The Customer Retention Lie in the Auto Industry (No One Talks About This)

A sandwich shop that marked the wrappers 0:00

Steve Shaw: Dave, what's on your mind?

Dave Rogers: Steve Shaw. I want to tell you a little bit of a funny story. It's a nothing story, but it's a funny story. So we go out to get lunch, and you've heard of PrimoHoagies, right? Normally you order online, grab it off the app or whatever, and take it home. But we decided we were going to sit down and eat, and both of us ordered a sandwich.

The guy behind the counter was probably the most enthusiastic person I've ever seen in my life. He loved his job. He was really good. Anyway, we order our sandwiches, and we both eat half a sandwich, and we have nothing to wrap it up with. You're in a sub place. So Gina walks up and says, "Hey, can I get a bag or something to take my sandwiches?" And a young lady behind the counter says, "No, bring it up. I'll wrap it up for you."

So she brings up the two half sandwiches. The girl is behind the cabinet doing whatever she wants to do, and then she hands it back to us in a bag. And I was like, that was cool. They wrapped it up. It's a nothing shop. You don't think much of it. We get home later that night and open up the bag, and she actually marked my sandwich and marked Gina's sandwich on the little wrappers.

She actually wrote on the two sandwiches, because you don't know which one is which. And I thought, what a nice little touch from a Primo place. Out of nowhere. I was like, well, look at that. We don't have to open them up to see whose sub is whose. Those stupid little things.

Steve Shaw: That's pretty cool. It is definitely the little things that make a difference. I'm out of town. I'm on vacation right now, and I can tell you a funny story. We went out for burgers. I'm in Santa Catarina, Brazil, in the south. We were looking for something really good, and it was a weird deal, because it was 12:30 and all the places were closed. We ended up at this hamburger place, and we had the exact opposite experience. My friends speak Portuguese, and I've never been there before, but the waiter and waitress, both of them, just could not be bothered with us, taking care of us.

The red napkin and the three-visit rule 1:35

Steve Shaw: And it led me to think about a story I heard recently. I'm always doing research, as we were talking about with the gentleman from Canada the other day, about best practices from outside our world and bringing them into our world. So think about that restaurant, and just a little thing, and what a difference it made. This restaurateur was talking, and he says it costs a lot of money to acquire a new customer in a restaurant. Generally restaurant owners are trying to get that one visit. They're not necessarily looking for the repeat business. So this guy is pretty sharp, and he says, here's what we do.

He says you've got to get people in for three visits to get their loyalty. If you get them in for one visit, you've got a 50-50 chance they come back for two. If you get them in for two, you've got a good chance they're going to come back for three. If you get them in for three, you've got like a 75% chance they're going to come back all the time. So what they do is, if you're a new customer, everybody else has white napkins, but they put a red napkin on your table. And if the customer asks why the napkin is red, they say, "Well, you're a VIP. It's your first time. We want to make sure you have a great experience, so we put a red napkin on your table."

Great. Then at the end of the meal the manager comes out and says, "How did you like your meal?" And of course the customer raves about it. He says, "Well, if you liked your steak, you've got to come back sometime for our chicken. In fact, if you come back again, I'll let you try our chicken for free. Here's my card. Ask for me. My name is Steve." So the guy comes back for a second meal, of course, because he's going to get a really nice free meal.

After that meal, the manager comes out and says, "How was your meal?" "Oh my God, that was great. I'm stuffed." "You know what? Next time you come, you've got to try our cheesecake. In fact, I'm going to give you my card again. Come back and ask for me, and I'll give you a free piece of cheesecake." And he says it works. They spend the money to get people in for their first meal, then they give them chicken, then they give them something less, which is the cheesecake. And he says it turns into a 70-plus percent chance that they'll be a lifetime customer after that.

So I start thinking about that and applying it to our business. What do we do? I know a lot of dealerships and a lot of manufacturers give away the first oil change free, or three oil changes free. But what does the car business do? If I show up for my first oil change, they avoid us like we have COVID or some crazy disease. "Oh my God, there's Steve. He's coming in for his first oil change, and he's not going to buy anything. So I've got to send my worst employee, my least trained person, out there to take care of him, and we rush him through."

And then it happens again on the second visit and on the third visit, and people have a bad taste in their mouth. Why does Toyota retention fall off at 36,000 miles? Because people have had a crappy experience for three years. It costs restaurants a lot of money to acquire a customer, and generally they stay once. He says, "We've solved that problem, and they stay a lifetime." But gosh, what could we do? It just blows my mind how we screw up a free oil change. How could we screw up three free oil changes and lose a customer after that?

