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Insight: customer retention

Bananas are very popular, as are apples, but only Golden Delicious and Granny Smith because they’re a bright green colour.

Russets don’t work well as they’re an unappealing brown and no one eats oranges because they’re too messy.

Keith Kingham – who buys a basket of fresh fruit for his dealership’s customers and staff, and has been doing so twice a week for five years – realised that fact early on so stopped buying them.

Kingham spends £100 a week on fruit and obviously can’t quantify the return on investment.

But he knows his efforts are appreciated and has proof.

Earlier this year his business, Kinghams of Croydon, was named ‘Britain’s Best Local Garage’ in the Motor Codes Golden Garages awards. It was voted for by customers.

Kingham’s most loyal customer has bought a new car every three years for the last 45.

Customer retention is vital for the success of any business and in new car sales it’s no different.

But the figures don’t lie; industry data says it has fallen from 64% in 1980 to 27% today.

More than 70% of people abandon a brand due to poor customer handling rather than price or the attraction of a rival product.

With tough times ahead many car buyers are likely to delay their next purchase. It means ensuring they return to your business – rather than ditching you in favour of one down
the road – is vital.

So how to generate loyalty?

Kingham sells Subaru and SsangYong cars, but has official aftersales status for seven brands, including Seat and Alfa Romeo.

Despite being the boss, he works day-to-day on the service desk, a role he believes is the lynchpin of the business.

“I think it’s really important to treat customers as though they were guests in a hotel,” he explained.

“If you arrive at a hotel you expect a happy, smiley face to greet you and soft music, so that’s what we have. It’s jazz CDs, not Radio One.”

Attention to detail in making people feel welcome is part of the Kinghams’ ethos.

Customers can choose from two varieties of Douwe Egberts coffee and five Twinings teas, and someone goes to boil the kettle to make the drink.

There’s even a library of motoring books.

“People start reading something and ask if they can borrow it. That’s fine with us. We say bring them back another time and they always do.

"Even that is keeping customers returning.”

Kingham is studying for an MSc in strategic automotive dealership management at Loughborough University.

His tutor is Prof Jim Saker, who says people have to recognise that there’s a big difference between customer satisfaction and customer loyalty.

“The industry measures CSI and most of it is a complete waste,” he said.

“A customer can be satisfied, but that won’t stop them going somewhere else.

"Loyalty is about relationship building and in the automotive industry most of it is done through a structured CRM approach.

"But there’s a risk that because it’s so process-driven, staff just fill out forms and don’t engage with the customers.”

Like Kingham, Saker believes aftersales is vital. “A customer might only see the salesperson once, so the service adviser is the most important person.

“Mostly the car will be working perfectly when it arrives for a service and working perfectly when it leaves, but the customer will have paid out £150. It’s an intangible, so it’s important to ‘tangiblise’ that.”

That could be something as simple as cleaning and valeting the car.

But is aftersales really aftersales?

Dr Will Holden is chairman of training and consultancy firm Sewells and doesn’t like the word.

“It’s not aftersales, it’s pre-sales, but very few people think of it like that.

"Look after the customer who owns car number one and they will come back and buy car number two.”

Holden, whose client roster has included Honda, Nissan and Volvo, said service staff know what they should be doing but don’t do it, generally because they’re under pressure.

But he argues that can be solved.

“If you have 20 customers coming in at the same time to drop their car off for a service because you’ve told them to bring it in ‘first thing’, why do that?

"If it was a doctors’ surgery, there would be appointments – 8am, 8.10, 8.20, 8.30.”

At Loughborough, Saker teaches that satisfaction is a very weak emotion while loyalty is much stronger.

This month Co-operative Motor Group (CMG) has launched an aftersales charter and price-promise guarantee.

The idea is to demonstrate how serious the company is about ensuring customers are completely satisfied.

Admirable attitude, but will it bring them back?

Carl Traviato, CMG’s aftersales manager, believes excellent service along with empathy, trust and honesty can only aid customer retention.

“A large number don’t have an in-depth understanding of motors. Therefore, if they know they are getting good value in addition to excellent service, they are more likely to return.”

Traviato believes low staff turnover helps, as stronger and longer-lasting relationships can be developed more easily.

He also reckons business initiatives such as incentive programmes inspire long-term loyalty.

That’s a view echoed at Essex Auto Group (EAG), which has spent in excess of £100,000 over the last two years on a ‘smart card’ system.

It works like a supermarket loyalty card, with drivers earning points every time they do business at the dealership.

“As an industry, we are seeing customers less and less and this is a mechanism for seeing them more and more,” said EAG marketing manager Matt Brown.

The system, coupled with website-based member incentives such as free valeting and discount parts, has led to a rise in customers in year four of ownership and beyond.

Another tool to generate repeat business is a service plan.

Customers who sign up get fixed prices, ease of payment thanks to a monthly direct debit and peace of mind and it can include attractive add-ons such as discounts or a free winter health check.

Graeme Sharp is an operations manager at RDS Global.

