1. Know The Difference: Loyalty vs. Satisfaction
“Loyal customers, they don’t just come back, they don’t simply recommend you, they insist that their friends do business with you.”
If your dealership consistently receives higher-than-average CSI scores, you may believe that a good percentage of your customers are happy and, therefore, loyal. But in fact, customer satisfaction and customer loyalty are two completely different things.
Here’s an example: Mr. Smith comes into your service department and has an entirely satisfactory experience. He gives your dealership high marks on the CSI survey. He never returns. Ms. Jones on the other hand, is a long-time, loyal customer who always brings her car in to be serviced. Yet, she wishes the chairs in the waiting room were more comfortable and she wishes there was something healthier than donuts to eat. Ms. Jones is loyal because she really likes and trusts your service advisors. But she really dings you on those CSI surveys.
A satisfied customer is not necessarily a loyal customer, and a loyal customer is not necessarily a satisfied customer.
The CSI may have some use for the manufacturers, but the CSI survey process leaves much to be desired. The surveys are too long with poor response rates, and both sales and service employees game the system for financial incentives. A dealership’s CSI score is a not an accurate representation of customer loyalty and retention.
However, the reality is that if the CSI is important to the manufacturer, then it has to be important to the dealer. Fine. Do what you have to do to keep your CSI scores up. But don’t let that be your gauge for measuring customer loyalty. In Step 10, I’ll introduce a very simple, effective and accurate tool for measuring customer loyalty.
2. Make Customer Loyalty a Priority
“The customer experience is the next competitive battleground.”
There are plenty of statistics out there regarding the connection between customer retention and a company’s profitability. Here are some examples:
It’s 6-7 times more expensive to acquire a new customer than to keep an old one – White House Office of Consumer Affairs
89% of customers have stopped doing business with a company because of a poor customer experience – RightNow Customer Experience Impact Report 2011
A customer is four times more likely to buy from a competitor if the issue is service related vs. price or product related – Bain & Co.
A 10% increase in customer retention levels results in a 30% increase in the value of the company – Bain & Co
86% of buyers will pay more for a better customer experience – RightNow Customer Experience Impact Report 2011
Increasing customer retention rates by 5% increases profits by 25-95% – Harvard Business School
Assuming you don’t need further convincing that customer loyalty is a good thing, the next connection to be made is the link between customer loyalty and employee happiness.
Dealerships are notorious for their staff turnover rates. The average company loses 50% of their employees every four years and 50% of their customer base every five years. This constant “churn and burn” means that managers are spending countless hours hiring and training new people. All this has a negative impact on the bottom line.
It’s no coincidence that 40% of the companies in Fortune Magazine’s “America’s Best Places to Work” list also appear on the Fortune 500 list. These companies’ average employee and customer churn rates are less than 5% and as a result, their profitability is 2-10 times higher than average companies.
3. Define Why You’re in Business
When asked, “Why are you in business?” what is your immediate reaction? If you’re thinking, “Well, to make money of course,” you’re not alone. But that’s not why you’re in business. Making money is a result of the why.
So we’ll ask again: “Why are you in business?” Oh, and “to sell and service cars” is not an answer either. That’s what you do, not why you do it. Your dealership probably has a mission statement somewhere. When was the last time you looked at it? Does your mission statement accurately reflect why you’re in business?
Apple makes and sells computers, but that’s not why they’re in business. In 1980, Steve Jobs’ original mission statement for Apple was “To make a contribution to the world by making tools for the mind that advance humankind.” Wow. His goal was to advance humankind. What is your goal for your company? At Auto/Mate, we make and sell DMS software for auto dealers. But what is our “why”? After discussions and meetings with our employees what came back to us was, “We have lived the dealership life. We understand what people in the dealership go through. We believe that they deserve to be treated better than they are by DMS vendors and we are going to do that!” That’s why we come to work every day: to make and keep our customers happy.
Whether you call it a mission statement or a company vision, it’s important to have one. Otherwise, how do you know where your company is going? On what basis do you make your decisions?
Here are a few tips for creating a mission statement that defines why you are in business:
Inspire: Your company’s mission statement should inspire you, your employees and your customers every day.
Provide purpose: Mission statements guide and help unify organizations. They go hand-in-hand with the corporate culture.
Keep it brief: There’s nothing more uninspiring than a long-winded paragraph about what the company does, how it strives to do this and that, blah, blah, blah. Keep your mission statement to one sentence. Focus on the “why,” not the “what” or the “how.”
