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We’ve all seen and heard statistics regarding the connection between customer retention and a company’s profitability. Here are some examples:


  1. It’s 6-7 times more expensive to acquire a new customer than to keep an old one – White House Office of Consumer Affairs
  2. 89% of customers have stopped doing business with a company because of a poor customer experience – RightNow Customer Experience Impact Report 2011
  3. A customer is four times more likely to buy from a competitor if the issue is service related vs. price or product related – Bain & Co.
  4. A 10% increase in customer retention levels results in a 30% increase in the value of the company – Bain & Co
  5. 86% of buyers will pay more for a better customer experience – RightNow Customer Experience Impact Report 2011
  6. Increasing customer retention rates by 5% increases profits by 25 to 95 percent – Harvard Business School


There’s no question dealers should be focusing on building customer loyalty but I believe many are going about it the wrong way. Although many customer loyalty programs have merit, discounts and incentives alone will not create a loyal customer. Loyalty is derived not from every day “good” transactions but by exceeding the customers’ expectations on a repeated basis. It is the delightful experience that makes someone emotionally devoted to you and tell others. True loyalty comes from a customer’s emotional connection and experiences with your dealership’s employees.


As a dealer, what’s the best way to ensure that your employees are giving a great customer experience? Hire a trainer? This might help if your employees are lacking in interpersonal skills. But all the training in the world isn’t going to help a grumpy service writer who is being pressured by their boss to increase gross for the month. In order to give great customer experiences on a repeated basis, your employees need to be happy and loyal.


“But I have loyal employees, many of my employees have been with me for years,” you may say. Well, just because some of your employees have longevity does not mean that they are loyal. We all know of long-term employees who routinely “diss” their employer and job.


If your employees are not loyal and are unhappy, your bottom line is negatively impacted. No matter how many cars you sold in 2013 and no matter how much money you made, you could have made a lot more if you had loyal, happy employees and loyal, happy customers.


So you may be asking how you can make your employees happy and loyal. You may believe it’s hard to find good workers.


It all begins with you…


“People ask the difference between a leader and a boss. A leader leads and a boss drives” – Theodore Roosevelt


If your dealership has a high employee turnover rate, if morale is generally low, if you have problems finding good workers, it’s your fault Mr. Dealer (“the buck stops here” to quote another President). Something in your company culture isn’t working. You can’t attract the best employees (or they won’t stay), and you don’t have happy, loyal employees because your dealership is not a great place to work.


If you are willing to accept that dealer principals are responsible for their workplace culture, the good news is the solution is simple (though it may not be easy). If you make your employees your number one priority and if you focus on creating a great place to work, you will benefit from increased customer loyalty and the resulting increased profitability.


How do you turn your dealership into a great place to work? That’s the subject for another blog that I will follow up with, same time next week.


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