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What Auto Players Can Learn from Other Industries: Nurturing Customer Relationships

May 31st, 2017 | Posted by APT in Auto

The average time between a consumer’s vehicle purchases continues to grow. Reports indicate that people expect to own the same car for six, seven, or even eight years – a notable shift from the typical past purchase cycle of every three to four years.

This shift is just one reason why automakers must think critically about customer retention strategies and how their new revenue streams can grow customer relationships. As leading OEMs increasingly invest in mobility programs like car-sharing services, these initiatives serve the dual purpose of providing an additional revenue stream and an added touchpoint with consumers between vehicle purchases. These benefits align with an evolving goal in the auto industry: Nurturing the customer relationship throughout the sales cycle, including between purchases.

While the customer retention challenge may be evolving now for auto players, retention and expansion of customer relationships has long been a major focus in industries like telecommunications and financial services.

Automakers can benefit from emulating leading organizations in these sectors that have honed and refined their strategies over time. There are several key analytic considerations OEMs must consider as they strive to optimize the complete customer journey.

The Value of Targeting

As automakers conduct marketing outreach – such as parts and service promotions, vehicle upgrades, and new service offers – there are many levers to pull, related to messaging, channel, and offer type. Identifying the right customers to target with the optimal offer, creative, and message, via the right channel and at the right time and cadence is complex – but incredibly valuable. In fact, APT often finds that targeting a campaign to the 30-40 percent of customers that respond best can generate nearly 100 percent of the benefit without the associated costs.

Consider, for example, a mailer advertising an automaker’s next model. After using test vs. control analysis to evaluate the effectiveness of the mailer, the OEM may find that it only drove incremental sales with customers with certain characteristics – perhaps customers that currently own particular brands, and those with higher income.

The company could then target customer segments with these key attributes when executing the campaign, to ensure it would reach only those consumers most likely to respond profitably.

Focus on the Right Success Metrics

Some metrics, such as offer redemption rates, can be misleading. Organizations frequently deploy offers or programs that are too generous in circumstances where lesser offers would have had the same revenue impact, so it is important that they evaluate potential offers to determine the optimal threshold.

Imagine a telco company that wanted to retain customers whose introductory promotions were about to expire – a perennial problem faced in the industry. The telco may already offer discounts, but could want to test an additional, targeted offer, such as a free, third-party streaming service, to customers who signed another 12-month contract. This approach could be intended to avoid customers cutting the cord and switching to streaming services altogether, but the telco might want to ensure they only extended this additional offer to customers that could not be retained through the existing discount alone.

When analyzing programs like customer promotions, it will be necessary to focus on incremental revenue, rather than metrics like redemption rate. This will enable automakers to ensure that they are not providing discounts to customers that would have purchased, subscribed, or renewed regardless.

OEMs must also consider intermediate metrics beyond units sold, including parts and services revenue, customer satisfaction levels based on call center interactions, and positive brand experiences. Other key considerations are the impact on other financial metrics, like profits per vehicle, and average incentive payout per vehicle, as well as halo or cannibalization effects on sales both within and across brands.

Understanding the Customer Journey

In order to have an effective customer engagement and retention strategy, particularly in light of new business lines, it is essential that automakers maintain a complete view of the customer that captures all of their interactions with the company.

Understanding how outreach to one customer may affect how he interacts with the brand across multiple touchpoints such as car-sharing, dealership visits, and more, can inform targeted strategies for other aspects of the business. This omnichannel view of the customer will be essential for automakers seeking to innovate and maintain a competitive edge.

As automakers re-evaluate their customer retention strategies, turning to key learnings from other industries can guide their efforts. Drawing on the above analytic considerations will help them make informed decisions as they move to develop additional touchpoints throughout the vehicle purchase cycle and maximize new revenue streams.

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