Dealership group tests the CRM waters cautiously

The Asbury Automotive Group is testing the waters as it prepares to use modern customer relationship management (CRM) in their stores.

The dealership group is moving cautiously to avoid drowning in the hype.

There's a lot of hype surrounding CRM, says Allen Levenson, chief marketing officer for the 89-store group based in Stamford, CT.

He calls CRM “one of the most overused terms in business America.”

But is there any teeth to it? No one can fault dealers if they're skeptical. The industry previously heard the hype of how the Internet would revolutionize the automotive industry and put car dealers out of business.

Now it's time to separate fact from fiction as far as all that's coming from the CRM companies and the industry experts.

Essentially, CRM is about increasing the customer base, retaining those customers longer and cultivating them into customers who buy more products and services.

CRM software tools and services allow dealers to track customers and their buying habits, and market to them accordingly.

To do that, dealers need to know more about their customers. It takes technology to do that effectively today. Technology advances and improved CRM tools allow dealers to access more customer data and share it with their various departments so they can target the customer more effectively.

Arthur Hughes, author of several books on using databases to enhance CRM, believes dealers can use the customer data they've collected to recreate the type of warm relationship customers once had with the corner grocer.

In theory, CRM will increase retention rates, sales and market share. But is the industry expecting too much?

Mark Dixon Bunger, a senior analyst with the Forrester Research Group, wonders what the true value of CRM is.

The industry has become enamored with the big enterprise solutions, he says.

He adds, “Customer acquisition and selling more to existing customers are the sexier subjects, but the reality of that is uncertain.

“The true value may be in lowering advertising costs. CRM will bring accountability to advertising expenses.”

Dealers today can have a much better idea of which products to market to specific customers and thus, reduce those mass-marketing expenses.

Levenson, while recognizing some of the hype, says he is “an absolute believer” in CRM. “If there is ever an industry where CRM makes sense, it's the auto industry. The potential profit CRM brings to this industry makes CRM necessary.”

Asbury began its study by pulling customer data from the dealer management systems in its North Carolina dealerships. Going back five years, Asbury evaluated every customer transaction.

Asbury learned 31% of its customers contribute to 75% of its profit margin. The goal, explains Levenson, is to identify who the best customers are — “something we're still trying to get a handle on.”

Asbury is evaluating that data and attempting to identify potential customer segments.

Says Levenson, “We want to determine which categories our customers fall into and train our salespeople to push those customers into higher categories.”

He says Asbury's approach is to go slow and test. “Our process is what matters.”

Process includes deciding what customer data to collect and how to collect it, determining when and how to follow up with customers and training salespeople to properly sell each product.

Hughes believes the focus needs to be on customer retention.

“The cost of retention is $180 per customer,” he says. “But most companies are set up for customer acquisition — which is crazy when you consider the average cost of customer acquisition is $1,000 or more.”

He suggests dealers take a small group of people whose behavior can be measured and then develop models to forecast points of defection.

“Determine which people are likely to defect, then put the bulk of your money toward retaining those customers,” he advises.

Dealers should start slowly, says Chris Rayl, vice president of VIP Services for Automated Data Processing (ADP).

“A CRM initiative should be implemented in steps. Attempting to do it all at once is a recipe for failure,” he says.

It needn't be a big step, experts say. For instance, a dealer may want to begin increasing the number of customers in the database so the store can start a follow-up program.

The first step would be increasing the capture rate of walk-in information. There are plenty of good tools in the marketplace designed to increase the capture rate.

The dealer could focus on that for six months, perfecting the process his salespeople will use to gather customer data.

Once that process is working well, then the dealer could begin to develop the follow-up process.

Trying to get the sales staff up to speed on both programs at the same time might be too much for them, say some experts.

Dealers also should make sure they are measuring the right results, cautions Ted Rubin, the president of Dealer Ups, a company that provides CRM tools.

He explains, “Some dealers believe closing ratios indicate the success of CRM in their stores. Actually, CRM will probably drive closing ratios down, but will increase sales.

“CRM should bring significantly more traffic into the store. But not all of those people are going to buy. The sales should increase though, because the marketing is more targeted.”

Bunger believes dealers can do several small and “scrappy” things to improve customer retention - like sending oil change reminders.

Many of those “scrappy” initiatives that don't require much technology or data are already a big part of Asbury's strategy.

“We are working to pick off that low hanging fruit,” says Levenson.

The dealership group has programs in place to retain the customers whose leases are reaching end of term.

Asbury is also instituting and marketing a quick drop-off and pick-up program for service customers as well as express oil change. Small things. But they can make a difference.

“CRM is not the program of the month, it's a way of life”

Despite all of its promise, customer relationship management (CRM) is doomed to fail if attitudes in the dealership don't change, say experts in the field.

“Right now, the philosophy is short term and transactional,” Says Allen Levenson, Asbury Automotive Group's chief marketing officer. “We need to change that to long-term profitability. CRM is not the program of the month, it's a way of life.”

Changing the behavior of front-line employees — the people who touch the customer — is the toughest part, Levinson admits.

The attitude change has to start at the top with the dealer principal, the general manager and the sales manager, says Buzz Waterhouse, CEO for the Reynolds & Reynolds Co. Then employees start to get the picture.

Training is also important, notes Waterhouse. “Without training, the tools are no good. And the training needs to be continuous.”

Dealerships also need to fix situations in which various departments aren't cooperating.

It's not necessarily a radical change, but customer data is the property of the dealership, not the salesperson, Waterhouse argues. “It takes a disciplined approach for management to get employees to buy in,” he says.