Although auto dealerships have been around forever, the way of doing business at dealerships has changed greatly over the years. Giant blow-up gorillas and tent sales have given way to online advertising and social media shout-outs. Likewise, traditional lead-generating strategies have given way to service-based lead generation.
While dealerships must still jockey with competitors across town for business, they now also have to compete with online disruptors like Carvana. Customers who do show up to buy in person arrive well-researched and expecting top-notch service, ready to post a negative online review or head to the competition if your business fails to meet their needs.
Why You Need to Adapt to Service-Based Lead Generation
In this ever-changing marketplace, dealerships who don’t evolve can’t survive. One look at the numbers compiled by NADA shows this stark reality; average dealership operating profits dropped from 8.9 percent in the first half of 2015 to 1.7 percent during the same time period in 2018. In addition to this, gross profits plunged from 3.3 percent to 2.4 percent.
What’s to blame for those kinds of numbers? I would recommend that you take a look at your vehicle sale history and measure the profit difference between conquest/ad sales versus repeat buyers. If you’re converting most of your sales customers to become loyal service customers and treating them well, you will be building a long-term sales strategy and utilizing your service department as a built-in sales pipeline with less advertising expenses. Just like any other business, an auto dealership that fails to adapt is doomed to fail. From a singular focus on chasing down new customers to the way customers are treated and followed up with once they sign on the dotted line, a dealership can make or break their bottom line by not recognizing and changing old patterns.
Failure to Follow Up On Service-Based Leads
One of the biggest pitfalls that trips up dealerships today is their lead strategy. Many dealerships only think of leads in terms of bringing brand new customers through the door — this despite the fact that it costs 5 percent more to attract a new customer than it does to retain a current one.
As a dealership owner, you are throwing money away if you don’t know your customer retention numbers and haven’t invested in a solid customer retention program. Your best opportunity to turn a one-time buyer into a loyal customer is to wow them through your complimentary service program. This kind of service-based lead generation doesn’t simply happen on its own, however; it requires diligence and a willingness to change strategies if your current one isn’t bringing customers back.
Not Considering Customer Communication Preferences
If your dealership is like many, you probably spend several thousand dollars a month on mailers reminding customers that “It’s time for your complimentary tire rotation!” or “You’re past due for your free oil change!” How well are those mailers (which are more costly to send, take more time to arrive, and have a lower response rate than emails) working, though? When five mailers go out to the same customer with no response, is there any method to document this, follow up, and find out why?
While nearly 40 percent of auto dealership customers used to prefer being contacted by physical mail, that number has now dropped to around 30 percent, with the other 70 percent preferring digital communication (40 percent email and 30 percent text message). This means dealerships that exclusively use snail mail to follow up with service customers are likely only effectively reaching one-third of those leads … creating a slew of lost opportunities.
This isn’t to say that snail mail has no place in service-based leads; it just means that outreach should be customized according to customer preference … and followup is an absolute must.
Now that we’ve looked at a few of the major pitfalls that can impact the bottom line of an auto dealership, it’s time to move on to what works. In Part 2 of this series, we’ll look at winning strategies for successful service-based lead generation.