Think big: Sure, everyone needs a car to get from point A to point B. But what else can cars do for people? They offer a sense of freedom, a sense of empowerment, joy, pride, achievement…the sky’s the limit. Well, maybe in this case the road’s the limit…at least for now.
Be specific: The hugely successful shoe company Zappos’ mission statement is simply “To provide the best customer service possible.” Sometimes, simpler is better.
4. Establish Your Company’s Core Values
“The quality of a person’s life is in direct proportion to their commitment to excellence, regardless of their chosen field of endeavor.”
Core values are the essence of a company’s identity. Values define a company’s culture, philosophy and support its vision or mission statement. Core values also help in the decision-making process. For example, if a core value is “customer first,” then your employees should feel empowered to take care of a customer without management approval needed —and then should be commended for it.
The first question you need to ask yourself is, “Am I truly committed to running a value-based company?” Not an easy question to answer. It means you may have to make some very tough decisions that, in the short term, can negatively affect your business. Say, for instance, a salesperson who is selling 25 trucks a month does something that by all measures should get him/her fired. Do you have to think about this? Then you are not committed to running a value-based company. When it comes to defining your core values, here is the most important guideline to follow: WALK THE TALK. The leaders in your organization must be able to exemplify your values on a daily basis. Let’s say one of your core values is honesty, and one day the attorney general shows up accusing you of deceptive advertising practices. What does that say to your employees and your customers? If you can’t walk the talk, choose another value.
How to define your core values:
1. Create a list of values. Gather a small group of senior managers and have them brainstorm a list of values that your dealership currently exemplifies or would like to exemplify.
2. Let your employees choose. Give your employees a list of values and ask them to choose the top three to five values that define your dealership’s current culture — not what they’d like the culture to be. Are your employees’ choices in alignment with yours? If not, you may have some additional work to do.
3. Define your values. Based on input from your employees, choose three to five values that best define your company culture and the people who work there. It’s best to choose values that are already built in to your culture rather than plucking a value out of thin air and trying to fit it into your culture.
4. Communicate your values. There’s a saying that if you repeat something loud and often enough, eventually people will believe it. You want to communicate your values as often and loud as you can until they become ingrained in every employee. Have your list of values posted in the break room, showroom and other visible places. In meetings, ask employees to provide an example of a transaction or customer interaction they saw recently that exemplified a core value.
5. Reinforce your values. Public recognition of values both reinforces your employees’ awareness of a value system and inspires them to live up to it. If your dealership chooses an employee of the month, make it a criteria that they are chosen based on the extent to which they live up to your core values, not on how much gross they generated. Recognize and rate management not only by their performance, but by their ability to embody core values.
Core values create a sense of unity and help to create an environment where the employees know how to behave and what is expected of them. If your employees feel good about where they work and the company’s vision, and if their values align with yours, they will know what needs to be done and they will do it — this includes taking care of the customers. What better customer retention program do you need than that?
What are your core values? Here is a list of values commonly used by businesses. Try brainstorming your own!
5. Become a Great Place to Work
“Your customers won’t love your company unless your employees love your company.”
What makes a great place to work: free lattes for the employees and a putting green out back? Those things aren’t bad but that’s not what motivates your employees to come to work and do a great job every day.
Workplace Dynamics is an organization that partners with leading publishers across the U.S. to produce regional “Top Workplaces” lists. According to the millions of employee surveys they have conducted, these 10 factors drive the highest level of employee happiness:
1. Leaders of the organization care about their employees’ well being.
2. Being able to trust what the organization says.
3. Having confidence in the leadership of the organization.
4. Being paid fairly for the work performed.
5. Feeling valued in the organization.
6. Understanding the long-term strategy of the organization.
7. Being treated like a person, not a number.
8. Having adequate staffing levels to provide quality products/services.
9. Employees liking the type of work they do.
10. Retirement plan benefits.
In addition to the Workplace Dynamics “Top Places to Work” rankings, nearly every city or state has a business journal. Most of these journals run an annual “Best Places to Work” contest ranking local companies.
In a recent analysis of the “Top Workplaces” and “Best Places to Work” lists compiled around the country, out of 2,224 companies that made these lists in various markets, only 29 dealerships were ranked, or about 1.3% of all companies.
Why aren’t more dealerships on these lists? Most dealers are actively involved in their communities; in local clubs, charities, causes and events. Many dealerships are family-run enterprises, and claim they treat employees “like family.” It seems to me dealerships should have a natural advantage in these types of rankings because they are locally focused.
