Zen and the Art of Customer Retention

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Webster’s dictionary defines the word Zen as “a Buddhist doctrine that an enlightenment can be attained through direct intuitive insight” and I believe that is exactly what is required to crack the code of what should be the best Customer Retention strategies. Customer Retention is not a new subject and I am certainly not the only one who’s tackling it currently. One quick Googling of the words will show results in hundreds, however this has become somewhat of a buzz word within the automotive retail industry in relation to both Service and Sales and that is indeed my chosen concern. I recently posted on LinkedIn that I need to crack this Customer Retention mantra wide open by shamelessly soliciting expert opinions and feedback from anyone who wanted to take part and boy was the response quality. One would be surprised to see how eager LinkedIners are to help a fellow LinkedIner, I can’t imagine how we survived without LinkedIn all these years. In my view LinkedIn is more valuable than Facebook and Twitter and some will counter argue but I digress.

I did not want this blog to only entertain general observations like my previous one. This time I wanted to get specific and get more to the point so to speak. I wanted to recommend a certain set of basic “To Do Things” for new car dealers. I wanted to help them increase customer retention and increase revenue in Service. To give my thoughts a real business value if possible.

Before I move forward, I want to mention two names. Roger Cahill and Joan Sparks. My call for help sprung them into action and they provided quality insight regarding the subject matter. Roger Cahill is a Sales Coach/Trainer and owner at Toyowest and Joan Sparks is a VP of Marketing at a company called Tranzact Information Services. I also appreciate all the others who so diligently took the time to respond to my request and provided me with insights and a knowledge base that I might not have possessed before.

Please note that my concern here is primarily with service customers of a new car dealership. In my view new car sales process has been so thoroughly disemboweled by theInternet “Long Tail Effect” http://en.wikipedia.org/wiki/Long_Tail that I am no longer certain how consistently a customer engagement effort can bear fruit towards a previously sold customer, when that customer is no longer servicing his or her vehicle at the same dealership. However, this does not mean one should not attempt to reach out to those customers. My goal here is to explore which methods and tactics deliver the highest conversion rates. I am of the solid opinion that it may begin with Sales but it may only continue and grow via Service and I am referring to a longterm relationship between a new car dealer and a valued customer. Although I also believe that a “Long Tail Effect” via Internet is also starting to influence the Service customer. See http://repairpal.com/ and also see http://www.justanswer.com/ and click on the Mechanics Tab.

Let me also mention the areas that I won’t be discussing here and then I will give you my reasons. First, I will not touch the Customer Service aspect of the Service business, because, customer service is a pre-requisite and no business can hope to maintain a healthy list of loyal customers if they are not providing strong customer service. That’s why it is called Service. This just goes without saying. Hire the right people who will interact with your customers and make sure that your facility is clean and your are providing ample enough amenities that customers have come to expect from a new car dealer based service center.

Secondly, I will not address the aspect of process management. It also goes without saying that you must have the processes and procedures in place to greet, diagnose, explain, fix and deliver vehicles right from the start. Efficiently managing the entire customer fulfillment process from first point of contact (Appointment) to the last in chain (Delivery of the vehicle) is existentially fundamental to the core competency of automotive repair and service business. Anything less than above average performance in these areas is setting your organization for a massive failure down the road. A proper functioning process management strategy hugely affects how customers come to view your overall organization from outside. A smooth operating process management strategy will also help increase your service drive and shop productivity. Which really means servicing more vehicles with amazing customer service and using less internal business resources. This I have to say is a must moving forward if new car dealers are to compete with the independent service centers which operate only at the fraction of the cost.

So here are my recommendations. A successful Customer Retention strategy is part wisdom and part action, part form and part substance. If you do not understand, do not worry. I will further explain.

The Wisdom Part

Here is what I mean. The most important part of implementing a successful Customer Retention strategy is the ability of your service management to expostulate immediate and future customer behavior. One way to do this is to create business rules using service history or past transaction points. Associate each individual customer/vehicle to the following customer groups:

1) Active Customers : Customers with atleast two visit within past six months.

