This is the fifth and final installment from a recent blog titled These Are the 5 Automotive Tips You’ll Love in the New Year.
The average dealership retains less than 25% of their clients over the average buying cycle. Retaining and winning back lost clients is not where a dealership's biggest opportunity for growth is - conquest sales is. However, if you lose 20% of your clients a year, you have to add 30% more new clients just to grow 10% in sales. You must aggressively and continuously have an effective retention and win back strategy for growth.
It does not matter how good your CSI score is. It does not matter how many awards you have for customer satisfaction. Every dealership has clients who decide to buy or service their vehicle somewhere else. You can retain and win back lost clients. Implement some of these easy strategies and your dealership will experience growth, even if you never increase your conquest marketing activities. Once you slow down the lost clients falling through the bottom of the bucket, you’re no longer forced to make up all that lost ground just to break even.
So what is the easiest way to increase your active client base? You can instantly increase your number of active clients by winning back your inactive clients. Dealers already attempt to attack this problem with service offers, coupons and reminder programs. There is a fundamental problem to to this strategy when it comes to clients who have already defected...
Your lost client ignore these offers. If these offers appealed to them they wouldn't have defected in the first place. Why would you continue to hit them with offers they are not interested in?
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Differentiate your Dealership from Everyone Else
Every dealership has a attrition challenge. Attrition is the opposite of retention. Attrition is the number of clients who stop doing business with your dealership. They've defected. They are the people who move out of your market area, they are people who for whatever reasons stop dealing with your sales and service teams. Most dealers I work with do not know what their level of attrition actually is.
Until you first identify how many of your clients are no longer actively dealing with your service department or have stopped buying from you, you can’t begin to improve on that figure. Identifying the percentage and which clients no longer actively do business with you, is the first step to reducing your attrition rate. And the opposite of attrition is client retention.
I published an article titled - You Need to Know the Shocking Truth, Retention vs Conquest Marketing. I'm providing you access here for two reasons. 1) It explains in detail the what the average attrition percentage is for dealers. The numbers are shocking. 2) It also explains my earlier comment about "conquest marketing is where your real opportunity is for growth". If conquest is your key to growth... why am I showing you strategies about improving retention? Because winning back lost customers is your quickest and least expensive path to growth.
So your first goal? Figure out what your attrition level is... and more importantly, which specific clients left you. Then you want to recognize the reasons clients stop doing business with your dealership.
Most people stop buying from you for one of three reasons:
- They stop servicing temporarily because maybe there was a time when it was more convenient to go to an independent shop or competing dealer - and just never got around to dealing with you again. Out of sight, out of mind. Once a customer stops dealing with you, no matter how valuable the product or service, they tend to fall into a different buying pattern.
- They became dissatisfied. There are hundreds of reasons people become unhappy and stop doing business with a dealership. But the important thing to realize is that rarely did you intentionally offend or dissatisfy them. Most unsatisfied people never tell you why they stopped buying or servicing from you - they just leave.
- The client’s situation has changed to the point they no longer can benefit from your dealership. They could have moved or their lifestyle has changed.
Customers Can Leave You Just Because
80% of all lost customers did not leave you for an irreparable reason, you can instantly take action and get a good percentage of those people back. But, you can't do it using the same old school marketing that hasn't brought them back up to this point or did not retain them to begin with. When they do come back, they tend to become one of your best, most frequent and loyal customers. They also can turn into your best single source of referrals.
With the dealerships databases we study, on average 50% of clients who defect were loyal, satisfied clients who only intended to temporarily stop doing business... but never quite got around to starting back up again.
I strongly suspect that a large portion of your lost clients are these same kinds of well intentioned but forgetful people, too. You have an incredible opportunity to assist your past clients to re- start their buying relationship with you again.
Don’t forget that your dealership brings tremendous worth, value and benefit to those people, and they have been disadvantaged for all the time they have not been dealing with you. By helping them start dealing with your dealership again, you help them gain more advantage and benefit for themselves.
The way I see it, dealers have a responsibility, an obligation, to reconnect and re-educate people to the original reason they did business with you, and to help them start enjoying those benefits once again.
What About Unhappy Customers?
Here are some interesting statistics regarding unhappy clients.
- The average dealership will hear nothing from 96% of unhappy clients who had a bad experience.
- Unhappy clients will tell his or her bad experience to at least 9 other people. 13% of those unhappy former clients will relate their stories to more than 20 people.
- For every complaint received, the average company has 26 clients with problems, six of which are “serious.”
- Of the clients who register a complaint, up to 70% will do business with your dealership again if their complaint is resolved. That figure goes up to 95% if the client feels the problem was resolved quickly.
- 68% of clients who stop doing business with you do so because of company indifference.
Maybe they just didn’t feel important, appreciated, valued or acknowledged by you and your dealership. There are all kinds of overlooked reasons why clients stopped doing business with you. But the important thing to recognize is that rarely did you or your team intentionally offend, dissatisfy or fail to acknowledge that client.