Originally an automotive IT and communications supplier, it launched a service plan in 2007 with Pentagon Group.

Now more than 40 dealer groups use it in 125 sites. “At the moment, people are either not having their cars serviced, or going to the cheapest place they can find.

"The fact we have tied them in is great for the dealers because it’s a mechanism for budgeting."

On the face of it, making mistakes doesn’t seem a good way to improve loyalty. But if it’s used as an opportunity, it can be.

Nick Vosper is a director of Vospers, with six franchises in 18 dealerships in the south-west.

"I’m a big believer in Tom Peters, who talks about the essential nature of ‘great comebacks’.

“It’s inevitable that something will go wrong with a vehicle and inevitable that something will challenge the customer relationship.

“What creates a loyal customer is whether they have a great comeback – you solve the problem and do it in way that makes them appreciate you more.”

In his books, Peters argues that being perfect first time round is good, but doesn’t make you memorable.

Getting it wrong then putting it right actually makes for happier customers, who will hopefully return.

Vosper said establishing a culture of employee empowerment – giving staff the authority to solve the problem without fear of recrimination – is key.
Senior staff should praise them for caring and wanting to put things right, but sit down later with them to look at how the situation could have been avoided and how else it might be resolved.

Doing things differently, in the hope your unique approach sticks in people’s minds, is another way to try to generate loyalty.

For Kingham it’s fresh fruit, but it can be something far more dramatic.

Sheffield Audi, part of the Gilders Group, presents new car customers with their purchase via a bespoke lift that comes up from the basement.

“We have a valet bay underground and it started as a way of getting clean cars upstairs without going outside, but we realised it could be turned into a unique handover device,” said sales manager Simon Wall.

Being Audi it’s prestige, so no flashing lights, smoke or naff music.

“Customers always mention the lift during feedback because it gives them the wow factor. I don’t know if it’s led to loyalty, but it’s certainly a talking point and we get people coming in just to ask about it.”

Shabier Zaman, sales manager at Steve Smith Motor Company, a used car business in Dudley, West Midlands, is a man who seems to inspire loyalty.

He was described by one customer who wrote to AM – and who has bought eight cars from him in 12 years – as “a breath of fresh air when it comes to dealing with customers”.

Zaman has been in the trade since he was 15; he’s now 44, and has customers who have followed him through four main dealers.

He explained his aim was always to under-promise and over-deliver, adding: “If you get that right you will create loyalty. Be nice and be yourself.

"It’s not rocket science. Everyone is conscious of getting the deal done, but sit the customer down, get them a cup of tea and talk to them about what they want. After the sale, always follow through by ringing regularly.”

Zaman isn’t a great fan of DMS and CRM solutions, relying instead on his diary and a pen.

It’s a view echoed by Nick Crawford, CRM expert at system supplier Mondial Assistance.

“You don’t need the whizziest CRM solution to help you with customer retention. The simplest tool is to follow up on all brochure requests within the same week of being contacted by a customer.

"It’s a point that many dealers forget. A further telephone call allows you to really find out what the customer is looking and why.”

Crawford also advocates not giving up on a prospect just because they don’t want to buy immediately, arguing if you impress them, keep in touch and show you value their business, they will probably come back later.

He also supports Net Promoter Surveys (NPS), which establish whether customers would recommend the dealership’s service to other people.

Finding a reason to talk to customers other than when you want to service or MoT their car is another way of building loyalty.

This could be to check how the driving experience is going, inform them of special offers such as free mini-valet or offer a test drive in a new model.

“This will make them feel valued, but will also enable you to confirm the details you hold for them are correct, which will immediately update your customer database,” Crawford said.

For some dealers, the database will always be king.

Daniel Burgess, automotive director at HPI, says there’s nothing wrong with that, and believes in maximising data to keep customers loyal.

“It’s about having a detailed knowledge of the people you do business with.

"As they move and their needs change, an extensive CRM solution can provide the upper hand.”

Burgess believes keeping things simple is the key to ensuring a CRM tool works; stick to something that does the basics well and avoid offerings with too many complex additions.

Regular updating of information is crucial, which means everyone in the dealership has to positively support the CRM system to get the most from it.

“There are also consumer databases on the market that will complement systems being used by dealers. An example of a highly effective tool is HPI Finance Watch.

"This allows dealers to monitor existing finance agreements that are coming to an end and seize sales opportunities before that cust-omer prospect has gone elsewhere.”

Another is HPI Customer Watch, which can check if a vehicle is still owned by the person who bought it at the dealership, or if it’s been written-off, stolen or has a new keeper. If it’s any of the latter, they might in the market for a new vehicle.

Holden doesn’t believe there are any new ideas to create customer retention.

“Everyone wants the new silver bullet that’s going to work for them, but it’s not about doing extraordinary things. It’s about doing simple things extraordinarily well – make eye con-tact, say welcome, ring back, make them feel valued.

How much skill does that take? It’s about attitude, about getting people to think about the service they offer the customer.”

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