Being ranked as a “Best Places to Work” has many benefits. You’ll attract better employee candidates, and it will make your customers perceive you as a more trustworthy company. Additionally, your current employees will be happier and, therefore, so will your customers. This can’t be faked!
To get started, just have an employee nominate your dealership. You may not win the first or second year, but the feedback you get from the anonymous employee surveys is invaluable. The surveys provide actionable data from which you can make decisions for your company going forward. Becoming a great place to work is not easy, but it’s a worthwhile goal that will make your dealership more profitable in the long run.
6. Hire the Right People
“Everyone is a genius, but judge a fish on its ability to climb a tree & it will live its life believing it is stupid.”
A common perception of what makes a business successful is as follows: the leader defines the vision and strategy, and all the employees work to make that vision into a reality.
The reality, however, is far different. In the best-selling business book, “Good to Great: Why Some Companies Make the Leap and Others Don’t” by Jim Collins, a team of researchers discovered that the most successful leaders focus on getting the right people on board before they set a strategy. In essence, they load a bus with the right people and get them in the right seats before they decide where to drive the bus.
So how do you find the right people for your business? Putting some serious thought and time into the hiring process is critical. When interviewing candidates, ask yourself the following and ask candidates the tough questions so you will have the answer:
1. Can they do the job? Give candidates hypothetical challenges to solve and pay as much attention to how they analyze and approach the problem as the solution. Ask them to complete a project before the first interview and give them homework between interviews. Also, give them three hypothetical projects and ask them to rank which they’d most and least like to work on, and why.
2. Will they do the job? Here you are looking for self-motivation. Ask them tough questions about why they want to work for you and what their work ethic is. Ask them about their likes and dislikes and what their passions are. In general, self-motivated people:
Have a purpose in life and live it
Are not afraid to take risks or go outside of their comfort zone to achieve a goal
Are energized when given a new project, jumping in with both feet
Are able to laugh at themselves, admit vulnerabilities and take criticism
Learn something new every day because they love learning
Believe in themselves and others
Are persistent and willing to explore new options if something isn’t working
Strive for health in all aspects of their life; physically, emotionally, spiritually, intellectually and socially
Are able to rise above failures, adversity and loss
Also ask candidates what they think “successful” means, and how that person has tried to achieve it. In general, most people decide early on in life how successful they are going to be or want to be.
3. When in doubt, don’t hire. Keep looking. If you are having trouble finding the right person to fill a position, don’t compromise. Find a way to get through until you find the right person.
4. Make sure their core values align with yours.
5. If you need to make a people change, act sooner rather than later. If you know you’ve made a mistake, don’t prolong the agony. If you are giving third and fourth chances, hoping for improvement and wasting precious time and energy thinking and worrying about an employee, act sooner rather than later. Keeping the wrong person on board is unfair to that person and to all your other employees who have to work with them. Let them go and everyone will be happier for it.
6. Move them to another seat. If you have a great employee but they are not working out in one position, find or create another position for them.
With the right people in the right seats, creating a vision and defining a strategy for success will be easy because it will be a team effort. Involve your employees in the decision, “Where to drive the bus?” and they will be motivated to help you get there.
7. Become a Leader, Not Manager
“Leaders become great not because of their power, but because of their ability to empower others.”
Take a look at Step 5 and the 10 things that motivate employees. The majority of them hinge on the leadership of the company. Are you leading your company or managing it?
Many dealers believe, “It’s not what you expect, it’s what you inspect.” But that is no way to lead. If you have to inspect everything, you are a manager, not a leader. Good leaders define their expectations and don’t have to worry about their managers and employees meeting those expectations.
If a dealer feels like they can’t leave the dealership for more than a few days because everything will go to “hell in a hand basket” without them there, they are a manager, not a leader.
The three following management philosophies are the cornerstones of what makes a great leader.
1. Employees are the #1 priority. How do you prioritize shareholders (owners), customers and employees — in that order? Southwest Airlines is an example of a company that makes employees their number one priority. In 2008, when the economy went south, most airlines laid off many employees. Southwest’s CEO refused to lay off a single employee. He insisted he was not going to put the company’s stock price ahead of the well being of employees. How do you think that made the employees feel? I would say very good, and today, Southwest is well known for its customer loyalty and profitability.
As Herb Kelleher, the CEO of Southwest, once said, “If the employees come first, then they’re happy…. A motivated employee treats the customer well. The customer is happy so they keep coming back, which pleases the shareholders. It’s not one of the enduring green mysteries of all time, it is just the way it works.”
