Moving Beyond Retention: A New Paradigm to Grow Your Service Business

The time has come to reevaluate your dealership’s service retention rates. In most cases, service retention rates not only provide an inadequate measure of success, but they will often lead you to make poor business decisions. We believe that retention strategies are enormously important to the health of our customer’s business. So important, that when the math proved how bad classic retention metrics are at measuring what’s really going on, we invented a new, accurate metric for measuring service performance called GRO™ (Gross Revenue Optimization).

Let’s start by looking at how classic retention metrics are failing our industry. Put simply, classic customer retention rates measure the percentage of customers who return for another service visit within a specified timeframe. So why is it that so many dealers experience an increase in retention rates, but at the same time experience a contradictory decline in revenue? There’s a major lack of business reliability in this measure and it’s this blind focus on retention that’s leading your dealership astray.

The primary issue is that retention rates focus on one simple question: Did a customer return or not? It’s a measurement of success that’s too limited. Another drawback with retention rates is they assign equal value for all customers, regardless of where they are in the customer lifecycle. This causes your dealership to lose a significant amount of potential revenue that could otherwise be found by differentiating customers.



Instead, your dealership needs to focus on the new and more reliable metric that we call GRO. The GRO metric is calculated by dividing the realized lifetime revenue (which represents the amount of revenue a store is currently capturing at each stage of the lifecycle) by the potential lifetime revenue (which represents the total revenue available during their lifetime). It measures a store’s ability to capture a customer’s revenue potential throughout the customer lifecycle and answers the question, “how well am I capturing the lifetime value of each customer?” GRO addresses the difference in importance in early and late lifecycle customers by assigning more weight to early lifecycle conversion. It enables stores to identify areas for additional investment and provides a higher likelihood for more loyal customers later on in the lifecycle. GRO is a more effective measure of the future value potential created by changes in retention rates across the customer lifecycle than the simple retention rate metric used by many dealers.

While there’s a lot more to GRO than simply improvingyour first service visit percentage, it’s a good place to start. And while we’re not recommending to completely abandon retention rates quite yet (they’re still likely important to your OEM), using a GRO measured strategy will give dealers a single measure to gauge their overall success. It’s with GRO that you’ll begin to see the entire picture, seizing the lifetime value of every customer.

Mike Martinez is chief marketing officer of DMEautomotive, the industry leader in science-based, results-driven automotive marketing that provides a range of marketing services to the biggest and most innovative automotive organizations in the industry. For more information, email dme@dealermark.com.

Mike Martinez

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