Management: The Relationship Rule

It’s an accepted truism in business that doing what you can to keep existing customers is a better strategy for business growth than chasing new ones.

Not only does it cost more to get new customers, but when new competitors arise the loyalty you’ve built forces the new guys to try to poach someone else’s customers.

Aside from all the strategy, however, it’s simply easier to sell products and services to people who already know you and do business with you.

Jean-Paul Belliveau, owner of JP’s Garage in Moncton, N.B., sees customer retention as the number one challenge in the industry.

“If you don’t take the time to service the customers right in front of you, why would you spend time to go and get more?” he says.

Providing consistent service is key to earning customer loyalty, but for him the real differentiator is creating a personal relationship. He accepts that as one of his primary responsibilities as business owner. Whenever a customer needs a lift while their car is being worked on, Belliveau drives them himself in the company shuttle van.

“It’s a great opportunity to talk to your clients,” he says. “You get to know them a lot better, they get to know you, and you can explain what’s going on with their car. I find it keeps clients coming back.”

Belliveau also makes a point of following up with every customer, whether it’s by phone, email, text messages, or Facebook.

Customer retention is a matter of solid financial common sense, according to Bob Greenwood, president and CEO of Automotive Aftermarket E-Learning Centre Ltd. “The average five-bay shop in Canada is missing $90,000 to $110,000 net profit out of their current customer base,” he says.

Missing business

According to his numbers, Canadian shops bill an average of 1.4 to 1.6 hours per invoice, when it should be 2.5 hours. And these numbers don’t include the parts gross profit that goes along with improved billed hours.

“Shops aren’t paying attention to the current business coming through the door,” Greenwood says. “Their internal processes have to be reviewed and accountability settled in. Shop owners think they need to get more new customers, and meanwhile the amount of money they’re missing from current business is just incredible.”

The cost of acquiring a new customer is typically way higher than the cost of keeping an existing one, says Darren Rabie, president of Focus America, a sales management and training consultancy. “With so much competition out there, any supplier can get interchanged,” he says. “So what keeps them together beyond just their quality and price? It’s how the supplier and customer feel about each other personally. Did you get to know them? Can you trust them? Can you depend on them?”

Jean-Paul Belliveau, owner of JP’s Garage in Moncton, N.B., sees customer retention as the number one challenge in the automotive repair and service industry.

Rabie says the biggest mistake businesses can make with regard to their customers is to stop talking to them. “When they can buy exactly what they buy from you at 100 different places for the same price, the intimacy of the relationship matters.”

It’s also critical to differentiate yourself from the competition.

“If you’re ignoring current and past customers, you’re losing substantial business – between a third and two thirds of your potential pipeline,” says Jeremy Miller, author of the bestselling book Sticky Branding, which offers principles that small- and mid-sized businesses can use to build outstanding brands.

“Being really good at what you do in any business, including the automotive sector, is the price of admission these days,” Miller says. “You can’t just assume your competitor isn’t doing a good job.”

Differentiating yourself

The real question is how do you tell your story so it attracts loyal customers.

Miller’s book offers one notable example. Jim Gilbert’s Wheels and Deals, a used car dealership in Fredericton, N.B., has established two major competitive differentiators. First, it maintains every car it sells to 250 per cent of provincial standards.

“They built their reputation selling hassle-free cars,” Miller says. “That created a lot of loyalty.”

Second, every year Wheels and Deals sends a personal birthday card to everyone who has ever done business with them – a grand total of some 12,000 people. It’s a mailing plan so ambitious that their location is now a registered post office.

Since 2000, the business has grown from $2.5 million in revenue to over $35 million… which of course means that they’ve added plenty of new customers in addition to looking after existing ones.

But few independents have the resources to do something on this scale, which is a real problem when you consider that they’re increasingly going toe-to-toe with the well-resourced car makers themselves.

“Our competition is the OE dealers,” says Leah Cochrane, general manager of Cochrane Automotive in Toronto. “The dealers are telling customers that independents can’t do a proper job, that only the OE dealers can, that ‘genuine OE parts’ is a reason to come back to them.”

Cochrane believes one way independents can compete is by signing on with an automotive banner program that enables them to offer some of the same advantages as the big guys, such as warranty protection and roadside service. Developing a system to ensure that independents can meet manufacturers’ warranty conditions on newer vehicles is also high on her list of must-do’s.

Back from the brink

Into every relationship a little rain must fall. But even the worst-case scenario – when a customer is unhappy and says they won’t be coming back – can become an opportunity.

The relationship can’t always be saved, but the way you handle the breakup can actually help to improve relations with other customers, and even attract new ones. The fact that unhappy customers can broadcast their dissatisfaction on a shop’s website, Facebook page or Twitter account only makes the need to respond properly more acute.

Unfortunately, however, a huge proportion of shops don’t respond at all, says Brian Warfield, senior product manager, social/CRM for Mitchell 1.

“On average, the response rate to low score reviews is just 34 percent, indicating that some shops are willing to let consumers complain about their visit without reaching out to correct the situation,” Warfield says. “That clearly has a negative impact not only on retention, but on new business as well. People will likely look elsewhere when they read a negative review that has gone unaddressed by the business.”

The point is to show you care by taking the time to respond. A professional response will defuse tension and show other customers that you’re serious about maintaining the relationship. It’s best to ensure that any online reply comes ‘from the top’ – from the owner or manager.

Depending on the situation, a shop can offer to look at the problem and fix it for free, or offer a discount or premium that the customer can use on a subsequent visit. At the very least, an apology may be in order.

Processes in place

“If one stops communicating to existing customers, or ceases to establish a fidelity link, customers tend to go elsewhere,” says Karole Lauzier, vice president of VL Communications. “But service – excellent service – means everything. Don’t just promote your services, promote yourself. Greet a customer with a smile and have him sit down comfortably while he waits. Provide him with a professional attitude and a professional invoice at the end. Tell him when he’s due back and take a note.”

Jeff Moody, general manager of Protractor Software, believes a shop’s own processes will determine the success or failure of customer retention efforts.

“A certain level of turnover is inevitable in every business,” he says. “What a business will find by looking at turnover is that it’s a symptom of a problem – and the problem isn’t the customers. It’s within the shop and is typically going to come down to their process, or lack thereof.”

He says if the staff has been trained to follow a winning formula every time – one that includes educating the customer and always booking the next appointment – that will speak volumes to customers and will generate repeat business.

It’s the up-front people skills that truly matter, says Gianni Barbieri, president of Extra-Tech Automotive in Calgary.

“You have to invest time to keep people coming back – and you have to invest in your employees,” he says. “You need to educate them on how to deal with clients.”

Barbieri believes the best link between a good business and good customers is a good staff.

“We’re building relationships with our clients so we can work on their cars,” he says. You have to have staff who are personable and who want to be here – who want to help people.”