Car dealers can improve business retention rates through the use of a dedicated customer contact strategy – even in a declining market.

A study of dealers representing 17 automotive finance brands, conducted by loyalty and retention specialists Chrysalis Loyalty, has revealed that big gains are possible.

Dealers confidentially shared details to reveal their ratio of cars sold per customer contacted, along with descriptions of their approach to customer relationship and renewal management.

The most successful dealers achieve one new sale for every 1.4 customers contacted, but many more are reporting only one sale for every 10 customers contacted and, in a significant minority of cases, one in 20.

But the key finding by Chrysalis is the consistently high performance of dealers who focus in the most structured way on customer loyalty.

Measured over 18 months, the average among 2,500 dealers across all the countries in which Chrysalis operates was one sale for every 2.8 customers contacted.

This was achieved regardless of a country's position in the automotive economic cycle, including performance in markets which were falling, or static overall.

Mark Fretwell (pictured), of Chrysalis Loyalty, said: “The key finding of the latest research was that renewal rates in dealerships which run a dedicated customer contact strategy are far higher than in those which approach the issue on an ad hoc basis – for example, when instructed to by a brand or finance provider.”

Major factors in the success of the contact strategies of the most successful dealers, he said, were a clearly defined approach, disciplined implementation, careful integration with existing CRM approaches and a strong focus on individual skills for staff focused on customer renewals.

The other major finding in the latest Chrysalis research is that even for dealers with a defined process for renewals, contact is too often limited to one moment in a customer's journey through a contract.

"Evidence shows that a more rigorous approach - beginning the moment a customer is first qualified - consistently results in more renewals.

"This is all good news for most funders and dealers because it demonstrates that many of the new customers they need are already hiding in plain sight.

"We have been able to establish a clear link between the lowest renewal rates and a lack of process for some dealers, who often report that their customer contact strategy relies entirely on being instructed to mount a campaign by their brand or finance provider.

"But even when we drill down into the approaches of dealers with a more structured process we see big opportunities for increasing sales to existing customers - backed by real evidence of what works.

"Despite the industry's reliance on data analysis for many operations there is still a lack of focus on the most effective change points.

“As an example, we know from analysis that many customers will renew well before they reach a point in their contract where the cost to change may be zero, or when they pass the point of owing less finance than their car is worth. Yet many funders and dealers with a defined retention strategy limit their customer contact to one of those points.

"In contrast, the evidence shows that maintaining a consistent contact strategy throughout the life of a customer's finance agreement is what maximises renewals.

"Increasing retention is a vital part of business growth and it is striking to see how opportunities to do that are still wide open across the automotive financial services sector."

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