Create Customer Loyalty

April 2007, Auto Dealer Today - WebXclusive

by Sean V. Bradley - Also by this author

The thrill of gambling is exhilarating. Am I going to win? Am I going to hit it big? Put it all on the line and see what happens. I am not a gambler at all. I am a realist, a numbers person. I don’t feel comfortable just hoping on the long shot. Today, in our industry some dealers are advertising on a long shot. There is no science, no reason, just hope that their initiatives sell more cars.
Let’s talk about some numbers; NADA states that the average store spends over $500 in advertising for each new vehicle sold.  Due to other factors, that number is probably closer to $800 or more for each vehicle sold.  The typical store will only close 22 percent of their ups, 40 percent of those never create a cash repair order and a full two-thirds of those customers are gone by the time they truly become valuable, which is when their vehicles reach 30,000 miles.  The customer that does remain loyal is seven times more likely to repurchase from your dealership and on average will create an additional $900 in gross profit per unit for the dealership.  Additionally, by keeping loyal customers we pick up amazingly profitable service business. Unfortunately, most dealers don’t allocate a budget for owner retention efforts, and the dealerships that do only allocate minimally.  

It is amazing that dealers ignore their own database and default back to that gambling mentality, choosing a shot in the dark versus science and math.  If the same 2 percent in your own database purchase every month and the typical store has an active database of 6,000 to 10,000 customers, think about the potential.  Then get sick over the fact that you have not created loyalty with these people.  Every month, 120 to 200 people from your store purchase and you have done little to say, “Buy from me,” unless they get that generic mailer.

Let’s claim our customers as our own.  If you are a gambler, at least play the odds. What makes more sense? Putting all of your money on a 22 percent long shot or at least some of your money on a 60 percent shot with the opportunity to make an extra $900 gross profit per unit?

Here are a few initiatives that you can put in effect immediately at your dealership and experience great results. Let’s start with an example of a customer loyalty program:

•  Free lifetime state safety inspections
•  Free loaner vehicle with a 30,000 mile service
•  Free shuttle service
•  Free car wash
•  10 to 15 percent discount on installed accessories
•  Loyalty pricing discounts
•  Referral program
•  10 percent toward your next vehicle purchase
•   “Frequent Flyer Miles” program

Anything your customers do at your dealership should be rewarded. When the customer comes to your dealership to buy parts, have service work done or purchase a vehicle, they earn points for future activities. Therefore, the more they do in your dealership, the more they can earn for future visits.  By increasing customer loyalty and retention your dealership will spend less on advertising.  After all, if your current customers are happy with the “perks,” then they will tell others which is free (and the best) advertising.

Vol 4, Issue 2

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