minimizing customer churn

Managing Your Customer Base and Minimizing Customer Churn

The words “customer churn” are enough to make even the most successful business owner’s stomach churn. Why? Lost customers translate into higher costs spent on marketing and reaching out to get new customers. In fact, it costs as much as five times more to attract one new customer as it does to simply retain a current one.

If this is the case, the primary focus at every auto dealership should be minimizing customer churn rather than a rabid chase for new customers. The secret to managing your customer base and convincing them to return isn’t even really a secret; it’s something that every business should be built on. To boost your customer retention, provide excellent customer service. If you delight your customers, you will retain them. Make them unhappy, and they will go elsewhere. It really is as simple as that.

The Importance of Good Customer Service

If that sounds a bit Pollyanna-ish to you, consider these numbers. When Oracle conducted a survey to find out what drives customer behavior, they found that a whopping 89 percent of people started doing business with a competitor as a result of bad customer experience.

Esteban Kolsky, the founder of customer strategy consulting firm thinkJar discovered similar results when digging into the nuts and bolts of the customer experience. In his research, 67 percent of customers pointed to a bad experience as the reason for churn. Only 1 out of 26 of the unsatisfied customers actually reported their negative experience to the company in question; the rest simply disappeared.

The bad news doesn’t stop there, either: Kolsky also found that when a customer is frustrated, 13 percent of them will tell 15 or more people about it. In this day of online reviews, the stage is set for consumers to digitally communicate with even more people if they have a bad experience at your dealership.

It’s not all bad news, however. When you make customers happy, 72 percent of them will tell at least six people about their experience. If these numbers don’t give you a reason for pause (or reason to get to work minimizing customer churn right away), we don’t know what will!

Minimizing Customer Churn is a Constant Process

One of the hardest concepts for auto dealerships to grasp is that boosting customer retention and minimizing customer churn isn’t a set-it-and-forget-it endeavor. Many organizations start off with the best of intentions; they’re enthusiastic as they kick off their complimentary maintenance program and market it as an essential part of what sets them apart from their competitors.

Over the next six months, year, or two years, however, it’s easy to lose focus. Sales staff no longer bothers to fully go over the complimentary maintenance program, walk the customer back to the service department, or make sure the customer gets set up with their first service appointment after a new vehicle purchase. When customers don’t arrive for a maintenance appointment, no one contacts them to find out the reason.

Why does this happen? Dealerships frequently cite time crunches and sales quotas. When you look at the actual numbers (five times higher cost to attract a new customer than to obtain a current one!), doesn’t it make sense to take 10 more minutes and invest it in the customer who has already signed on the dotted line?

Making the Process Even Better

Dealerships that are using Performance Administration Corp.’s Lost Opportunity Campaign software have an easy tool to track customers who fail to show up for their next appointment. Utilizing this follow up tool is an excellent way of finding who has defected and, more importantly, the technology can be used to win customers back.

By utilizing the Performance Administrations CXT software tool, dealers are able to poll each customer after their service experience to determine their net promoter score to find out what may be going wrong and minimizing customer churn.

The ratings your dealership receives on its customer surveys are another excellent way to figure out how you can improve your processes to make customers happier. If you aren’t receiving 9’s and 10’s, follow up to find out why. Are your oil changes keeping customers waiting for two hours? Did a technician leave grease on someone’s seat or steering wheel? This kind of feedback can help you communicate with staff to tighten things up and make things better.

Not only will this improve the experience for future customers; it will give you a way to make things right with your current customers, minimizing customer churn and solving the mysterious case of the disappearing customers … and avoiding the resulting drop in sales.