Like any other entrepreneur, you are constantly striving to increase revenue and improve profits. By now I am sure you are aware how important each customer’s experience is to the formula for success, but — like many dealers — you may not fully appreciate how it impacts your business.
Statisticians commonly use a “linkage” analysis to develop an understanding between customer experience and business results, such as increased sales, higher profits and customer retention rates. The calculation is seemingly simple: Happy customers move through the sales funnel quicker, buy more, return for additional services and recommend your dealership to others more often, and their satisfaction levels impact sales and profits.
There’s only one problem: It’s a myth.
Whether your next customer makes first contact via email, chat, Web form, phone call or an in-person visit, a positive experience doesn’t guarantee they will make an appointment, buy a vehicle, or remain loyal to your store. As a result, dealers often abandon efforts to improve the customer experience. They don’t think their initiatives will provide a positive return on investment.
Proving the relationship between the customer experience and improved production is sometimes difficult. Part of the problem is the environment. You can’t give excellent service to some customers and treat the others poorly.
What you can do is appreciate that the analysis is correlational in nature, so you need to be clear in what factors you’re measuring and how you’re linking them together. This means avoiding some of the common pitfalls of analysis. Let’s go through them one by one.
1. Overestimating the Transaction
An individual experience doesn’t give an accurate picture of a customer’s entire relationship with your dealership. As you know, even one poor service encounter can lower your grade. Look at the relationship in its entirety, rather than by transaction, to draw more accurate links between the customer experience and business outcomes.
2. Assuming Experience and Outcome Are Parallel Metrics
Dealers typically respond quickly to negative customer reviews and low sales by offering over-the-top service, putting more employees on the floor, and insisting on better follow-up and more training. It’s easy to assume that the resulting boost in satisfaction ratings will positively impact business outcomes. However, customer experience metrics often appear right away, whereas the change in outcomes (i.e. sales) may take weeks or months. Choose an outcome metric that manifests itself in a shorter amount of time.
3. Disregarding External Buying Factors
When comparing the customer experience to business outcomes, many people make the mistake of using a very specific measure of the former — and a very broad measure of the latter. For instance, the dealer sales experience may be important, but it’s a minor factor for those potential car buyers who are loyal to a particular brand or model. It’s best to conduct an analysis that takes into account multiple inputs that may affect the outcome variable.
All the factors above will prevent you from identifying a direct relationship between experience and sales. If you can recognize and avoid these pitfalls, you will almost always find a way to measure the metrics that count the most and grow your business and loyalty as a result.
Mark Stringfellow is vice president of sales at The Next Up. MStringfellow@AutoDealerMonthly.com.