How to Achieve Admirable Customer Retention Rates — and Reap the Financial Benefits of Return Buyers

You don’t know what you have until it’s gone.

Ever hungry to expand their customer bases and revenue growth, many auto dealerships focus on customer acquisition at the expense of perfecting their retention strategies. They pour money into advertising plans aimed at attracting new customers only to discover their previous customers moved on —casualties of ineffective customer retention management.

Today’s auto customer is a fickle creature with high expectations, proving more knowledgeable and discerning than ever before. And the stats regarding the costs of failed retention strategies and declining customer loyalty can paint a sobering picture:

• 68 percent of customers leave because they think you don’t care about them.

• 89 percent of customers purchase from a competitor following a poor service experience.

• It’s up to 10 times more expensive to acquire a new customer rather than maintain a current one.

• The cost to bring a new customer to the same profitability level as the lost one is up to 16 times more.

Yet, in the face of an ultra-competitive market, some dealerships do achieve admirable customer retention rates, reaping the financial benefits of return buyers. Loyal, repeat customers are simply worth more to your bottom line. Research indicates increasing customer retention rates by five percent results in profits soaring by anywhere from 25 to 95 percent.

So how can you convert your customers into loyalty boomerangs, returning to your dealership at every turn? Here are five key reasons customers come back:

1. Positive First Impression

The power of a strong first impression cannot be overstated. Everything from the dealership’s curb appeal to the greeting received upon arrival to whether a customer feels pressured during that all-important initial interaction factor into the perception that the customer begins to generate.

While it may seem outlandish to think first impressions dictate customer retention rates, they certainly play a significant role. Whereas a positive first impression can result in a closed sale and a budding longterm relationship, a negative first impression can ruin a sale opportunity, much less any hope for the development of customer loyalty.

2. Superb Customer Service

Operating in an industry marked by fierce competition, auto dealerships have the ability to establish a competitive advantage by being able to offer world-class customer service. Dealerships that invest in professional training and incentivize their employees to consistently offer exceptional customer service will be rewarded with growth in customer loyalty and return buyers.

Since employee turnover often plagues the retail automotive industry, having staff capable of conveying knowledge of and familiarity with the regular customer base goes a long way. Nothing delights a customer more than entering a dealership unannounced and being greeted by, “Hi Joe, it’s a pleasure to see you. Do you have your Honda today?”

3. Customer-Centric Approach

When customers are at the heart of everything a dealership does, it’s often reflected in the customer retention rate. A dealership that’s willing to sacrifice the speed of its sales or maintenance processes for the sake of easing a customer’s concerns does not go unnoticed by that return-minded customer.

A good rule-of-thumb is to devote a quarter of your marketing budget toward customer retention initiatives. A customer retention plan that’s detail-oriented incorporates small customer-centric gestures like providing free loaner vehicles and furnishing the showroom with a children’s play area. The end-result: customer appreciation and increased likelihood of customer retention.

4. Dealer-Owned Maintenance™ Program

Auto dealerships that draw customers back for service by creating and owning a promotional maintenance plan to include with every vehicle have a leg-up when it comes to customer retention rates. After all, the goal of a Dealer-Owned Maintenance Package from Performance Administration Corp. involves not only attracting customers to your dealership for the initial purchase but also bringing them back for service and their next auto investment.

With Dealer-Owned Maintenance, auto dealerships can promote inventory with Maintenance Included while dictating their own coverage and reimbursement rates —even to include services the manufacturer doesn’t offer. This retention strategy translates to more satisfied customers and more return buyers.

5. Demonstrated Expertise and Trustworthiness

Customers lacking sufficient vehicle knowledge often enter an auto dealership feeling vulnerable. They have their guard up and fear being taken advantage of by employees who prey on their naivety. Consequently, dealerships that consistently convey transparency and honesty with their pricing and expertise with their craft have the makings of an effective retention strategy.

The degree of training requirements and sophistication of diagnostic equipment make auto dealerships superior to most auto repair shops for any maintenance need. However, most customers don’t become aware of an auto dealership’s level of expertise unless it’s explicitly demonstrated to them. Like with any business, an auto dealership must prove its worth before customer loyalty can emerge.