It’s Time to Invest in Customer Retention

OK, I am a fixed operations guy – you know that – and if you have ever read any of my articles you also know that I can be a bit controversial. So, in an effort to keep up my reputation for being a tough guy that “calls’em like he sees ’em”…here ya go. In the past 10 years or so, I have seen some dealers spend millions of dollars on nice new facilities. I see state-of-the-art architecture, multi-level parking, marble floors, restrooms that you'd find in a Ritz Carlton and showrooms that just blow me away. I have seen large-screen TVs, computers with internet access for customers to use and interactive kiosks to engage vehicle shoppers with facts about the vehicles they sell.

And they didn’t stop there. They even spent millions on the fixed operation part of the business with hospital-clean service departments, nice professional service write-up areas, quick service bays and all of the high-tech diagnostic equipment you can imagine. I am an old guy of 50 and without a doubt; I have to say that some dealerships have come a long way.

So, here is the controversial part: I just don’t understand how these obviously smart, savvy businesspeople can invest so much, go in debt so far and plan so hard for success and not get the big picture. What I am talking about is the lack of customer retention from sales to service. It has always been a problem, and for the most part dealers have buried their heads in the sand in the hopes it will just “get better.” Well, it won’t; it's getting worse. In fact, most manufacturers report that less than 30 percent of new car buyers ever visit the dealership for service. Why? Because there's no reason to. Cars don’t break like they used too, warranty work is down, maintenance intervals are stretched and customers have more choices now than ever before when it comes to getting their cars serviced.

With that said, my question is, why don’t more dealers get it? I mean, I understand that a good customer retention program is long term and not as sexy as a huge tent sale or balloons on the cars on the lot or some wild, creative, “win a new car” or FedEx-looking mailer campaign. But my gosh, look at the true cost and you will see that the return on investment for keeping customers is hundreds of times more than the return you get by constantly spending as much as $400 or more per car sold to attract new customers.

Fact is, today a lot of dealers are struggling. The high-rent factor, slower car sales, and lack of service business is taking its toll on a lot of previously successful dealers. Do the math on the amount of service business you would have if you just got the new and used car buyers from the past three years to visit your store for service at least twice a year. What is your average dollars parts and labor per repair order? What is your gross profit percentage? How much of that falls right to the bottom line? It’s time to stop burying your head in the sand. Think long term for once – spend some money on a good customer retention program and be patient. It will pay off in a huge way if you do it right.