2. Employees trust their leader. If your employees trust what you say and believe that you are genuinely looking out for their interests, if they are excited about your vision and see how they will benefit from it, they will go all out to help you achieve that vision. They will want to grow the business and meet other goals that you have set. If employees feel valued and understand how their roles contribute to the company’s success, they will take personal ownership in helping the company to become successful. Ultimately, this benefits the leaders as much as it does the employees.
3. Rank does not have privileges. Many managers believe it’s their job to set goals and to ensure that their employees are doing what they’re supposed to be doing. Most managers believe that the employees “under them” are responsible for helping the manager to meet the goals set for the department.
In fact, it should be the opposite. Managers should be working for the employees, making sure they have everything they need to do their jobs successfully.
Think about the look you would get from your sales manager if you told him he works for the lot attendant and not the other way around. But doesn’t he already, in a sense? Assume the lot attendant has a major issue in getting keys for the vehicles. He can’t find the keys and can’t move the vehicles in a timely manner. If he tells his manager he has this problem and the manager works to address the problem (new key machine, better process with the sales people for return of the keys, etc.) who is working for whom? Employee has a problem, manager fixes problem. The lot attendant is happy now because he is able to do his job better and nobody is yelling at him. Every day your managers should ask “What do I need to do to make my employees’ job easier?”
8. Inform, Empower & Reward Your Employees
“Always treat your employees exactly as you want them to treat your best customers.”
Stephen R. Covey
Now that you’re a great leader of a great place to work with the absolute best employees, how do you keep those employees happy and motivated?
According to the book “Drive: The Surprising Truth About What Motivates Us” by Daniel Pink, and contrary to what many dealers believe, money is not a primary motivator for most people. Most people want to feel like they’re a part of something meaningful and what they do matters. When they work hard to accomplish something, they want to be recognized. To meet those needs, dealers should do the following:
INFORM: There’s nothing worse than when an employee says, “I didn’t know that!” — especially when it’s something they felt like they should have known. If you believe in sharing information on a “need to know” basis, here’s what you need to know: your employees aren’t happy.
Have a monthly dealership meeting for the sole purpose of informing your employees. Share everything that’s happening — successes and challenges — in every department in the dealership. Share your goals and vision for the organization. Encourage managers to have weekly staff meetings to do the same on a micro scale. If you don’t inform your employees, they’ll start making stuff up; and rumors and gossip are a death knell to employee morale.
EMPOWER: If your goal is to keep customers happy, your employees must be empowered to do so. The goal is to avoid the run-and-check syndrome.
Imagine this scenario: A customer who just spent a large sum on a repair happens to mention to the tech his windshield wipers are shot. The tech says, “Oh, no problem. We’ll put a new set on for you now, no charge.” How far does that kind of goodwill go?
Some dealers, when they hear this empowerment suggestion, fear their employees will give away the store. They won’t give away the store. If empowerment is a tough concept to swallow, you can always set a cap on the dollar amount an employee is allowed to “give away,” such as $200.
Another way to empower employees is to involve them in creating solutions to problems. Is there a process that your employees complain about or that you know is inefficient? For example, in some dealerships the relationship between service techs and parts counter people can be contentious. Techs complain they have to wait too long for parts or they are not notified when the parts are ready. The parts employees say they’re busy, understaffed and doing the best they can.
Regardless of where the blame lies, not getting parts delivered in a timely manner impacts the bottom line and should be fixed. Who better to fix it than the service and parts employees? Form a cross-functional team, lay out the rules (such as no finger-pointing) and have them brainstorm several solutions. You may be surprised at their innovation, and they will feel the glow of accomplishment. Plus, they are more likely to follow a process they created.
REWARD: Does your dealership have a system for rewarding employees? Is it based on gross? Is it an “Employee of the Month” award? Do you even know which employees are doing a great job and which ones are coasting?
As a leader, one of the most sought after and rewarding things you can give to employees is your time and attention. Sure, bonuses and awards are fine. But if you want to increase the loyalty, motivation and happiness of your employees, try this: seek them out, ask their opinions, ask them about their personal lives, get to know them and actually care about them.
Once a month, have lunch with a select group of employees. Try this also with your managers. Make the conversation personal, not about business.
When a customer calls or gives other feedback that praises an employee, make a point to praise that employee, publicly and loudly. Sometimes, a simple “Atta boy” is the most effective reward you can give.
Your managers know who is going the extra mile or not. Take the time to single these employees out, acknowledge their hard work or exceptional skill and praise them. They will remain motivated, and hopefully, the employees who aren’t going the extra mile will be motivated to do so.