Why advisors run from the free oil change 6:09

Dave Rogers: I was at a Toyota store years ago that had a free oil change for life program. When I first got there, corporate told me to analyze it to see if they thought it was worthwhile. I'm watching the advisors answer the phone and look at the computer, checking the customer value screen or whatever it is. Then they'd put the customer on hold and transfer them to the newbie advisor when it was a free oil change, because they didn't want to be bothered with it.

They weren't on hours-per-RO pay plans, not that it would have mattered anyway, since it was internal. But people have this mindset: why deal with that guy? He's only here to mooch. He's only here to get the free oil change. I had this discussion with one of the GMs the other day too. I said, but the guy might buy his next car from you, even if he doesn't buy anything in service, and it costs you three, four, five, six, seven hundred dollars to get a new customer in sales. So why wouldn't you let that guy in, even if he's got 180,000 miles on his car and he's never bought anything?

A lot of it is pay plans, or people's perception of their pay plan. They think a free oil change is going to ruin their hours per RO or their effective labor rate. That's a bad pay plan. We've talked about that before.

And you're absolutely right about the new customer who's never been there before. Maybe he moved into the area, maybe he's got a recall. What do we do with that customer? I've seen it before: "That guy's never been here before. He's got 80,000 miles on his car. Let's write up that RO, get that multi-point out in the shop, try to bang him for everything we've got, write up the list and try to sell him $2,000 or $3,000 worth of work." That doesn't work that well either.

My philosophy has developed over the years. We used to try to get people in for recalls, do the multi-point and upsell them. Now I tell the guys to ask permission. "Can we do the multi-point? It's just a free inspection." I think we talked about this once before. I don't want the technician doing price and availability on the parts. Don't presume, because then it looks like you assume this guy is going to buy something. It looks like you're trying to get him. Just give me the facts. "Mr. Shaw, your multi-point inspection is done. Could I have permission to review it with you?" If you say no, I tear the back page off and say, "Here you go. Call if you have any questions."

In all these years, we've wanted to hit and run, the wham-bam-thank-you-ma'am type of thing, or like you said, run away from that poor guy who's coming in for his first free oil change.

Steve Shaw: I had a black SUV, and I had a service advisor once, at a Ford store, who would not wait on customers with black cars. He said, "They're the biggest pain in the ass. I don't want any part of them." Especially if they were coming in for an oil change, he'd just run away. Maybe you're right, maybe it's pay plans. And as Damon said too, and forgive me for saying this word, maybe it's culture. Maybe it's just the way that dealership is run. I can guarantee you there's not a general manager or a dealer principal on the planet who doesn't want to retain that customer. But how do we get that message down to our people, that the first oil change is our life? That is our life.

Get customers used to buying from day one 9:33

Dave Rogers: I agree 100%. And I think that's where you miss out, even with some of the free maintenance or the factory maintenance. We've talked about that before. I really do believe you have to give them good treatment, and you have to try to get them to reach into their wallet. I don't think it's good to have a customer come into your store for two years and never spend a dollar, because psychologically, the first time you ask them for money after two years, they think you're trying to steal from them.

But to steal Damon's term, it's got to be frictionless. If they come in for the first oil change, it would be great to do the red napkin thing or something like it, to let everybody know it's their first time in. And not to leave the drain plug loose so they blow the engine up. That's not a good first time.

I do agree with you 100%. I think general managers generally don't know anything's happening. And it's more than just pay plans sometimes. It's people's perception of the pay plan. We don't pay on hours per RO. We pay on gross profit. We do compare hours per RO. That's one of the levels of management you do in the store. I look at advisor reports throughout the whole company, and you can use them for comparisons. But brand by brand, store by store, you can't just blanket the number.

I see it all the time where a service advisor thinks that if he has a multi-point inspection line, he has to change the line to internal, even if there's no labor or parts on it, because it's going to affect his hours per RO. It doesn't affect anything. It's a zero line. It doesn't count. The system ignores it. Usually the first labor line with dollars on it determines what kind of RO it is: customer pay, warranty, internal. You could have a thousand customer pay repair orders with 3,000 customer pay lines, but it's only the ones with dollars on them that count.

And yet, "I'm not writing him, he's a free oil change." It's like the F&I guy who runs away every time a cash deal comes in the box, or a lease. All of a sudden they have a bladder problem or a stomachache. It never fails. And you have advisors doing the same thing, and it's stupid.

Steve Shaw: Well, you said a magic word there. They have to pay something. We've got to get them used to paying for something. I think Toyota is the absolute worst at this, in the mindset of Toyota advisors: "Toyota says they've got a free oil change, so we don't do anything with them." At all. That's how I perceive most Toyota people. We don't do anything with anybody until they're past 36,000 miles, because Toyota gives it for free.

