Car Dealers:  Conquest vs. Retention and the Impact on Your Dealership's Profitability

It struck me at the recent Digital Dealer show, that almost all of the vendor activity and training sessions were focused on CONQUEST activities for car dealers to execute against.

Did I miss a best selling book where conquest is suddenly to be done to the exclusion of RETENTION?

As car dealers and Internet Managers are we setting ourselves up for perpetual frustration by only focusing on conquest?

If it has been a while since you have heard it, here is the traditional conceptual explanation of the need for the mix of conquest AND retention.

While every industry is different, the old maxim is that it costs 5-10 times more to acquire a new customer than keep an old one.  Graphically, from a car dealer's or car manufacturer's perspective, this looks like this:

#1... Operationally...

You acquire consumers through your various channels.  You sell them, then you keep them.  How well you do at each stage of transition determines how successful you are the retention point (happy face). 

Looked at through the lens of dealership profitability however takes us to...

Image #2... Car Dealer Acquitision-Retention-Profitability

Interpreting this image... dealers spend money on advertising, marketing, training, websites, buying leads and staff in order to conquest or make the initial sale.  Breakeven occurs after those up front costs are recouped from the consumer.  Profitability occurs once the gross profit of individual purchases exceeds the upfront + ongoing costs to acquire and continue to acquire those ongoing purchases.  The range of Blue on the graph is meant to show the range in results based up dealership gross profit (quality process = ability to maintain margins) as well as differing retention rates.  Which leads us to this rather startling metric:

#3... Impact of service retention on repurchase intention...

The image oversimplifies the importance of the equation, but basically consumers are 70% more likely to repurchase from you if they service with you. 

However if you have been running a car dealership for any period of time, you also know that this means:

• there is no retention without initial conquest
• in-your-trading-zone consumers are far more valuable to your dealership than those from outside
• Perpetual conquest is not a path to a high profitability car dealership.

Now all of that great learning that has been around for 30+ years has absolutely nothing to do with car dealers and their manufacturers on the Internet... because for the most part, the current state of car dealers and their manufacturers bears little resemblance to how this is done.  Or at least that is how I see it.

Consider:

• As was well said by my friend Ryan Gerardi on his blog...

"3rd-Party automotive sites... have created a cut-throat mentality throughout the car dealer community that Internet Marketing is about lead generation and “ups”. Unfortunately, car dealers and auto shoppers suffer as a result. Dealerships are obscured to buyers because the search engines are riddled with 3rd-party automotive sites attempting to produce qualified leads they can sell to dealers. It can be overwhelming for buyers to find car dealer websites unless they consciously set out to locate them."

• But it is more than that.  Even when a consumer does set out to locate a dealer website, what do they find when they get there?  Is the destination worthy of the journey?
• Looking at your dealership's website and online marketing execution:
  • What competitive differentiation messages does your dealership have?
  • Would you buy from you looking at what you do online?
  • How do you transfer the trust-building things you do offline to your online efforts?  Community involvment, customer testimonials, who we are, etc.
  • HINT #1:  Online you can't tell, you have to show.
  • How do you attract conquest consumers to you?
  • Is your website attractive to them when they arrive there?
  • Are the things that it does what they want or what you want?
  • HINT #2:  Online consumers have to want to move forward.  Use old-school tactics (call or email for price = withhold information, maintain control) and click they are gone.  Present them with a commercial they have to watch... click gone.  Confuse them with where they should go or what they should do for the reasons they came to your website in the first place... and click they are gone never to return.
  • What else can you do to get them to your website?  Blog?  Search Engine Marketing (SEM)?  Pay-Per-Click (PPC)?
  • How do you communicate with your current consumers online?
  • What online retention efforts do you have?
  • HINT #3:  send us an email from a form on our website is NOT the type of convenience today's consumers are looking for.  If they want to transact, why are you getting in their way?
    • Shopping cart ecommerce (give email address to get in, then prepare own car deal - price, credit, interest rates, trade in, extended warranties, protections, tax, title, fees, accurate monthly payments)
    • Self-serve service appointment writeup, scheduling and confirmation
    • Parts and accessories
    • Aren't those things you would want if you were a consumer?

I've created a discussion forum to post any thoughts and comments you have on this newsletter or any prior one too.... and just to dispel any rumors that I'm a perfectionist (I am far from it actually), it is possible that you will receive an false error upon registering.  If you get one, just refresh your screen and keep going and things will work properly.  It is a one-time glitch in the forum that we can't figure out.