore.

Soon enough, they stop driving across town just for your service. Or when you increase prices to account for rising costs, vehicle owners decide the cheaper option is a better value. And even if they keep coming back, they might not be as enthusiastic about sharing you with their friends and family. 

When it comes to retention in the automotive industry, your work quality does the heavy lifting.

Turn loyal customers into brand advocates

As we’ve written before, loyal customers spend $167 in year three for every $100 they spent in year one. And it’s 5x more expensive to acquire a new customer than to keep an existing customer. Clearly, it’s worth your time to invest in retention.

But even though acquiring new customers is expensive, having a list of loyal customers can make it cheaper. It’s much easier to win a new customer when they’ve been referred by someone they trust, and nobody is more likely to refer you than your loyal customers.

Consider offering exclusive rewards to your best customers based on how many new customers they refer to you. This could be something as simple as a discount on their next service stop, or something special like an additional benefit (more on that later).

Leverage the services that already earn business, to better serve regular customers

One of the great parts of the 80-20 rule is that it helps you focus on what’s already helping your business most. One of the valuable insights we gained from our study was that vehicle owners prefer to get certain services from dealerships, rather than somewhere else.

Overall, vehicle owners are much more likely to head to dealerships for services like manufacturer-recommended maintenance, electrical issues, unknown issues (from the Check Engine light) and oil changes. When it comes to deciding which services you want to promote the most (whether in advertising or referrals), these are going to be the most persuasive things to talk about.

At the same time, vehicle owners are less likely to return with issues related to batteries, tires, and brakes. This means it’s important for service advisors to identify those issues while the customer is already at the dealership. Make sure your customers know your dealership can handle their tires in particular, because this is a huge weakness in retention: of drivers who purchase tires elsewhere, 90% of them never return for service.

Not only can proactive maintenance prevent the customer from going elsewhere for those services, but it also gives dealerships an opportunity to prevent issues for their customers before they even occur. This helps turn your “somewhat loyal” customers into “extremely loyal” customers.

Provide extra value

One of the quickest ways to boost satisfaction for your best customers is by providing them with an amazing experience, such as by providing special benefits. This means giving them something more memorable than a simple loyalty discount.

This is an area where DriveSure thrives. DriveSure empowers new-car dealerships to provide a unique suite of renewable benefits with every qualifying service visit. This sets you apart from the competition, and helps you establish long-term relationships with your customers. Further, these benefits stand out from other dealerships, giving your loyal customers reasons to come back to you — and to keep sending new business your way.

These benefits make it easy to entice future car buyers, giving you the chance to win them over with superior vehicle service, from routine maintenance to unplanned repairs. It gives you the chance to earn their trust, so when the time comes to buy their next car, your dealership becomes the first place they think of.