In our training, we always say ask for fries. What are your fries at 5,000 miles? Could you present them a detail? Could you, like your friend did, present the windshield wipers, the rain guards or the mud flaps?

Dave Rogers: The rain guards.

Steve Shaw: Or a detail or something like that. It's got to get the customer accustomed to buying. I always talk about Jeeps because I've had one for so long. As an owner, I love my car. When do I love my car most? The day I bought it, and at 5,000 miles. So I'm willing to buy an accessory from you, a floor mat or something, which starts the cycle of me buying from you. I love to buy things for my car, and I think most customers like to buy things for their car, given the opportunity.

That sets the mindset: "You're a car dealer. I can get cool things for my vehicle while I'm there." And for some reason the perception is no, no, no. I'd take a guess, and I don't work for auto manufacturers, I work for car dealers, so I always blame the manufacturer for that mindset: the rep in the store saying, "Don't sell them anything. We've just got to get them in and get them out real fast, and that's going to make them happy." But we've seen what happens to the retention chart when we get them in, get them out and ignore them while they're in our store.

Dave Rogers: I saw it years ago when Mercedes had free maintenance. That's the first time I really watched customers who wouldn't buy anything, because they were never told about needing anything. BMW, still to this day, has three years, 36,000 miles. One of my BMW service writers who's been there a long time recently told me he's gone to the six-month, 6,000-mile oil change and tire rotation, if the car doesn't have staggered tires.

And he has people taking him up on it. Even though they get the one-year maintenance for free, he's getting some people who own the car to spend the money on it, and he said it's a world of difference. He said, "Now that I know I have your blessing, I don't have a problem doing it." Everybody's been pooh-poohing that for years. And he said, "I always did my own oil change every six months. I would never drive my BMW a year without an oil change. That's crazy. I'd have no oil in it in a year."

And listen, we talk about this all the time. Chrissy, one of my service managers, is very retail-oriented, very sales-oriented. Mazda has the first oil change and tire rotation for free. She recommends a wheel balance on the front wheels, and she charges $19.95 or something. The wheels are off already. You could do all four wheels, for the same reason: just to get the customer used to spending money in the dealership.

That's one area where I think drive-throughs really could come in handy, with the walk-around with the service writer. Some of my stores don't have drive-throughs, so it's kind of hard. But when you walk out to the car: "Hey Steve, I love the color of your Grand Wagoneer." You always have to say something nice about it. Then you open the door: "Have you ever thought of getting all-weather mats?" Or, "I noticed you don't have a ball on the hitch," whatever the case may be. That's how you build a relationship with the customer, and it doesn't look like a hard upsell. "Have you ever thought about getting all-weather mats?" Who hasn't thought about getting all-weather mats?

Why the walk-around is the last thing taught 16:04

Steve Shaw: Well, I don't even know what you have to offer, and quite frankly it doesn't matter to me. I think walking around a car is the most advanced thing we can teach. We actually teach fixed ops numbers before we teach a walk-around. As you go through our certification, the walk-around is literally the last thing we would ever teach an advisor. And most people think the walk-around is the most important thing we can do.

I look at it like this: if you can't present maintenance to a customer, if you can't present these additional items, if you can't ask them for all-weather floor mats or fries or whatever you want to call it, then the walk-around is ridiculous. We have a multi-point inspection from our techs doing that stuff. So people spending time trying to teach advisors to do walk-arounds, when we know they're not going to do it anyway and the manager generally isn't going to hold them accountable, is the wrong focus. We've got to focus that time on minimum requirements, as I always talk about. At least get what the manufacturer says is the minimum.

We could get more. We could ask the customer for additional items, whether it's 6,000, and I agree with you that it's a 5,000-mile or two-year type of service. Even if the manufacturer says just come in every year, you've still got to rotate your tires, and you've still got to come back for that middle service for your tires. So we've got to spend our time educating people that it's OK to ask questions. No one's ever gotten mad at me for asking, "Would you like fries with that?"

I always tell the story, you've probably heard it a million times. I got to the airport at three o'clock in the morning last week, and by the time the bars were open, I'm sitting there and I ask for a Tito's on the rocks, and what do they say? "Would you like a double shot for two dollars more?" Without fail, every single time. Certainly I need my Bloody Mary to have a double shot at five o'clock in the morning. So why can't we do that?