9. Make Decisions Based on a Long-Term View
“It’s not hard to make decisions when you know what your values are.”
“What makes a good company great?” One of the most important things is the ability for the leaders of a company to make decisions based on their long-term vision for the company rather than reacting to short-term results.
You know the drill. Dealers review Daily DOCs and often manage on a day-by-day or month-by-month basis. If you have a bad month, you ask what went wrong? What needs to change? If the economy and sales slow down, it seems logical to cut expenses and lay off employees. Then when things get better, hire more people again.
That’s a short-term view, and it’s not an uncommon business practice in any industry. But that doesn’t mean it’s the best approach to take. If you look at the most successful companies, leaders make important decisions with a long-term view.
Here’s an example: during the economic downturn in 2008, James Sinegal, the former CEO of Costco, was under pressure to lay off employees. Sinegal not only refused but he gave his employees’ raises! Sinegal has said that his choice to provide workers with top-notch pay and benefit packages was not an altruistic act. Instead, it was good business. During his tenure at Costco, Sinegal continuously increased profits while keeping employee turnover at 12%.
Are the decisions you make today in alignment with your long-term goals for your company?
Let’s say one of your long-term goals is to build your dealership’s name recognition in the community. How do you support that goal? You may decide to give employees one day off per year to volunteer with a community program, or you may decide to sponsor a high-profile community event. In lean times, instead of reducing donations, you may want to rally employees to hold a fundraiser so the dealership can meet its obligations.
When making a decision, be sure to examine both the short-term and long-term implications.
10. Track and Record Results
We’ve talked about the difference between loyalty and satisfaction. So how do you measure customer loyalty? The easiest, least expensive and most accurate system is called the Net Promoter Score (NPS). The NPS methodology is based on the fundamental perspective that every company’s customers can be divided into three categories: promoters, passives and detractors. It asks one simple question: “How likely is it that you would recommend [Joe’s Dealership] to a friend or colleague?”
Customers respond on a 0-to-10 point rating scale and are categorized as follows:
Promoters (score 9-10) are loyal enthusiasts who will keep buying and refer others, fueling growth.
Passives (score 7-8) are satisfied but unenthusiastic customers who are vulnerable to competitive offerings.
Detractors (score 0-6) are unhappy customers who can damage your brand and impede growth through negative word of mouth.
To calculate your company’s NPS, take the percentage of customers who are promoters and subtract the percentage who are detractors.
For example: You have 100 surveys returned. 50% score you as a 9 or 10. 20% score you as an 8 or 7. 30% score you as a 6 or below.
In this situation, your NPS would be 20 (50% — 30%)
The NPS survey can be emailed or texted to your customers. The ideal time to do so is immediately after a customer leaves your store. Asking one question greatly increases the response rates compared with traditional CSI surveys, giving a more accurate reading based on a larger sample.
However, there is an option to expand the survey by asking one or two other questions. For instance, if a customer scores you an 8, you may want to ask a follow-up question such as, “What do we need to do for you to score us a 10?”
If a customer gives a score of 6 or below, you may want to ask two or three questions as to what caused them to give you this score. The survey is sent right after the transaction, so if there is a “detractor” who had a poor customer experience, the dealer can take immediate action. It’s also simple, so the focus stays on the employees, process and customer service, and not on the “score.”
Studies have shown companies that achieve long-term, profitable growth have a NPS score twice as high as other companies. Most businesses average a 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 (more detractors than promoters) are more likely to suffer stagnant growth or go out of business.
Before you implement the steps in this eBook, conduct a NPS survey with all your current customers to get a benchmark score. Then set a goal to improve it. For instance, if your score is 5, set a goal to raise that to 10 in six months. Learn from the negative feedback and use it as a guideline to improve processes.
The ultimate goal of the NPS is to create more promoters of your dealership’s brand. These are the customers who, at cocktail parties and other events, mention your dealership’s name with no prompting and proceed to talk about what a great experience they had. Likewise, you want to reduce the number of brand detractors who will also talk about your dealership with no prompting, but in a negative fashion.
The 10 steps outlined in this eBook are simple in theory, but to implement them will take time and determination. However, the return on investment for these efforts will be worth every minute. Keep in mind that employee happiness and becoming a great place to work are not simple trophies that, once achieved, can be placed on a wall of achievements. Going forward, it will be necessary to remain committed to the processes learned: for yourself, for your employees and for your customers.