24 May 2021

Partner feature: With the market now emerging from the biggest disruption of our industry in memory, dealers are heavily focused on meeting immediate demand. But even as releasing the pent-up appetite for changing cars creates a short-term boost to business, this intensely busy period will eventually subside. That is when those dealers who have continued to focus on customer loyalty and retention will gain the longer-term advantage.

However, even many of those dealers with a disciplined and robust renewal strategy will miss a substantial number of opportunities, due to the typical way in which retention tools are made available. This is because, from our experience of working with retailers who operate sophisticated data-driven renewal programmes, a significant number of previous customers fall between the cracks and are rarely – if ever – contacted again.

These ‘forgotten customers’ are those who did not take captive funder finance. They include ‘second string’ finance customers, sub-prime finance customers or those who paid cash, potentially on the back of a personal loan.

Thousands of potential renewals

The opportunity cost of this was recently highlighted to us while working with a multi-franchise dealer group, whose retention programme was focused exclusively on maturing captive finance agreements. Remarkably, in a database of customers sold to in the preceding 12 months we found 3,525 customers for whom there was no structured renewal process in place, including:

• 1,317 cash customers
• 1,208 non-captive HP/PCP customers, 304 of whom were already in a position to renew with no cash input

Given that our analysis only covered recent sales, it is safe to say that this dealer clearly risked missing out on many hundreds more renewal opportunities.

Retailers will often focus exclusively on maturing finance contracts as the low-hanging fruit of renewals. Even at 12 months there will always be renewal opportunities and statistics prove consistently that earlier contact produces better results. But how will you – or those customers – know that they have an opportunity to change if they are not part of your retention strategy?

Captive buyers only part of the picture

A retention strategy that only targets captive finance customers can provide false reassurance that everything is being done to renew customers, when in fact a significant proportion of opportunities are simply invisible.

A truly comprehensive renewal strategy involves calculating the trading position for every single customer, regardless of how they purchased their vehicle.

This is an exercise that we will conduct free of charge for any dealer, to help them understand the sales potential of their database. Real-world data consistently demonstrates that Key2Key can deliver 15 sales a month for every 1,000 customers in a retailer’s database, which means that excluding several thousand of them can easily be quantified in terms of lost sales.

When the market settles back to a more typical level of business it is those renewal customers – who provide the lowest cost per lead, highest margin per sale and the best conversion rate – who will give your business the edge.

Tags: Chrysalis