Published in Automotive

Automakers Focusing More Attention to “Retention/loyalty”…But Can Dealers Deliver at the Customer Facing Level?

There’s a change going on with automakers! For the first time, automotive OEMs are creating and implementing proprietary customer loyalty programs for their dealer network.

Those programs are anchored by redeemable rewards points and aimed at keeping customers in the dealership “loyalty loop.” And car makers are even funding entire programs…one has even deposited $210 worth of points for each new car buyer so that new sold customers can use their points immediately.

It’s a first for the automakers, who, until recently, have ridden the wave of robust car sales following the great recession of 2008. The past hot market for sales placed retention on the back burner. But that wave is now ending, prompting dealers to search for other means of profits…mainly from used cars and the service center.

Loyalty programs, driven by redeemable points, are not new. Those programs offered by vendors have been around for decades. What makes them more attractive today is the new awareness on the part of retail auto leaders of the true value of a retained customer.

Loyalty programs can send a clear message to the customer that “we care about a relationship with the customer for the future”.

In addition to creating loyalty rewards program, car makers are also focusing more and more on retention rate benchmarks of their dealers…even rewarding them with bonus cash for meeting manufacturer preset goals.

And there is an increasingly strong feeling among retail auto leaders that “retention” will eventually replace “CSI” as the key measurement for the customer’s experience at the dealership.

In one case, a major automaker has already replaced the traditional service CSI score with an expected retention number.

These changes are also prompting a subtle but significant shift in dealership strategy. Traditionally, dealer leadership has always focused on the showroom, but now, with the plateauing of sales, that same leadership is now gaining a more intimate awareness of how the service center is the key to retaining customers for service revenue and repeat sales.

Dealer Service Centers are Ground Zero for Customer Retention

There is little doubt that what happens in the dealer service center has the most profound effect on customer retention. I spoke about this in two previous posts in the Maritz CXCafe Your Other Showroom, The Service Center and Client Loyalty Is Not Dead…But Client Follow-Up is!…but some of that information bears repeating in this latest post.

Success with ramping up acts of retention will require a dramatic cultural change that dealers will not adapt to easily.

Ever since the dawn of auto retailing, budgets for bringing traffic to the showroom have far exceeded those allocated for the service center. That will have to change with the new focus on loyalty.

Consider these NADA stats from 2017:

  • Dealers spent an average of $7.00 on retaining their already sold customers (2017)
  • Luxury dealers spent an average of $762.00 on each vehicle sold, non-luxury spent $670.00 (2017)
  • Average gross on referral vehicle sales was $1,200.00 vs $817.00 for fresh “ups”
  • Referrals have a 51% service usage vs 29% for fresh ups
  • Referrals have a 96% CSI score vs 73% for fresh ups

Clearly, increasing budgets for the service center have had a hard time gaining traction with store General Managers, a group dominated by those whose pedigree was developed in the showroom. That will have to change.

Greatest Deterrent to Focusing on Retention is the Existing “Transactional” Culture

Dealer service advisers don’t instinctively view the value of customer retention. I know this after observing it for 3 years as customer experience manager/retention (the service center exclusively) for one of the largest Buick dealers in the country.

As I stated in a past MaritzCX Cafe post, the number one enemy of customer retention is what I call transactionalism…the preoccupation with an all-consuming focus by dealers on the sales “deal” or the service “RO”, to the detriment of creating a “memorable” experience for the customer with follow up to match.

That proverbial focus on the transaction pushes a “memorable experience” and “customer follow up” to the back burner.

Customer Rewards Programs: A Platform for Delivering a Memorable Experience

We already have established that the service center is ground zero for retention success/failure for dealerships. We also know that service advisers are the primary brand ambassadors for that retention.

Sure, the CX delivered by the sales unit is important, but not as critical to retaining customers as the service lane experience and customer follow up. And while the customer experience during their visit to service is important to retaining them for future loyalty, the follow up of that same customer is even more critical.

That’s why loyalty programs, featuring redeemable points for future service discounts are so critical to repeat visits to service…and eventually to that next vehicle purchase.

Those programs not only offer the customer future discounts on products and services; they also convey a perception that the dealership cares about a future relationship with the customer.