Key Performance Indicators to Increase Repurchase Rates in Auto Dealerships - Food for Thought

Transcription

1 Key Performance Indicators to Increase Repurchase Rates in Auto Dealerships - Food for Thought Prospective Loyalty and Real-Life Action When the time is ripe, selling a replacement car to an existing customer should be a rather straightforward task for a salesperson. The salesperson is familiar with the customer and their needs and preferences. This should make it easy to exploit the potential, well easier, in any case, than making a sale to a brand new prospective customer. Customer surveys collected shortly after new car purchases typically reveal a 90% intended repurchase rate (the so-called prospective loyalty rate). Though this number tends to fall over time, it usually remains above 70% when the time comes to replace a car. At that time, however, auto dealerships surprisingly realize only a 50% repurchase rate on average - 20% of potential repurchases are lost! Obviously, there is a gap between customer repurchase intentions and their real-life action. Converting prospective loyalty into sales appears to be more complex than it seems. Market experts agree that part of the loss occurs from the fact that dealerships often miss the precise moment when customers re-enter the market to repurchase. While this is obvious for customers who service their cars elsewhere, it also holds true albeit to a lesser degree - for customers who regularly turn to their dealer service center for maintenance. The Goal: A process to increase repurchase rates with core customers The aim of this paper is to present a management process that will if properly implemented effectively increase the vehicle repurchase rates in auto dealerships. This goal goes hand in hand with boosting profitability and customer loyalty and with a concomitant boost to the service business. Bochmann Consulting AG Rolf Schmidt, Ehra-Lessien, November 2014 Page 1

2 A Repurchase Support Program The basic approach to raising repurchase rates for core customers is simple: Auto dealerships take part in a Repurchase Support Program. It implements repurchase support with customers who have purchased an automobile at least 30 months ago. This program seeks to: 1 Systematically explore customer repurchase intention and service loyalty 2 Establish service loyalty if it is currently absent 3 Convert repurchase intention into successful sales in a timely and targeted manner In order to secure acceptance, the program will allow dealer salespeople to decide on their own level of support: they are free to participate completely, in parts or not at all. The decision can be made on an individual basis according to customer. The program supports the salesperson by way of phone or online dialogues that are triggered and executed with the help of appropriate software. Each customer dialogue is designed to match the interests and needs of the individual consumer. These are not market research surveys, nor are they CRM interventions. Each dialogue integrates an individualized thank you comprised of useful tips and complimentary offers. The aim is to make the dialogue a helpful, beneficial, and valuable experience for the customer. Dialogues can be executed online or by phone. If done by phone, calls can be carried out by the salespersons personally, by other dealership staff, or by agents in customer service centers. Bochmann Consulting AG Rolf Schmidt, Ehra-Lessien, November 2014 Page 2

3 When executing the program, it makes strategic sense to either link the OEM sales management with selected dealer chains, or to link the Chain Sales Management to the individual dealerships. The execution of the concept uses the following 7 steps. Each step is supported by a specific module of the Repurchase Support Program. 1. After 30 months of ownership, customers who use the dealer service center are surveyed (for the first time) regarding their repurchase intentions Customers without contact to the dealer service center are asked why they stay remote and are invited to give the service a try. Additionally, an opt-in permitting further contact is offered. Consequently, a new dialogue is triggered to learn about repurchase intention. 3. If a customer indicates an intention to repurchase, then the sale process is set in motion: clarification of needs - test drive - offer - completion of sale. The program module can interface with client-systems where necessary. 4. If a customer does not initially indicate an intention to repurchase, the sales team determines an appropriate point in the future to ask again. 5. If a customer decides to repurchase, he or she is systematically guided through the post-purchase process. 6. If, on the other hand, the sale goes to a competitor - another dealer, or another brand - the lost customer is asked what motivated her or his purchase decision. 7. In the event that the customer simply postponed his or her repurchase, the sales team determines an appropriate time in the future to re-gauge repurchase readiness, and the process begins again at step 1. The 7-step concept presented above is a closed system that accompanies each customer from the point of initial purchase to the repurchase decision. Since it is closed, it can be accompanied by a system of key performance indicators (KPI). 1 Surveys are carried out each month for private or small-business customers who made purchases 30, 42, 54, and 66 or more months ago, respectively. Thus, across the year, the entire existing customer base of the dealer is covered. Customers who have chosen to lease are surveyed in a separate process 6 months prior to their contract expiration. Bochmann Consulting AG Rolf Schmidt, Ehra-Lessien, November 2014 Page 3