How often (if ever) have you considered or thought about the possibility that you – or your dealership – could be the reason clients stopped buying?
Out of the thousands of Dealers, GMs and Service Managers I talk to, only a handful have ever thought about this before. So I’m reasonably certain none of the dealers you compete with have thought about it either. Once you understand that 80% of your lost clients didn’t leave for an irreparable reason, you can almost instantly take action and get many – even most – of those clients back.
If a client stopped purchasing for the third reason (because maybe the moved and their situation has changed to the point they no longer can benefit from what your dealership offers) they obviously still have enormous stored respect, goodwill and connection to your firm. By merely contacting them and honestly expressing your concern about their well-being, you position yourself perfectly. If they tell you they no longer can use your product or service, ask them to recommend you to friends, family members and associates who can benefit from what you do. They’re usually delighted to do so, but never thought about it on their own.
The Easiest Way to Bring Back Customers
First, understand that trying to win back all lost customers will never produce the ROI to justify your marketing expense unless you do two things. You have to be to identify 1) Who is most likely to respond to your offer?... and 2) Who has the highest propensity to become a customer again if they do respond?
You can't afford to go after everyone or broadly segment a list of clients who defected from you. The article Real Data Success Comes When You Increase the Behaviors You Want - explains how narrowing down your list with simple segmentation (Blanket targeting people who haven't serviced with you in 18 months) is not enough – especially with today's consumer.
Understand this: If you can improve your attrition rate, it’s like adding that number of new clients to your dealership. It is much easier to attract people back when there is no obligation for them to buy anything. It is also easier to win them back when you offer something of real value that they are required to do anyways - like maintain their vehicle. Active service customers are much more likely to buy their next vehicle from you.
By taking the time to offer something of real value to the right audience of lost clients, you have the effect of impacting and impressing these inactive clients at a level you can’t even fathom.
There are a few highly successful ways you can do this both with your service and sales teams.
Just by contacting and communicating with the right targeted group of inactive clients, a wonderful thing occurs. You can bank on the fact that a good percentage of them will almost immediately start repurchasing or repatronizing your dealership again. And, once they start repurchasing from you, there is a high probability they will actually become the most loyal and profitable clients you have.
How the Penske Stores Won Back Lost Customers
J&L Marketing is fortunate to be a preferred vendor for the Penske Automotive Group. I take great pride in this relationship because of the tremendous respect I have for the entire group and Mr. Penske for his drive, attention to detail and accomplishments. We created and managed a series of pilots (vetted for months) before becoming a preferred vendor for our private sales and service events.
The most cost effective approach to helping dealerships win back lost customers and differentiating dealerships from competitors is a private service event - there are a lot of reasons that contribute to this fact.
- It offers something of high value the client needs (not wants) and does so with no-strings-attached.
- The offer does not try to be everything to everybody.
- It identifies to a high degree of certainty who is most likely to respond and more importantly re-enroll with the dealership again as a paying customer.
- It is completely different - it avoids the same tired offers the lost client has ignored for years.
- Educates clients on why your team is more capable of handling their maintenance needs over independent shops.
- It's turn-key. This is critical because dealers are too busy with day to day activities. You have to get the maximum result from the least amount of effort.
It's astonishing the percentage of old clients who will take you up on this offer. What's more astonishing is the average number of days most of these clients have been lost for... and now they become paying clients again.
After a few months of test pilots the Penske Automotive Group made the decision to move forward with us because of this approach. Private service events are why we have strong relationships with companies like GM, FCA, Mopar, BMW, MINI and Shell Oil. This is not meant to impress you. It is meant to impress upon you... that customer retention and loyalty is a major challenge in the auto industry. These are world wide brands who invest a small fortune in research and development to retain a higher percentage of customers.
The attitude and approach of a private service event is so dramatically different, unexpected and impactful, it turns the tide and breaks through to the lost client and actually wins him or her back.
Even if it doesn’t, it has a wonderful residual benefit. People can’t stop telling other people when someone does something beneficial for them – particularly when they had nothing to gain.
Remember clients should be valued like true friends. Your business relationship is not far from your personal relationships. Imagine if your friends only reached out to you when they wanted something. You don't want to be that friend. Private sales and service events are very similar to inviting people to your home. The more they are there, the more connected they feel to your dealership. There is a sense of belonging.
So ironically, you can actually use this mindset and strategy to get totally dissatisfied past clients thinking about you and speaking about you in a more positive light.
Remember, whatever number you're able to cut into your attrition rate it’s just like boosting your sales and profitability by the same amount.
Get going immediately on plugging up the hole in your dealership. Start a policy of offering real value offers regularly with the right audience of inactive clients (Remember not all other or just segment them). This will help avoid the misunderstandings, unintentional interruptions in business and lack of attention that open the door to competition.
Many will start quickly buying and referring again because they never really wanted or intended to stop. So reward them for your lack of initiative in the past – do something special and preferential for them as a “welcome back” reward or gesture of appreciation.