5 Signs Your Dealership Is Leaking Customer Retention
A dealership sinks or swims based on its ability to retain customers—which direction are you headed?
A dealership sinks or swims based on its ability to retain customers—or not retain them. Are you certain you know which outcome you’re moving toward?
Your customer retention should command management and staff attention, intention, and action. This focus on retention should shadow every customer engagement, from sales and F&I to delivery, and to service and follow-up.
Having been involved in retention programs and training for years, helping many dealerships restore healthy retention outcomes, I have noticed the following five symptoms that indicate retention leaking from dealerships.
1. Self-serving focus
It’s rare that individuals naturally practice others-first engagement, so unless all customer-facing staff is taught to embrace and practice a retention mindset—and is measured for accountability—retention efforts will remain an afterthought.
In sales meetings and break room chats, make it your mission to promote the value of each retained customer—and make known the cost of those allowed to slip away.
2. New car self-absorption
New car sales have always been the “honey hole” for excitement in car sales, but used car sales are the actual moneymaker. Used car inventory turn is greater, and so is per-car profitability.
We too often neglect to connect used buyers to the dealership for the long term. Offer or provide them dealer-branded prepaid maintenance programs (PPM) that give them incentive to return to you for service.
Research has shown that customers who develop a habit of maintaining their vehicle at a dealership are 86 times more likely to purchase their next vehicle there.
3. Misplaced confidence
Customer loyalty is not necessarily customer satisfaction—and neither is it certain to drive customer retention. Nor is advertising.
NADA has noted, “Advertising campaigns don’t significantly improve customer retention or achieve a high rate of customer returns for service and maintenance.” In fact, 45% of industry survey respondents who defined themselves as loyal to an automotive service center go elsewhere for service.
4. Reliance on OEM programs
Carmakers know the power of incentives to bring customers into their dealerships. These are not only cash and finance incentives, but programs like free maintenance.
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.
5. No active retention building
Retention building should be aggressive. Nothing is more direct than offering or gifting buyers a dealer-branded PPM.
These automated programs produce measurable, demonstrated retention growth. An eight-dealership East Coast group, for example, says its dealer-branded PPM:
- Retains lease customers’ routine maintenance services for at least two years.
- Retains finance customers’ regular maintenance services for up to five years.
- Results in a $75-per-repair order upsell, or $200,000 a month, in additional customer-pay service revenue across the group.
The fate of a dealership’s success depends on its ability to retain customers. To get a sense of how you’re doing, check out how your operation stacks up against these five common retention leaks.
Ryan Williams is president of Fidelis PPM, and is a 20-plus year veteran of the auto industry, having served in multiple dealerships as sales manager, F&I manager, and general manager. You can reach him at email@example.com.