Huge cost of poor retention strategies among auto dealers revealed

For the study, dealers confidentially shared facts and figures to reveal their ratio of cars sold per customer contacted, along with descriptions of their approach to customer relationship and renewal management.

Chrysalis found the consistently high-performance dealers focused in the most structured way on customer loyalty.

The 18-month study covered around 2,500 dealers worldwide and found the global average was one sale for every 2.8 customers contacted.

This average was achieved regardless of a country’s position in the automotive economic cycle, including performance in markets which were falling or static overall.

Renewal rates in dealerships which run a dedicated customer contact strategy are far higher than in those which approach the issue on an ad-hoc basis – for example, when instructed to by a brand or finance provider, according to Chrysalis executives.

Key success factors include taking a clearly-defined approach, careful integration with existing CRM approaches and a strong focus on individual skills for staff focused on customer renewals.

Mark Fretwell, product and marketing director of Chrysalis Loyalty, said: “This is all good news for most funders and dealers because it demonstrates that many of the new customers they need are already hiding in plain sight.

“We have been able to establish a clear link between the lowest renewal rates and a lack of process for some dealers, who often report that their customer contact strategy relies entirely on being instructed to mount a campaign by their brand or finance provider.

“But even when we drill down into the approaches of dealers with a more structured process we see big opportunities for increasing sales to existing customers.”

He said that there is a lack of focus on the most effective change points, with too much concentration on a single moment in a customer’s journey through a contract.

Fretwell said many customers will renew well before they reach a point in their contract where the cost to change may be zero, or when they pass the point of owing less finance than their car is worth, yet many funders and dealers limit their customer contact to one of those points.

He added: “The evidence shows that maintaining a consistent contact strategy throughout the life of a customer’s finance agreement is what maximises renewals.

“Increasing retention is a vital part of business growth and it is striking to see how opportunities to do that are still wide open across the automotive financial services sector.”

Chrysalis Loyalty has published a whitepaper on the research, including best practice advice and case studies focused on implementing an effective customer loyalty programme.