Existing Customers Most Important

COSTA MESA, CA – It’s not that new sales prospects aren’t important to a car dealership. They are, says Tom Dobry, vice president-marketing for dealership chain Lithia Motors Inc.

It’s just that existing customers, with whom a store already has an existing business relationship – are more important, he says.

A lot of dealerships, including some Lithia stores, have been topsy-turvy on that point, as they inordinately chase new customers.

“We’re trying to turn it around,” Dobry says.

That’s why Lithia is experimenting with a new loyalty marketing campaign that targets existing sales- and service-department consumers.

Lithia is a big operation, with 187 franchises and $3.2 billion in total revenue last year. It is No.9 on the Ward’s Dealer Business MegaDealer 100.

It has 1.3 million customers in its data base. It would strain the marketing budget to try to reach them all by mail.

So Lithia crunches numbers to determine who are the 100,000 sales customers and 100,000 service customers most likely to buy again.

Tom Dobry oversees Lithia’s loyalty marketing campaign.

Those people receive periodic mailings telling them about new products, incentives, specials, financing offers and such. Recipients are encouraged to call or mail back filled-out forms expressing their interest.

“We communicate with them about four times a year,” Dobry says at this year’s ENG Customer Relationship Management conference here. “Any more is too much. You can wear customers out with a lot of mailings. But if they opt in and say they are in the market, the communications increase.”

CRM software and dealership-management systems are used to track the program. It is still in trial-and-error stages. Lithia is testing different messages to see which get the most lift.

More money and effort is spent on marketing to occasional customers as opposed to those who regularly patronize Lithia dealerships.

“We spend more money on ‘struggling’ customers than we do on great customers that will be coming in anyway,” says Dobry, an advertising industry veteran who worked with Dodge and Saturn dealers on customer-focused efforts.

Early results of Lithia’s customer-loyalty program are encouraging, he says. “We’ve seen a 60% sales lift and a 22% service lift vs. a control group.”

Not all Lithia stores are part of the program, and there were a few snags. “In hindsight, we should have done it regionally, not just dive in,” Dobry says.

Store personnel are trained to follow up and track leads from the marketing campaigns.

“We tell our people not to worry about other stores, focus on pushing your own scores up,” says Dobry. “If customers fill out forms indicating they’re in the market, we forward that to stores as hot leads. If customers say they are unhappy about something, we follow up on that, too.”

It sometimes is hard to get customers to admit to being somewhat dissatisfied, he says. “They’ll often say, ‘Yeah, I’m satisfied; just get this guy out of my life.’

“If they say, ‘I’m not 100% satisfied,’ we can say, ‘What part were you unhappy with?’ It is easier to identify people who are abjectly unhappy than those who are sort of unhappy.”

Staff training includes emphasizing that loyalty programs don’t necessarily produce immediate results.

“We are changing compensation plans so that customer loyalty factors in,” Dobry says. “Most people who sell cars are short-termers, not planners. We’re trying to show the value of looking forward. It’s more a cultural change than a process change.”

He adds: “It feels more real if we can say to sales people, ‘Five of 10 customers you sold to came in because of the owner communications program.’”

Lithia’s BMW stores are exempt from the in-house effort. That’s because BMW of North America LCC has a similar customer-contact program. “Is better than ours,” Dobry says.

Auto makers helped fund Lithia’s program with co-operative advertising funds. But the allocations can be erratic. “We scratched our heads when one manufacturer approved co-op money for one of our stores, but not another,” Dobry says

Lithia would like to use emails to conduct the marketing campaigns. That would eliminate postage costs. But Lithia’s data base of customer email addresses is lacking.

“We haven’t done a good job of collecting emails, even though the more emails you collect, the more your marketing costs go down,” Dobry says.

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