For the first 100 years of the automotive industry, the main thing you heard about at 20 group meetings, conventions and regional dealer gatherings, was customer satisfaction. With a decline in automotive dealerships and an increase in aftermarket service centers, the focus has shifted to customer retention. I’m glad.
But let me be quick to clarify that customer satisfaction and customer retention are not the ends; they are the means to the ends. Satisfied customers that return to your dealership will not make you any money unless you sell them preventive maintenance services when they return!
Ferguson GMC Buick in Broken Arrow, Oklahoma (a suburb of 100,000 east of Tulsa) understands the importance of customer retention. But more importantly, they know how to turn retention into revenue by selling preventive maintenance on the service drive.
First, let’s take a look at what they accomplished in a 12-month period and then we’ll discuss how they did it.
In January 2010, they had 20.7% of their new car buyers coming back to their service department for their first service visit. In January 2011, they had 42.9% coming back! Every month showed greater retention than the month before, in other words, 12 months of solid customer retention growth. The national average for GM dealerships in 2010 showed 28% of new car buyers returning to the dealership for their first service visit.
But wait, there’s more! In the same 12 month period, their used car first service visit retention almost tripled, going from 13.1% to 36.9%. By the way, that’s 150% better than the 23% national average for GM dealers holding on to their used car buys for that important first service visit.
I have always known the first service visit was critical, but I didn’t know how critical it was until I saw an eye-opening statistic from J.D. Powers and Associates. Their analysis shows that if car buyers come to the dealership for their first service visit, then they’ll return to the dealership for 92% of their service needs the first year.
However, if car buyers have their first service done at an aftermarket shop, they’ll only return to the dealership for 25% of their service needs the first year. In other words, you must get the customers into your service department early in the ownership cycle or they will likely be lost forever, and that is quite simply, too great a price to pay!
Jim Crews, service manager at Ferguson, has the hard numbers to prove the value of retention. “Our December labor revenue was up 40% compared to December a year ago,” Crews said. “In addition to that, our fluid maintenance service business increased 250% to over $125,000!”
Ferguson Buick GMC is a mid-sized dealership with two advisors, seven technicians and two lube guys. They see an average of 525 cars per month (325 of those are customer pay).
I got a call from Crews a few months ago, saying “Hey, Charlie, it’s 7 a.m. and we have six cars on the drive…not one of them is a GM vehicle… we are really starting to see the fruits of our used car retention strategy!”
So what is their strategy? Crews got together with Jimmy Easton, fixed operations director, and Stewart Brown, general manager, to formulate their “handoff” from sales to service. In a nutshell, their strategy combines a value-added oil change program with a comprehensive multipoint inspection of each vehicle.
Their oil change program includes a lifetime engine protection plan, lifetime roadside assistance, maximum fuel economy due to increased engine cleanliness and service performed by a top-tier technician. They provide all this value on every oil change done at the dealership, including oil changes done during used car prep and the first oil change done for new car buyers.
Customers are continuing to come back to the dealership for all their subsequent oil changes so they can continue to receive the value added benefits.
Another key component in their retention strategy includes filling out a multi-point inspection form on every car, every time. The advisors use the multi-point inspection document to inform the customer of additional maintenance and repair recommended by the technicians.
Randy Johnson, president of Car People Marketing, recently wrote an article on customer retention. I asked Randy for permission to quote him, and he graciously agreed:
“I would define a great month as one that really maximizes all of the opportunities out there. I’m talking about all of the cars that your store has sold in the last 10 years that are still driving around, buying service somewhere every month,” Randy said. “Those cars need to be in your store for service! You sold them; they ought to be yours for service, right?”
Randy nailed it dead on. If your dealership sold the car, your dealership should service the car! For life!
So, how are you doing? How’s your new and used car retention in fixed operations? Randy designed a really cool formula to figure retention. I added some forecasting data and put it all into a spreadsheet.
I’d be happy to run your numbers and email the results back to you. I need four pieces of information: number of new vehicles sold monthy, number of used vehicles sold monthly, number of customer-pay ROs per month, and average CP revenue per RO (parts and labor). E-mail me at firstname.lastname@example.org. You owe it to yourself to have me do this free analysis for you.
I suspect that your retention is not as good as you think and that you are leaving lots of money on the table! With “units in operation” continuing to drop, it is vitally important to hold on to your precious customers.
My personal thanks to Randy Johnson for his valuable input and to the professionals at Ferguson Buick GMC for letting me tell their success story. It is working for them and it will work for you!