No one has ever yelled at the McDonald's guy for asking, "Would you like a hot apple pie?" or at the lady at Twin Peaks for asking, "Would you like a man-sized beer?" Every time, we will buy additional items. It drives me crazy that, like you said, the lady at Primo's could go the extra mile for you, but we can't ask one simple question to make people happy.

One extra thing on every car 18:31

Steve Shaw: I know I'm rambling on, but I heard one time, a long time ago, I don't know if you told me this or somebody else, about a Honda store where the technician was supposed to do one thing free on every single customer's car when it came in. It could be that the antenna's bent, so replace the antenna, or vacuum it, or whatever. It was just one extra thing the technician would do. And it was probably old school, where they put the cards in the dashboard or the console: "Here, I'm doing this one extra thing for you, because I actually give a shit, and I actually want you to return." I think that's lacking in today's dealership environment.

Dave Rogers: Oh yeah, it's big time lacking. And it has to be genuine. I really think it has to be genuine. I don't know if it was a consultant I had in the '90s or some other training I did, but we did the same thing. I was at a Toyota store at the time. We wanted the technicians to do one thing over and above, and it was even a union shop. They had no problem doing it. Like you said, a bent antenna, something random, radio knobs that were faded. It was always something.

They used to tell us what it was, and we'd put it on the repair order with a little note. It was great. It was a little touch point. It's that mint after dinner, those little things that go a long way, and we don't do it as much as we should. I shouldn't say that. There are probably a lot of stores that do nice stuff. But I think the run-of-the-mill regular volume stores aren't doing that. Maybe a high-line premium store will put a little bottle of water in with your label on it, or something like that.

Electronic menus and "What level of protection would you like?" 20:41

Dave Rogers: And when you go back to the upsell and the recommendations, there's a minimum requirement. We have an outside company that's been doing a good job bringing in electronic menus for us. I'll mention their name if they sponsor us one day. Or maybe I'll give them a free plug one day.

Steve Shaw: Yeah, thanks, Michael.

Dave Rogers: If the factory says this is the minimum, you can show them electronically: good, better, best. You can show them the minimum requirements and then what we recommend. Not that everybody has to do it. We did this years ago with oil. Remember when semi-synthetic first came out, and the Quaker State bottles for the older engines? We used to have the bottles lined up on the counter, and you were trying to sell an extra oil. We've been doing this for years. I don't understand why it's not commonplace by now. Probably because nothing sticks.

Steve Shaw: "What level of protection would you like for your engine?" When we practiced that back in the day, you could either say, "Would you like to upgrade?" and they'd say no. Or you'd say, "What level of protection would you like?" and people would say, "I want the best." All of a sudden they walk themselves into "I want the best care, the best protection for my engine." It shouldn't be that hard.

Now that I'm on vacation and I literally have nothing to do, I've been sucked down the reels. I'm watching these reels, and there are all these people going, "I'm going to give you the secret code. If you say this to your girlfriend or your husband, it'll change your relationship." It cracks me up, because it's literally what we would say on the drive: best care. The words are so simple. And we get so caught up in "I can't do that, I can't say this, I can't sell anything else," when all you've got to say is, "What level of protection would you like? Would you like to give your car the best care?" Simple phrases people can internalize and share with their customers.

And you keep talking about getting back to selling, and I believe you that there are a lot of places right now that are not in that selling mindset at all. My phone's ringing off the hook. I actually got a call today, I looked down and it's ringing from Detroit, and I don't know why I picked it up, I'm on vacation. But I did, and I talked to a guy about that whole thing. He says, "We just don't have that sales mindset in our store." So we had a long conversation about it. I don't know when it went away, but it has gone away. And the selling mindset is the same thing as going the extra mile for that customer while they're in our store. That's kind of how we started.

The vet, the eyeglass store and asking for money 23:38

Dave Rogers: Well, I don't know if this was going to go this way. I never know which way our conversations go, which is great. Last week we brought the dogs to the vet: annual checkup, get their shots, the Bordetella and vaccines and so on, so they can be boarded. And the vet notices my 10-year-old hound has tartar on her teeth. And the vet, or the tech, had no problem presenting a $1,200 bill to Gina to get her teeth cleaned. What do you mean, you have to knock her out to clean her teeth? She's 10.

And people talk about service departments screwing up people's cars. She's in there getting a checkup, and the vet's moving her back legs around and tells me she has hip dysplasia. Now, she's never limped. She's a little stiff in the back because she's older. Two days later, she can barely walk. She can't even pick up her left rear leg, because the vet roughed her up too much. Gina was good. She acted like a regular customer. She called them and said, "Listen, I'm bringing her in, you're checking her out, and you're not charging me for the visit." And they didn't. She gave them the business. There was nothing wrong with her before we brought her to the vet.

