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Price obsession spells end to customer loyalty

I recently dug out my old dealership sales log and it was a vivid reminder of how the car retail market has changed in recent years. Every detail of 250 sales a year is recorded, but it wasn't an exercise in nostalgia. I was interested to see how frequently the same customer names cropped up and, sure enough, after three years a large proportion of them did. It serves as a reminder of how, 10 years ago, most franchise dealers had a solidly loyal customer base. My colleagues and I had customers who came back again and again. You developed good relationships with them based on mutual respect and trust. You knew they weren't tyre-kickers and they knew they would be treated right. How different it is today. Despite the millions – maybe even billions – invested in customer care throughout the dealer networks in recent years, customer loyalty has all but flown out of the window. The reason is price. I remember putting together a deal for a guy on a new Toyota. He went away and found someone who could beat me by £500. But he didn't like the way he was pressured during the process and treated in general by the dealer in question. Next thing I knew he had come back, bought the car from me and written to Toyota telling them about his experience. This would rarely, if ever, happen today. Over the past few years the popular motoring press has educated the punter into believing that the only factor in the car buying process that matters is price. This has wiped out the loyal customer base and replaced it with nomadic tribes of car buyers who scour the country and the internet for the cheapest car they can find. Even the loyal customers who had bought 10 cars from you are traipsing round the car supermarkets on a Sunday in search of discounts. Service and care are firmly second on the list of priorities now. The internet creates yet another element of competition for your roving customer to stumble across. And sometimes there is no way to compete. One of the Cap Black Book team was told by a dealer contact that he had just lost a £17,000 sale because the guy had found the same car imported for £14,000. No arguments about aftercare and service can overcome that one. Used car departments in the franchise network are now at a serious competitive disadvantage in many ways. The manufacturers are constantly telling their dealer networks they have everything they need to succeed – the infrastructure, support and expertise to sell cars and look after the customer. But without the lowest prices the critical ingredient for success is missing. The car supermarkets, on the other hand, do benefit from that dealer network infrastructure. They are generally selling cars with a manufacturer warranty still applying and if the car breaks they can return it to a dealer . So, not only do supermarkets take the sale away from the franchised dealer, they also benefit from the same aftersales support dealers offers in vain as one enticement to buy. There seems only one answer to this. If the customer now has a tendency to shop around you must do everything possible to prevent it. That means reducing margins and remembering the old trade adage – your first bid is your best bid. (April; 24 2000)

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