4 "Hard" Key Performance Indicators of the Program The following indicator descriptions point to goals of measurement. Each indicator must be adapted to meet the needs of the individual business context. 1 Participation Rate To what extent are the salespeople allowing the program to support their existing customers? The participation rate gives the number of customers that a salesperson has entered into the Repurchase Support Program relative to the total number of qualified customers. Qualified customers are those who have purchased an automobile 30, 42, 54, 66 or more months ago, for example. Participation rate thus measures the extent to which the dealership sales team entrusts 'their' customers to the systematic of the Repurchase Support Program. Since salespeople have the option to individually serve select customers without the help of the program, this indicator measures an internal level of program acceptance. It also points to the relative success rate of the structured program versus individualized sales support (this has to be handled with care, since salespeople tend to take those customers on their account who will most likely repurchase). 2 2 Prospective Repurchase Rate What percentage of customers indicates an intention to repurchase, or are at least seriously considering it? The prospective repurchase rate points to the number of customers who clearly express an intention to repurchase relative to all surveyed customers. Prospective repurchase rate is an important KPI. It depends on two main factors: the level of a customer's satisfaction with the dealership and the quality of the repurchase dialogue. A customer is more likely to express intent to buy if the repurchase dialogue is presented in an appealing way. 2 The management team may insist that all existing customers participate in the first step of the repurchase program. In this case, a participation rate less than 1 would only be possible in steps 2 to 7. Bochmann Consulting AG Rolf Schmidt, Ehra-Lessien, November 2014 Page 4

5 3 Rate of Customer Care How intense is the customer support by salespeople, by other persons, or by other action elements of the Repurchase Support Program? The program measures the number of customer contacts (i.e. special offers, test drives, telephone or online dialogues) against the number of customers who expressed intent to repurchase. The rate of customer care indicates how actively the sales team engaged customers who want to repurchase. The various types of contact (test drive versus telephone call) can be separated out and weighed accordingly. There is a wide range of options to formulate this performance indicator. Some may be dependent on the numbers made available to the dealer by the manufacturer or distributor. 4 Repurchase Rate How many sales are actually made to repeat customers? This indicator is central to the program and the one that ultimately matters. It measures the number of repurchase sales made in relation to the total number of customers who qualify for the repurchase support program (those who purchased a car at least 30 months ago). This indicator is relevant for studies undertaken by manufacturers, distributors, or chain managers seeking to compare the sales of dealerships that participate in the Repurchase Support Program and those that do not. The necessary information to compare this indicator against non-participating-units is not difficult to provide. 5 Service Center Recovery Rate Step 2 of the program offers a desirable side effect for dealers - it encourages the return of customers who have 'migrated away from the dealership. The service center recovery rate is the number of lost repair and maintenance customers who have returned for at least 1 visit since the start of the program. Bochmann Consulting AG Rolf Schmidt, Ehra-Lessien, November 2014 Page 5

6 "Soft" Key Performance Indicators In addition to the 'hard' KPI, the support program provides information regarding levels of customer loyalty and customer satisfaction. Some of these soft indicators are:! Overall customer satisfaction with the comprehensive dealer performance (sales and maintenance) after a 30 month waiting period! Service center satisfaction or reasons why customers have sought service elsewhere! The relative success of various support measures within the entire program, for instance test drives versus offers! After a won sale: Competitive advantages of dealer or brand in repurchase support, customer satisfaction with delivery, and follow-up communication of salesperson! After a lost sale: Competitive disadvantages of dealer or brand in repurchase support, reasons for the lost sale, and securing a future 'opt-in' to communicate with lost customers Implementation Opportunities The Repurchase Support Program offers support to dealerships and their salespersons in a critical area of business success. Since it does not infringe on the freedom to operate independently it should be met with a good level of acceptance. However, in any implementation process, the program details will benefit greatly from the combined involvement of all relevant participants. The ultimate goal, raising the repurchase rate, will be best achieved through the positive experiences that dealership managers and salespersons create by using a well-designed program. Bochmann Consulting AG Rolf Schmidt, Ehra-Lessien, November 2014 Page 6

7 Cost versus Benefits The costs associated with implementing a Repurchase Support Program should be covered by the resulting increases in repurchase rates and service center business. Significant increases in profit are possible with even small increases in the repurchase rate. Depending on the structure of a dealership customer base, (number of fleet buyers, business customers, and private customers) Bain & Co. suggests that a 5% rise in repurchase rate in the automotive industry can lead to a 28% rise in additional gross profit. BOCHMANN CONSULTING will gladly take on the task of assessing the needs of your business and guiding the rollout of a Repurchase Support Program with you. Rolf Schmidt, November 2014 Bochmann Consulting GmbH Bochmann Consulting AG Rolf Schmidt, Ehra-Lessien, November 2014 Page 7