Every dealer knows customer pleasing is good for business. But no one knows how profitable it can be.
Now, Maritz Research has gone out and found out how much it’s worth to the average dealership. About $64,669 in gross sales revenue.
Add an additional $41,640 for customer-pleasing in the service department and the bottom line is all the healthier by $106,315.
That’s American dollars because the Maritz did the study south of the border.
The research firm calls the study its Customer Experience Payback Study. It came out Sept. 4.
“We went back and interviewed customers of five-year-old vehicles to see what they did when they came back in the market,” explained Chris Travell, Maritz’ vice-president, automotive research group.
Maritz ranked their satisfaction at the dealership where they bought their car in terms of being “completely satisfied,” “very satisfied,” “fairly well satisfied,” “somewhat dissatisfied,” and “somewhat dissatisfied.”
Forty-seven per cent ranked themselves in the completely satisfied category. Twenty-three per cent were very satisfied. Sixteen per cent said they were fairly well satisfied. While seven per cent and six per cent of them opined they were somewhat dissatisfied and very dissatisfied, respectively.
Maritz found, for example, that the happiest of them, the 47 per cent group returned to the dealer where they bought their old car 52 per cent of the time and drove off with 179 units.
Given that the average U.S. dealerships sells on average 726 units yearly according to NADA figures, that means loyalty is worth 179 sales a year. And given that the average gross on a unit sold is U.S.$1,401 (also NADA stats), that means completely satisfied customers can gross the dealership $250,779 a year.
But Maritz wanted to know what the result would be in incremental sales if dealership staff increased customer satisfaction to the degree where all customers who were satisfied by the sales and service moved up one notch in satisfaction terms.
The result? Sales increased by 46 or $64,669 gross profit.
And what if staff raised those customers’ satisfaction by a notch in the service department?
Assuming a yearly cost of ownership (Edmunds.com) of $5,376 and gross profit of 46.1 per cent for service and parts (NADA), the result was $41,646. In all, $106,315.
“When dealerships consider investing in improvements to their customers’ car-buying experience, this model will help them understand exactly what financial benefit they can expect. This is essential in justifying the cost of customer experience improvement initiatives,” said Travell. “It also shows what’s possible, if dealers … change the mindset that customer service doesn’t matter that much.”