Most dealers know how many cars they sell on a weekly, monthly and annual basis. But if I asked you how many new customers you acquired this year, would you know the answer?
On the service side, you probably know how many ROs were closed last month and how much revenue was generated, but do you know how many new service customers you acquired? How many of those ROs were customers that you sold a vehicle to?
In this business, we talk a lot about improving the customer experience, but if you’re going to run a truly customer-centric dealership, a mindset shift is needed. It’s natural to track numbers related to revenue, but if that is your only focus and priority, it will show in the way you conduct business with your customers.
Selling a car is more than a transaction. It’s an opportunity to develop a new relationship. Let’s give an example of a “sell the car” mindset vs. an “acquire a customer” mindset.
John and Suzy are both on your lot looking at cars. John lives 50 miles away and visited your store because he heard you’re having a sale and you have the vehicle he wants. Suzy lives five miles away and is also looking for a deal. Who gets the better deal?
A salesperson with a “sell the car” mentality might look at John and think, this guy lives in another town so I’m never going to see him again. I will discount $500 off MSRP just so I can make the sale. That same salesperson might look at Suzy and think, this woman lives so close by, there’s a good chance I can get her back in here. Therefore, I won’t give her as good a deal as I gave John.
This mindset is the exact opposite of what it should be. With this mindset, you will never see John or Suzy again.
A salesperson with an “acquire a customer” mentality will offer the bigger discount to Suzy because she does live close by. If you can get Suzy to become a regular service customer and/or repeat sales customer, her lifetime value as a customer will far exceed that of John’s. So, it makes more sense to give her the discount and make the effort to acquire her as a customer.
Even better than a discount off MSRP is another type of incentive that establishes an ongoing relationship. For example, a service incentive. I’d rather give $500 of free service or aftermarket accessories than $500 off the cost of a car. You still make the sale and you have the opportunity to introduce her to your service department.
The same mindset shift can apply to your service department as well. Many dealers run conquest campaigns offering large discounts to consumers outside their PMAs. What is the point? You might get some ROs but you are not acquiring new long-term customers. With this type of marketing, you are buying transactions, not investing in relationships.
On the other hand, if you offer customers within a 15-mile radius a compelling reason to come in, you are creating opportunities to build long-term relationships. Coupons work well but I wouldn’t always rely on discounting tactics. For your best and most loyal customers, free loaners cars, movie tickets and other value-added offers can be incentive enough.
To build a customer-centric business, a fundamental shift in mindset is required. Instead of focusing on the number of cars sold, ROs closed and gross revenue generated, focus on how many new customers you are acquiring and how to retain them.
Author: Scot Eisenfelder
Scot Eisenfelder is a 25+ automotive market veteran who has driven innovation across multiple auto sectors. Previously, Scot was Senior Vice President Strategy at AutoNation, responsible for major change initiatives in eCommerce, pricing, IT and creating a blueprint for auto retail transformation and before that served as acting CMO, focused on realigning marketing spending. Before that, Scot led JM Family’s dealer software business and was Senior Vice President Product Management, Strategy and Marketing at Reynolds and Reynolds, leading both companies through value creating sales. Scot is a Board member of Quorum, a public dealer software company. He has an MBA from Wharton School, graduating with distinction and is a Palmer Scholar. He attended Mannheim University in Germany as a Fulbright Scholar and graduated summa cum laude in Economics from Princeton.