Timing is Everything When Getting Customers to Upgrade a Vehicle
In July of 2018, CARMAX published a loyalty report from customers who traded in cars. Using their data, CARMAX explored which cars people own at trade-in and what they purchase as their next car. Did they stay with the same brand or not? Are people loyal to the same type of car they used to drive (i.e., do SUV owners keep buying SUVs or do they switch to sedans)? This was a great test case because, given choices of dozens of brands in close proximity, what percentage would stay with the brand they were driving. New car retention hovers around 52 percent, but given freedom of choice, what would consumers pick?
The highest ranked vehicles traded in for the same vehicle was only 30 percent. That means three out of 10 repurchased the same brand, at best. The average was closer to 20 percent. In this new era of digital-based competition and customer control, people are increasingly buying because of a brand’s relevance to their needs in the moment.
The truth of the matter is that loyalty is waning. And you don’t want to take the chance of your customer picking something else. Acquiring a new customer can cost five times more than retaining an existing customer. Increasing customer retention by 5 percent can increase profits 25–95 percent. The success rate of selling to a customer you already have is 60–70 percent, while the success rate of selling to a new customer is 5–20 percent.
Timing is Everything
A new vehicle purchase is still an impulse buy. A friend of mine in the car business always used to say, “Rarely does anybody really have to have a new vehicle. Somewhere in their brains, they have justified a new vehicle.” The service lane is the optimum location for capitalizing on relevance and timing. The customer is thinking about their vehicle, they may be questioning if it is time for a new vehicle, or a new model may have caught their eye on the way to the service lane. This is the perfect time to insert yourself into a conversation.
Having a dedicated person or team is a great way to help ensure that you’re in the conversation. This way, their main focus is on transitioning service customers to new or used vehicle sales. Having a person that becomes used to dealing with these transitioning prospects is an important asset. Having someone that has learned the nuances of nudging a prospect along increases the chance of the sale.
You have to find the right customer who is in the perfect equity position to upgrade to a new vehicle. Once the service appointment is set, look at the customer’s history and their equity and see if the time is right to draw them toward a new car. Providing them with a loaner while their car is getting serviced is a great way to help transition them from the service drive into sales. Prepare some offers for the customer, and once the car is returned and they say they love it, provide them with the offers to purchase the vehicle with no money out of pocket. Thanks to your data, you already knew the customer’s situation before they arrived and were able to draft offers that fit their particular situation.
Don’t Fall Prey to the Status Quo
To succeed in the non-loyalty era, dealers must be continuously willing to abandon old practices. As new technologies shift customer journeys and expectations, they can (and should) also enhance companies’ abilities to engage with customers in more relevant ways. Often, the greatest roadblock is a dealer’s lack of willingness to transform their processes, organizations, and mindset into something new.