May 2010, Auto Dealer Today - WebXclusive
A worthy goal for every dealer would be to sell a new or used vehicle today and keep that customer coming back to your dealership for life. You want them coming back for all their service needs, for parts, for body repairs, to buy additional vehicles for their family and of course, to trade in the vehicle you just sold them to buy another. Makes sense, right? If so, then let’s put together a marketing plan designed to keep your customers for life.
According to NADA’s Average Dealership Profile, the average dealer in 2009 spent a record high $708 in advertising per new vehicle retailed while averaging $1,193 on gross profit PRU. Looks like about 59 percent of the average dealer’s new vehicle gross profit was spent on advertising. Wow! Does anybody see a problem with that? In reviewing hundreds of dealer financial statements last year, I found that the average dealer is spending about $10 in advertising per retail service customer per month which comes in at about 5 to 7 percent of service gross profit. Does anybody see a problem with that?
Research shows that over 70 percent of your service customers who come back to your dealership for all of their service needs will buy or lease another vehicle from you. What’s your closing ratio on repeat customers? I guarantee you it’s not the 15 to 20 percent you’re getting with walk-ins! A realistic number would be well over 60 percent. So the question is what can you do to keep them coming back? The answer is: give them a reason.
A customer retention marketing plan for fixed operations costs a fraction of what most dealers are spending to bring bodies into the showroom. Again, according to NADA the average dealer is spending about $28,320 in advertising per month to sell cars. So if you’re an average dealer selling about 40 new units a month, you would then most likely be writing about 500 customer pay repair orders per month and spending around $5,000 in advertising and marketing support for those 500 customers ($10 each).
So the average dealer is spending $28,320 to sell 40 vehicles to strangers (20% closing ratio) and only $5,000 to keep the customers they already have coming back to the service department (60% closing ratio). Understand that these customers already know where you’re located, own your product, have done business with your dealership and must like someone at your store since they are coming back. Here are some questions to ask yourself to determine if you’re trying to keep them coming back:
• Have you told them lately that you appreciate their business?
• Do you remind them when it’s time to return for preventive maintenance?
• Do you have an appointment reminder system in place?
• Do you schedule their next appointment before they leave on each visit?
• Do they receive invitations for seasonal promotions?
• Do you follow up on all open factory recall campaigns?
• Do you have a process to follow up on no-shows?
• Are all lost sales followed up within 48 hours?
• Are first appointments scheduled at time of delivery?
• Do 100 percent of these customers get maintenance menus?
• Do you have an automated or live call program?
• Do you communicate with them through e-mail and/or text messaging?
• Are these customers invited back twice a year for free car-care clinics?
The important thing to remember about follow-up is that it must be done daily to build customer retention, not quarterly. Most dealers spend more money on one weekend advertisement for the sales department than they spend in an entire month on customer retention in service. All of the reasons to come back as outlined above can be accomplished in most dealerships for around $2,000 per month, or $24,000 per year which, coincidentally, is about what the average dealer spends on advertising in one month to sell cars. As an ex-dealer, I know we all waste money on advertising, whether it’s TV, radio, newspaper, direct mail, event sales, etc. The tough part is figuring out which dollars were wasted, right? That being said, you don’t need to increase your advertising expense by my $2,000-a-month budget; you just need to reallocate some of that $25,000 you’re already spending.
Of course, in addition to selling more new and used vehicles in the future, you will also see a dramatic increase in your customer pay parts and labor sales. I’m seeing increases in service gross profit of over 60 percent in a lot of our dealership. Increasing service absorption is a terrific way to recession-proof any dealership in our current economy. Imagine unlocking the front door of your dealership tomorrow knowing that 100 percent of your overhead is paid for before you sell your first car or truck. Sounds like a plan to me.
Vol. 7, Issue 3