Inactive customers are a huge challenge for dealers. If they only knew how to correctly manage their customer database, they could take advantage of this low hanging fruit. All dealers recognize the importance of retaining customers. However, most dealers simply do not have the metrics in place to know how many are lost. Instead of focusing on recapturing these lost opportunities, most are looking for the next sale and next new customer.
Reardon always asks; "Why are we all so concentrated on new [customers] when we are sitting on a database of tens of thousands of customers of which only about 10 percent are active?" – All it may take is a personal call or a hand written letter to Mr. Smith who had a bad experience last time, to get him reengaged – keep him from falling off the radar. Customer retention is the single biggest opportunity for increasing dealer profitability.
I started out testing CallCommand in our Chevrolet store. We didn't even know how many inactive customers we had. We were amazed to find that we had 24,068 customers that were inactive. We recorded a personal message for the service manager and automatically sent out calls to these inactive customers encouraging them to come into our service department by offering an exceptional discount on oil changes.
I had neglected to prepare the Chevrolet Service Manager for the response and after we had sent out about 1,800 calls, he frantically called me saying that customers were calling and also flooding the service drive for discounted oil changes. However, I did an analysis and it ended up that discounted oil changes had generated an average Repair Order (RO) of over $200 and total sales of $30,000.
It was so successful at bringing customers back into our store that we completely changed our marketing focus and now use this in all of our stores.
One of the most helpful components of this system is the metrics it provides. I review a campaign and know what is happening at any given time; it gives a great snap shot. Many dealers are not good at metrics and run their businesses off opinions. The ROI report provides exact metrics. For example, I ran a report of all stores from October '05 through the first week of August '06.
For Chevrolet, it found that we had 24,068 lost or inactive customers – these customers were pretty much gone. We were able to get 7 percent -- 1,598 of them back into the store, generating an average RO of $212 and total sales of $338,365. For Ford we had 17,612 lost customers and returned 1,113 – 6 percent, and generated sales of $216,464 for an average RO of $194. In our Chrysler store, we had 15,523 lost customers and 982 came in, or 6 percent, generating revenue of $239,269, an average of $244 per RO.
I find it interesting that the metrics were so similar for each store – with 6 to 7 percent of our customers returning. Taking a closer look at this, just from this "lost soul" campaign we returned 3693 customers and generated $793,098 for an average RO of $215. However, we still have 83 percent of these customers lost somehow. Some may have died, some moved away, changed vehicles, etc.; which would conceivably knock out about 50 percent. That still leaves a good 20 to 30 percent of these lost customers for us to reach with other campaigns. We look forward to creating more campaigns in the future to further increase our number of active customers.
Following the success of our "lost soul" campaigns, we started using the same system to communicate to our existing customers to help improve our customer response rates in other areas. Our dealerships have really good service departments with top notch staff handling an extremely high volume of customers.
With such a high volume, it can be tough to reach all our customers with the appropriate communications at the correct time. One area we decided to focus on was the service appointment reminder.
For years, our service departments had relied on postcards generated from the DMS to remind customers of upcoming appointments. The response yielded using this method alone was 78 percent, above average, but still leaving a great amount of opportunity untouched. "No-shows" not only push back other appointments and interrupt schedules, but they also contribute to a substantial loss of revenue.
So, in an effort to boost this response rate, we extracted all customer records with upcoming service appointments and deployed a timely, relevant, professional and consistent message from our service managers.
The addition of this message helped us to realize a 25 percent increase in our service show ratio, moving the needle from 78 percent to 97 percent! It was a simple addition to the method we already had in place and it didn't require our service staff to take on any additional tasks. Now I know that every customer is getting a personal and professional reminder from our managers.
We use the same system to help increase the impact of and response to our marketing messages by calling our customers to remind them of sales events or to notify them of marketing information we have mailed or will be sending them. Our direct mail response rate almost doubles when we add a call to a specific marketing campaign. I believe that a "real" human voice with a dealership title adds authenticity to our sales offers.
Years ago sales drove service – the more cars you sold the more service revenue you generated. How times have changed. The dealer who keeps the service customer is the one who will generate the strongest future car sales. That's why we place a greater emphasis on sales and service-based marketing directed at retaining our existing customers.
Vol 3, Issue 11