  • Loyal Active Customers: Customers who spend consistently above the average RO within their own ‘Customer Activity Bucket’.(Defined below)
  • Active Customers Likely to Defect : Customers who are spending substantially less then your average RO within their own ‘Customer Activity Bucket’.

2) In-Active Customers: Customer with at least one visit in the past year.

3) Lost Customers: Customers with no visits in the last full year.

Keep it simple and start to tailor or target specific promotions or your marketing techniques to these groups individually. The future of marketing is all about personalized and targeted promotions.

The term “Customer Activity Bucket” explained

In automotive service Customer Activity Bucket parameters would include the customer’s average repair order (RO) dollars based on these attributes:

  • Year
  • Make
  • Model
  • Sub-model
  • Number of available transactions points.

I am afraid this can only be achieved via a database reporting mechanism. The entries are too vast and complex to be analyzed and modeled by a human being. Make sure to contact your DMS company or better yet put one of your CRM companies to work towards this goal.

Once a Customer Activity Bucket average RO dollar is ascertained, then you can start to visually project the figures on a graph comparing each customer versus the bucket average. Those customers who are consistently spending below their bucket average will be more likely to defect. For added insight you may also cross reference average RO dollars from the same bucket but of your Lost Customer Group. This may produce yet a deeper level of insight into your own customers’ buying habits and future behavior.

This ought to give a substantial amount of insight into your customers’ buying habits and help you decide whether the customer is likely to defect or not. Right away start creating promotions based on this business intelligence. Tweak the model as you move forward for most accuracy and be sure to check out your competitions’ prices and promotions on the internet within your target market or geo-location.

The Action Part

As I mentioned earlier that in my view a successful Customer Retention Strategy will entail part wisdom and part action. Well here is what am including in the action section.Now that you have identified via the ‘wisdom’ provided by your own customer transaction records and later customer groupings and further creation of Customer Activity Buckets, you can begin to act upon this ‘wisdom’ and bring zen and the art of customer retention full circle.

Here is what you can start with. Begin further filtering each Customer Group using attributes found within the customer and related service records. What do I mean by that? Well, you can create specific promotions within each Group for let’s say people whose birthdays are falling within the current month. This would amount to a real-life personal event that a customer can relate to and in result come to be more influenced to take action. One can also create promotions to bring back recently visited customers that might have declined required repairs. Also create value in your promotional offerings by making them limited availability and limited time offers. This will create a sense of urgency on customer’s part. Which takes me to the next section.

Be the “Call to Action” Jackson!

Another technique that new car dealerships should use, is the ‘Call to Action’ technique based on current events. For instance using real-life conditions such as hot weather, extremely cold weather or taking advantage of more than usual spells of rain or snow to launch specific promotions. These promotions would appeal to customers to come into your dealership based on real-life conditions or events. Last thing a soccer mom would want is her Odyssey to get stuck on the side of a highway with the back seat full of kids because of a bad battery. I hate to say this but fear has proven to be the most effective way of forcing action out of human kind and your are only attempting to prevent a future inconvenience to the customer, hence the word ‘preventive’ maintenance.

Remember you do not always have to charge customers for a simple battery test. The goal is to bring in a set of targeted customers for a visit to not only continue to allow your organization to interact with them, but also to put your service department in a place to take advantage of any ancillary revenue opportunities that might exist.

I am sure personalizing special promotions further focusing on Customer Groups and attribute filters will not only increase your marketing conversion rates but also make for happy and returning customers. Be pro-active in ideas and action, in form and substance and then, and only then you will start to see the tangible and intangible qualities in your promotional efforts. These qualities will help separate your organization from the rest of the competition down the road. So take some time from your busy day-to-day dealership routine and indulge in some Zen like activities with your DMS data. The path to true success goes through the valley of deep enlightenment.

Cheers

Joe Tareen

Automotive Blog Writer and Customer Retention Expert.

Email : jtareen@yahoo.com

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