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September 3, 2021
Improve Customer Loyalty and Retention Amid Dealer Inventory Shortages
As dealerships’ new and used vehicle inventories tighten amid ongoing microchip shortages, now is the time for automotive industry dealers to focus on proactively retaining their loyal customers to improve retention.
According to IHS Markit, brand loyalty among U.S. consumers for new vehicles dropped to a six-year low in June 2021. This follows steady declines in April and May, attributed in part to dealer inventory shortages. At the same time, body style loyalty has remained strong – increasing by 1.1% year-over-year in June.
If a customer wants to buy a pickup, they’re most likely going to buy a pickup – even if that means switching brands for future purchases. In this sort of climate, customer loyalty is no longer guaranteed – even if a customer (and their family) has been purchasing from your dealership for years.
As inventory shortages drag on, successful dealerships will take intentional, proactive action to protect their customer base against the competition’s conquest efforts. In this blog post, we share how to increase loyalty and improve dealership customer retention by:
- Proactively engaging loyal customers
- Personalizing your approach
- Focusing on your customers’ experience by staying in touch
Utilize Proactive Strategies for Customer Communications
The first step in protecting your dealership’s loyalty audience is determining which of your customers pose the greatest risk of defection. IHS Markit finds loyalty begets loyalty, meaning a customer becomes more loyal with each purchase. Dealers need to engage loyal customers before they start shopping around to prevent defection and improve customer retention. Retention strategies can occur among the marketing and sales teams, and even in the service departments.
Remember: You have a key advantage over the competition. You know your customer. Leveraging the customer behavior data in your dealership’s CRM, DMS and sales platform, look for cues that customers are preparing to return to market, such as identifying those approaching the end of their warranty or lease.
Advanced dealership marketing tools empower dealers to take this approach even further. Combining these insights with third-party data like financial records and household demographic information gives dealers an even clearer view of their loyalty audience, enabling them to prioritize their marketing strategy and efforts and ultimately reach customers before they return to market.
Working with Mastermind to take a similar approach, dealer partner Lexus of San Diego increased their year-over-year loyalty rate by 4%, which was 3.5% higher than the brand’s regional average.
Personalize Messaging to Address Unique Needs
Identifying which of your loyalty customers pose the greatest risk of defection is only one part of the equation. Retaining loyalty customers means keeping them engaged over time, an increasingly difficult challenge amid aggressive conquest efforts from competition. To stand out from the noise and retain loyalty buyers, your dealership needs to craft personalized messaging that proves you know – and can care for – your customers best.
Personalizing your messaging means more than including your customer’s name and vehicle of interest in an email template. Your messaging needs to demonstrate why they should continue trusting your dealership with their business. In fact, in a 2021 industry study, 91% of car buyers said “trust” was important to them when deciding where to purchase their new vehicle.
Look for opportunities to build trust with your loyalty audience through every customer touchpoint, such as marketing F&I products or personalized financing special offers, as well as through ongoing communications after the initial sale.
Focus on the Customer Experience and Keeping in Touch
Amid ongoing inventory shortages, aggressive offers from competitors and expanded online retailing options are increasingly tempting your customers to shop around. Staying in consistent communication with your loyalty audience is key to staying ahead of defection.
Look for opportunities to keep in contact with your buyers with personalized messaging that speaks to their specific and evolving needs and in their preferred medium. Ensure each touchpoint builds on the last in a useful and helpful manner, meeting your loyalty customers where they are in their ownership or buyer journey to keep them engaged over the years.
For example, some proactive dealers are utilizing behavior prediction technology to maintain consistent communication with customers to build loyalty through convenient service alerts. By serving as an ongoing customer concierge through service alerts and following dealership service drive best practices, dealers are creating the type of service experience that keeps customers coming back.
Typically representing a dealer’s highest ROI sales and the most likely to generate service and other fixed-ops revenues, keeping your loyalty customers continually coming back benefits your dealership’s bottom line now and in the future. By taking a data-driven approach to consistently and intelligently engaging loyalty buyers to create long-term retention, dealers are empowered to stay a step ahead of customer defection – and two steps ahead of the competition.