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The Importance of Customer Retention in the Automotive Industry and How to Improve It.

The Importance of Customer Retention in the Automotive Industry and How to Improve It.

In today's highly competitive automotive industry, customer retention is one of the most critical factors for success. While acquiring new customers is important, retaining existing ones provides a much higher return on investment.

Understanding Customer Retention

Customer retention refers to a company's ability to keep selling to its existing customers and prevent them from switching to a competitor. 

Customer retention is measured by the percentage of customers who stay over time: customer retention rate = (number of customers at the end of a given period – number of new customers)/number of customers at the beginning of that period. For example:

  • You had 300 customers at the beginning of the month 

  • During the month, you've gained 50 new customers and lost 10 existing customers

  • At the end of the month, you had 340 customers in total

  • (340–50)/300 = 0.97 (or 97%)

In this example, of the 300 customers you had initially, 97% stayed, and 3% churned.

Retention rates are crucial indicators of your company's health and viability, so you should watch them like a hawk!

The Impact of Customer Retention

According to research conducted by Bain & Company a while ago, it costs six to seven times more to acquire a new customer than to retain an existing one. Increasing customer retention rates by just 5% can significantly boost profits, ranging from 25% to 95%! These statistics highlight the importance of customer retention as a marketing objective and its potential to drive sales and financial forecasting models.

Strategies for Effective Customer Retention

To improve customer retention, here are a few tried and tested strategies equally applicable to car manufacturers and dealerships.

1. Consistent Contact Strategy

Meaningful and timely communication with customers is crucial. You need to engage with customers from the beginning and provide the right message at the right time, personalised for each customer.

To do that, you need to develop a contact strategy - a planned approach to communicate with your customers or prospects across the entire customer journey. It needs to outline how, when, and through what channels you will engage with your audience to achieve specific objectives, such as increasing sales, enhancing customer service, or improving customer retention.

Key elements of a contact strategy include:

  1. Segmentation: Dynamically divide the customer base into distinct groups based on characteristics like behaviour, demographics, psychometrics, purchase history, preferences, engagement history, etc.

  2. Personalisation: Customising messages and offers to meet your segments' specific needs or interests to increase engagement and conversion rates.

  3. Channel Selection: Choosing the most appropriate communication channels (e.g., email, social media, SMS, phone calls, web personalisation, mobile app, car infotainment, etc) for reaching out to customers based on their preferences and the nature of the message.

  4. Timing: Determining the optimal frequency and timing of communications to maximise impact without overwhelming or annoying the customers.

  5. Content: Developing relevant and valuable content that resonates with the target audience, encouraging engagement, and driving desired actions.

  6. Measurement: Creating key performance indicators (KPIs) to help you monitor your contact strategy's effectiveness.

And, of course, you also need to design the paths, which connect it all into specific sequences or flows of communication and interaction that would take customers through their customer journeys. 

The paths are represented as steps or touchpoints, showing where you engage with customers and guiding them towards a desired outcome, such as purchasing, renewing a service, or enhancing loyalty. 

2. Data Analysis for Personalisation

After you've launched your contact strategy, you also need to start analysing broader engagement patterns, which would help you identify new scenarios not yet covered in your contact strategies.

For example, you can spot a deviation in customer churn, which, after analysing the causes, identifies a spell of poor customer service. Armed with this insight, you can create a new path (or a fork in an existing path) to target customers who might have been exposed to it and offer them additional support or services to turn their bad experiences into positive ones.

3. Right Marketing Automation for Efficiency

Marketing automation platforms then deliver your personalised, targeted content, offers, and messages to customers at the right time, through the right channel and at the right time. 

They also provide valuable insights, measure the effectiveness of your contact strategy and the right ones, and continuously optimise themselves against your pre-set KPIs.

4. Better Customer Experience

Providing excellent customer experience is a critical factor in customer retention. So what are the key elements?

  1. Unified Customer Profiles: Unified customer profiles across all channels and interaction points provide a seamless journey and experience, making customers recognised and valued and improving their satisfaction and loyalty. 

  2. Consistent Brand Experience Across Channels: A consistent brand experience reinforces customer trust and recognition. When customers receive the same level of service and encounter the same brand values online as they do in person, it strengthens their connection to the brand, encouraging loyalty and repeat business.

  3. Integrated Online and Offline Touchpoints: Integrating online and offline touchpoints streamlines the customer journey, making it more efficient and enjoyable. This integration shows respect for the customer's time and preferences, enhancing their overall perception and increasing the likelihood of a repeat sale.

  4. Personalised Communication Across Channels: Personalised communication makes customers feel unique and valued, increasing engagement and conversion rates. Tailoring messages to fit the customer's interests and needs across all channels reinforces the perception that you genuinely understand and care about your customers.

  5. Real-time Customer Support Across Platforms: Providing real-time support across all platforms and channels shows that you prioritise customer service and are committed to resolving issues promptly. This responsiveness builds customer trust and satisfaction, key customer retention and loyalty components.

  6. Efficient and Friendly Customer Service: Prompt and accurate responses signal customers that you value their time and business. Friendly interactions add a human touch and turn a routine transaction into a positive experience that customers will likely remember and share with others.

  7. Transparent Pricing: Transparency in pricing builds trust between your company and customers. It helps them feel confident in their decision-making process, knowing they won't encounter unexpected costs and surprises later.

  8. Convenient Service Options: Convenience is a critical factor in customer satisfaction. For example, by making it easy for customers to book and receive servicing, you will demonstrate your commitment to customer-centricity and encourage repeat visits and loyalty.

  9. Exceeding Customer Expectations: Going above and beyond what customers expect can create memorable experiences that solidify their loyalty to your business. These gestures show customers they are appreciated, encouraging them to return and recommend the dealership to others.


In automotive industry, customer retention is crucial. 

You can improve customer retention rates and foster long-term customer loyalty by implementing effective strategies such as consistent communication, data analysis, and marketing automation. And when you continue to prioritise customer retention, you can expect increased profitability, a stronger brand reputation, and sustainable business growth in the ever-evolving automotive landscape.

Next step

Download our Sales Journey Scorecard toolkit to discover gaps and identify improvements in your customer journey. Use it to create a pragmatic roadmap for addressing these areas.


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