Steve Shaw: Well, those vet people. When I bought my dog, I did not want a dog. I had no desire to get a dog. I'd just lost my previous one. We went into the pet store because my girlfriend wanted to hug a dog, and I picked up this dog and said, "I have to get it." And they were, I'm not going to say aggressive, but they have a process they must go through.

Dave Rogers: Yes, they do.

Steve Shaw: I was at the pet store trying to get the dog I fell in love with instantly, and I probably spent 10 grand. "Steve, you've got to have this cage. You've got to sign up for the kennel training." They were not letting me out of it. I'm on a trip in my RV, going out of town, and I'm like, "Can I just go? Here's my cash." Nope. "We have a process, and you're going to follow our process." They even tried to sell me a warranty. We should go hire those people as service advisors.

Dave Rogers: They have no problem asking for money. That's what drives me crazy: a service advisor won't ask a customer for $1,000, when the average car payment is probably $800 now. But they don't know that. And have you ever taken your dog to a vet hospital? They tell you they want to keep him overnight on saline, and it's going to start at $3,000. I told the vet one day, "Listen, I'll give my dog saltwater at the Waldorf Astoria or the Ritz-Carlton for a hell of a lot less than $3,000. What are you doing, a comfy bed?"

And listen, that's emotion. You love your dog, you love your animal. People love their cars too, hopefully not as much as they love their dogs, but some people do. It's the same thing. The eyeglass place: I just went to get eyeglasses the other day. "Guess what, Dave? The normal price is $1,400, but your insurance kicks in, so you only have to give me $600." Now, my daughter is going to kill me, because she works at Warby Parker and I probably could have gotten it cheaper. But I'm like, OK, $600. They don't have a problem. This young girl didn't blink asking me for $600. Yet I've got an advisor who can't sell an alignment for $149 or $159. It drives me nuts.

Steve Shaw: These people. I get new glasses every year or every couple of years, and I got the coupon in my email: come down for a free eye exam, eyeglasses $99.99. A thousand dollars later, I'm walking out with the lenses and the color change and this and that. And you're right. The lady literally handed me a menu and said, "Which one of these would you like?" And I'm going, "Would you like a job at a car dealer?" She said, "Why would I want that?" She probably makes more than an advisor, I don't know. But it's crazy that they can do that stuff, and for whatever reason we want to be friends.

Dave Rogers: They don't blink an eye. And they look you right in the eyes: "Would you like to have your dog's teeth cleaned for $1,200?" No, are you kidding me? And then you feel guilty. You're sitting there going, "Oh my God, I'm a bad owner to my dog." We should make people feel like that with their cars.

Steve Shaw: Before I was a dog person, I used to make fun of dog people. If I saw somebody with a dog at a restaurant, trust me, I was that guy in the background going, "Why the F is this dog here?" Now I'm the guy with my dog there. But think about how many people in a Mercedes store or a BMW store love their cars. My Jeep has a name. My orange Jeep is Nemo, and my bus was Dory, because it was blue. Do you not think I love it?

I remember taking my RV in. An RV engine like that costs $50,000. And the guy goes, "I can save you some money on your oil." I'm like, "Bro, I don't want you to save me money on oil. That $50,000 engine has got to last me a lifetime. Stop trying to save me money and protect it. Make it last. Charge me whatever you want." It's crazy. I think we need to continue this.

GM tip: put a sales process in the service drive 29:41

Dave Rogers: I agree. It's nuts. It really is nuts. It looks like we're buttoned up against the 30 minutes here, so we've got to end this one. I don't want people losing attention.

Steve Shaw: You mean people stop paying attention to us? I couldn't believe it. All right, well, let's get out of here, and I'll chat with you a little bit later. Oh wait, wait, wait. My bad. What's our GM tip of the day? Holy cow. Can't get enough of that.

Dave Rogers: They've probably checked out by now. But I would tell you: just like you teach the 10 steps to a sale to your salespeople, why not institute the five steps to a menu presentation? Put something in place. We talked a little about this last time: some service managers are technically oriented, process oriented, but maybe not sales oriented. Use your selling skills to help that guy train the advisors. I think that's one of the reasons, like you said, that stores stopped selling. We've promoted technicians, we've promoted people who are logical, Spock-like, and they're not salespeople, and they don't see the value in it. So that would be my suggestion.

Steve Shaw: Awesome. Great job. GM tip of the day, sponsored by that menu company to be named later. All right, man, I'll catch you later.

Dave Rogers: To be named later. All right, thanks, bro.