Why Is Retention in the 3-5 Year Parc So Low?

 

Key

When are you losing your clients exactly? It is not that difficult a question to answer and it’s an answer you should know.

Our research shows that most franchise dealers can hang onto their clients for 1-2 years parc but perform badly in the 3-5 year parc. We focused our research teams on this to find out exactly why retention fell off a cliff in year 3 and along the way uncovered massive opportunities to increase Parts and Labour sales in virtually every franchise site in the UK.

So why do Retention Rates fall off a cliff in year 3? Well, there are a number of contributing factors, all that can be controlled and indeed harnessed. Do the following research yourself and the answer to this age old problem may come to you.

Firstly, analyse your own customer database for each of your market groups and calculate the average length of time your clients hold on to their car before they change. You will find that, new car clients, who change at 2-3 years are reasonably loyal. If they leave you it is because of dissatisfaction or as part of the MAD group ( clients who have Moved Away or have become Deceased). They have 2 services and most additional work is covered by Warranty. The opportunity lies in the Used Car client who buys the 1-2 year old car or the client that keeps their car beyond 3 years. Here’s what happens and causes the drop off.

Year 1 service comes in at £150 for example. Not bad, as quoted and business retained.
Year 2 comes in at £267. Whoa! Ouch! That is way more and I’m thinking that I won’t be able to afford the 3rd year because that is bound to be more… so I make other arrangements to join “Fred in his Shed” or visit a non-franchised provider. There is often an unseen cost to this apart from the loss of income from the service which is the fact that at the point of third service or later the client is more likely to change their car which means they are thinking of change right at the moment they are not on your site. So you lose service and sales income from non-retention.

This is easily fixed. Simply by communicating “What the service will cost next time” you can often diminish the fear of an ever increasing service bill. If the following service is more expensive on the schedule, a simple re-enforcement of the value of the service plus an overall picture of the service schedule and costs will re-assure the client that it is worth staying with you.

The elephant in the room of Service Retention is the appalling low level of achieved in Used car sales. While our statistics vary on New Car retention (from 18% to 67% over 3 years), in Used Car sales from franchise sites, some are as low a 9% and most struggle to get above 25% (with some remarkable exceptions). This is at least a 75% opportunity that can be accessed through simple strategies that need to take place at the Used Car sale and through active reminders. At the sale offer a free MOT for cars 2 years or over. Pre-book the first service or use a free Summer or Winter Check to bring the client in to experience the service and win the booking. Active reminders are vital. Don’t rely on post or call centre. Make it personal, make it direct and retain the client through effort and care. Retention has to be at the heart of any strategy in the modern Automotive business. In the franchise business, you only earn from a client when the client comes in and while the sale attracts the client, it is service that keeps the client.

For more information, contact Karen at
TALENTStream.
karen.allan@talentstreamuk.com
T. (+44) 1423 700210

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