If you only had $1,000 to spend on your dealership business to promote increased sales and service traffic — how would you choose to spend it?
Which automotive marketing strategy do you think would get the greatest return on investment?
- Option 1: Invest the $1,000 in a CRM software or
- Option 2: Invest the $1,000 in a Customer Retention Strategy
Let's take a deeper look into both scenarios.
Option 1: CRM Software
For option 1, let's say you decide to invest your advertising budget in a customer relationship management software (CRM tool) to connect with customers through direct mail campaigns, email marketing and targeted blog posts.
In all your efforts to attract customers back for service, you drive customers to redeem a $29.95 oil change coupon — which is basically a giveaway, right? Because you probably don't make any net profits with that steep of a discount.
On the bright-side, you'll be chasing a wide-range of prospects, including existing customers and new leads. But realistically, only about 2-5% of leads exposed to your offer will actually come in to redeem it.
So, getting back to the original question, what's your ROI on this approach? What are you gaining in the long run?
Like many things in marketing, it's complicated.
But it raises the question, what about the other 95%? How do you reach out and connect with your lost customers who don't return? If a discount doesn't work, what will work to drive them back to our dealership?
Option 2: Customer Retention Strategy
For option 2, let's say that instead of investing your money in conquest marketing efforts, you invest your allotted $1,000 in a customer retention strategy such as a Dealer-Owned Complimentary Maintenance Program.
Now, instead of promoting a 1-time offer for discounted maintenance, every customer receives complimentary oil changes and routine maintenance visits for the first full year of vehicle ownership.
Now you have a hook. Now, EVERY customer has a reason to return to your dealership for service.
If customers return to you for service, you have double the chance of selling them their next vehicle in the future. And if they don't return, you're still making a little bit of money on the backend.
I bet you can't say the same for a CRM software tool.
The problem with a CRM approach is that you're missing the prime time to build the relationship — which is before customers drive off your lot. When you rely on standard CRM tools, you allow customers to drive away after delivery without any real strategy to bring them back.
Instead, you rely on Online tools to connect without giving them a valuable incentive to return to you for service when it's time.
The CRM approach waits until customers are too far gone to try to attract them back.
A Complimentary Maintenance Program, on the other hand, puts a customer retention strategy in place before vehicle delivery by including maintenance incentives on the spot to give every customer a reason to return.
Think in terms of net profitability — which investment goes further? A one-time service discount, or a long-term retention strategy?
We put together the infographic above so that you can compare the long-term strategy of each marketing approach.
What it comes down to is conquest versus retention.
I'm curious, did you ever add it all up to see what you're spending on advertising and CRM expense each month? Do you know your acquisition cost of one customer?
Think about this:
If you spend $7,000 on advertising and conquest marketing each month, and sell 150 cars per month, you could have invested that money into a retention strategy by covering 50% of your sales with a Complimentary Maintenance Plan.
Then, instead of receiving a 2-5% ROI from a 1-time service coupon, you'd see 60-70% of customers return for service visits multiple times in the first 12 months of vehicle ownership.
That's how you really build a relationship.
I challenge you to do the math. Figure out what you're spending each month on advertising per sale and let me know what you find.
I'd be happy to reveal the underlying customer retention strategy of a Dealer-Owned Maintenance Program and show you how you can convert a 5% take rate to a 70% return rate — and I'll demo the tools we use to measure performance.