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How and Why to Improve the Most Important Metric in your Dealership

By Mike Esposito, President and CEO of Auto/Mate Dealership Systems

As featured in the September issue of Dealer Magazine.

Dealers look at metrics all day long: number of units sold, front gross, F&I penetration rates, service gross, etc. And if they don’t like what they see, the department manager hears about it pretty quick. In a typical scenario, the dealer asks the manager why that number is what it is and then instructs the manager to rectify it.
 
But what if the manager’s assessment of what is wrong, is wrong? What if they try fervently to fix it, but can’t? Over time, if the numbers don’t improve, the dealer may be tempted to fire that manager and hire one who can improve the numbers. But what if the new manager can’t improve the numbers either? What if it’s not the manager’s fault at all?
 
The fact is most metrics within a dealership are a reflection of one single metric that is perhaps the only metric that really matters, and that is your Net Promoter Score (NPS).
 
In a nutshell, the NPS is a measurement of customer loyalty. This is very different than customer satisfaction and has nothing to do with your CSI score. The problem with CSI scores is they often take into account factors that are outside of the dealer’s control, such as vehicle manufacturing and quality problems. Also, to satisfy pressure from OEMs, many dealership employees will prompt customers on how to fill out the survey, which means the dealer never gets a true measurement of customer satisfaction. Also, just because a customer is satisfied does not mean they are loyal. Even the most “satisfied” customers may not purchase from you again or recommend you to their friends.
 
The Net Promoter score is calculated based on the results of a single question that is sent to every customer: On a scale of 1-10, how likely is it that you will recommend this company to a friend or colleague?
 
Customers that select 9 or 10 are classified as “promoters,” customers that select 7 or 8 are “passives” and customers that select 6 or below are “detractors.” The percentage of customers who are detractors is subtracted from the percentage of customers who are promoters, and the resulting number is your Net Promoter Score.
 
Why should you care what your NPS is?
 
1)      Studies have shown that companies that achieve long-term, profitable growth have an NPS that is twice as high as other companies. Most businesses average an NPS of around 5-10%, but extremely profitable companies such as Apple and Harley Davidson have scores in the 50-80% range. The same studies show that companies with a negative NPS (which means you have more detractors than promoters) are more likely to suffer stagnant growth or go out of business.

2)      Customers that promote your business are likely to be very loyal customers, who will return to your dealership for service. Loyal customers who get their vehicles serviced at your dealership greatly increase customer pay RO revenue, critical for service department profitability.

3)      Promoters will recommend you to their friends and colleagues. In today’s world, these recommendations are extremely powerful as most promoters will use social media to promote your brand. Younger consumers in particular nearly always ask for recommendations from their peers and look up reviews from other customers before they make purchasing decisions.

4)      Over time, the increase in business you will enjoy as a result of referrals and social media perception will allow you to decrease your advertising costs. What better advertisement could you possibly have than a base of loyal customers promoting your brand?
 
So how do you turn your passive and detractor customers into promoters and thus increase your NPS score and revenue?
 
1)      Survey your customers. Initially, send a two-question survey to every customer in your CRM. Then, be sure to send the same survey to every customer who visits your dealership as soon as they leave. The first question is the one stated above. The second question should be open-ended and as follows: “For those scoring 9 & 10, what is the single most important thing that makes you likely to recommend us? For those scoring 7 & 8, what is the single most important thing that we could do to make you more likely to recommend us? For those scoring 0 to 6, what is the single most important thing that makes you unlikely to recommend us?”
 
The open ended question serves two purposes: if a detractor, what you are doing wrong, if a promoter, what you are doing right.
 
2)      Respond quickly. Look at every response immediately. If a customer is a detractor, that customer’s issue should be addressed within 24 hours. If negative issues are not resolved quickly, that customer is likely to go elsewhere, i.e. your competition.

3)      Share results with employees and managers. For detractors, find out which employee is responsible for the negative experience and share the results with them and their supervisor. Don’t be confrontational or accusatory. Employees often don’t realize how their actions and words affect customers. Try to find out the context of the incident and use the opportunity to coach employees. Positive experiences from promoters should also be shared and celebrated with the employee as positive reinforcement.

4)      Contact all customers who respond, both positive and negative. Thank the promoters and work to resolve the issues for detractors. Even if the customer is difficult or not entirely happy with the resolution, they will know that as a company, you care. That goes a long way towards creating goodwill.

5)      Make employees accountable. Requiring employees or their supervisors to “fix” their messes will help to shape their daily priorities and behaviors on the job, making it less likely they will repeat bad behavior and more likely they will improve their behavior. Employees will learn far more from these “real-life” examples than they ever will from reading manuals or attending training seminars.

6)      Examine the responses from a “big picture” perspective. Negative experiences that are repeated may be indicative of a process or management issue at the top. Use this information to dig in and examine your processes with an open mind, and try to identify what’s not working. Make changes where necessary.

7)      Design training programs to reinforce the value of relationship-building and the role that customer feedback can play in helping achieve that.
 
Identifying and tracking Net Promoter Scores forces businesses to listen, learn and act. Yes, it takes time and effort, but turning detractors into promoters is one of the most valuable long-term investments a dealer can make. It’s also very satisfying to track this metric and watch it improve, because the results have a direct impact on all those other metrics that are tracked, including the bottom line.

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