Why personalised service is vital to good customer outcomes and loyalty in the dealership model.
Much has been written about the demise of the car dealership, the redundancy of a distribution model that was conceived decades ago and has opted to iterate vs transform. The model is resilient despite perpetual criticism about the level of customer satisfaction with many of the sales and aftersales processes. Digitalisation has offered a degree of innovation but stops short of a fully online direct sale in most cases with OEM adoptions of Agency sales models seemingly being postponed or cancelled. In a sense a fuller digitalisation of the car dealership has stalled and left us with an omni channel approach despite the inherent complexity of such a system. We essentially have a hybrid model, the same “bricks and clicks” strategy spoken about almost 20 years ago and one that has therefore foregone any meaningful productivity gains or improvement in customer satisfaction and led to a decline in loyalty to brands and dealers.
Why is this the case?
The reasons for this are multiple and could be the subject of a much larger critique than we intend for this article.
- A lack of imagination, creativity and risk appetite from dealers and OEMs regarding how products are distributed or serviced.
- The low margin returns available in the sector which inhibits risk taking and adequate capital investment in digital systems.
- A highly competitive product environment
- High levels of fixed and il-liquid costs in the dealer networks
- Few viable alternatives
- The failure of highly capitalised disruptors to develop a sustainable distribution approach without physical dealerships.
- Legacy systems and the complexity of systems integration
However, perhaps the most important reason for the persistence of the current model is that – IT WORKS.
It works for OEMs in that it allows mass distribution of products into the market even when natural demand is lower than supply. It works for investors in the franchise dealer model as they can achieve returns that have been relatively stable albeit low in comparison to other capital uses. Finally, it works for most customers in terms of providing convenient access to products and services.
Customer satisfaction
Whilst we can generalise that the model works for customers, satisfaction with the experience is at best static for most OEMs. Around 8.5/10 customers surveyed immediately post sale of a new vehicles can be considered “net promoters” with aftersales customers typically returning a slightly lower NPS around 75%. These are of course averages, but OEM standards incentives tend toward a relatively tight spread around the average. The problem with this is that there is an increasing disconnect between these scores and repurchase loyalty or retention. Customer experience in Automotive retail is flatlining and has been for years. Loyalty is decreasing as evidenced by the ability for new to market OEMs to build market share quickly at the expense of incumbents. This fragmentation is set to continue and indeed accelerate with the arrival of more brands and products from China who seek to emulate the sales growth of MG.
This places a far greater emphasis on retaining customers and acknowledging that product excellence, differentiation or brand will not play as great a role as they have in past decades. There is therefore a strong argument to be made around improving customer experience not only due the cost efficiency of retaining customers versus conquesting new ones but also because the technology now exists to better support that process.
What customers really want/ value?
In order to get a good sense of what customers want we have reviewed publicly available data for car dealerships in the United Kingdom. Trustpilot has the highest response level for customer feedback in the UK car dealership sector and whilst the data is not completely “open source” it can provide a good insight into common themes that underscore good customer outcomes. I have examined the data in the “Car Dealer” category to gain an insight into what the best dealers accomplish and whilst we cannot directly correlate this to any better retention outcomes we believe that it must contribute positively.
Customers can rate dealers on a 1-5 scale. They are encouraged to leave an explanation regarding their score and can personalise the result to a branch which helps give better intelligence to dealer groups with multiple locations. Below is an example of the AI summary of a dealer groups Trustpilot feedback.
What makes dealers good?
We can only appraise the verbatim comments from customers but there is plenty of data. Trustpilot provide an AI generated summary of the reviews. As with a lot of AI this can tend towards generalisations and non-quantitative assessment, but it helps identify key themes and having reviewed hundreds of individual comments we can agree on some of these.
Specifically, we would like to highlight the following aspect.
“Consumers value the excellent customer service they receive, with many reviewers specifically mentioning individual staff members who went above and beyond to accommodate their needs.”
Repeatedly customer mention by name the employee that helped them and in terms of genuine affection.
So, what does this tell us,
Customers value personal service.
They value human interaction and feel motivated to give feedback whether solicited or not. This is why the dealership model persists. At its best there is no substitute for well informed, polite, attentive and courteous dealership staff who are motivated to help and support customers in order to facilitate a sale.
Technology as an enabler
Done correctly the current dealership model can deliver excellent customer service. It would however be complacent to interpret the Trustpilot data as fully representative. The vast majority of reviews originate from car sales transactions and not those in the service arena. The aftersales experience is more important in influencing re-purchase loyalty and securing service revenues beyond the OEM warranty period. Service plans have arguably been the best retention tool in recent years but they have a lower penetration in the Used market and ultimately you still have to ensure that the customer experience is exemplary and something that will encourage customers to remain loyal to the dealership or dealer group.
Removing transactional friction is the primary consideration for improving customer experience in aftersales. Dealers have invested in technology to support this mission and with good success. For 15 years the sector has added transparency to the vehicle health check process by including technician POV video. Key drop and online check-in is also becoming more common. However, it is vital that there is an evaluation made prior to any new technology adoption.
- ROI – how is this actually being calculated?
Every CRM optimisation claims more leads, more productive leads. It’s vital that you also evaluate if the new methods introduce more “friction” for either customers or staff. Friction always has a financial consequence and needs to be estimated and deducted.
In an industry of historic low returns (1-2%) it’s easy to fall into thinking that stacking marginal gains is a credible way to securing profitability. It really isn’t if you are introducing more complexity to your processes, more stress to your staff and therefore less care for your customers.
- Systems Integration – not more spreadsheets.
Many businesses are run on a series of spreadsheets. Data arrays that are downloaded from the Dealership Management System (DMS), reconfigured and then often printed out for user convenience. In 2025 there has to be a better way and there often is. However, integration with key systems is becoming a non-negotiable. Any systems enhancement that requires manual data input or double keying is not supporting a frictionless employee or customer journey and should be disregarded.
- Partnership and Continuous Improvement.
Are you a short-term investor looking for a quick return? Are you engaging with a third-party provider to for a strategic partnership? Dealers should evaluate their motivations and assess vendors on the long-term value they can bring to a business, it’s employees and customers. Today’s solutions are tomorrow’s baseline and it’s vital that clients look beyond the initial problem fix and towards a longer-term roadmap that shows continuous improvement and the ongoing reduction of friction.
Summary
The best car dealers will recognise that their future depends on delivering consistently excellent customer service. Feedback overwhelmingly highlights the value of personalisation and great human interaction. This is where dealers win and remain relevant in an increasingly digitalised, online world. However, unlocking this level of service depends on the ability to remove manual, repetitive and friction filled process. The use of technology to liberate employees to have more time to build rapport and give genuine personalised service will surely be the differentiator for car dealers who wish to succeed in the next 10 years.