Volkswagen dealers could increase retention if they would focus on car-age segments. Here’s how.
Let’s be honest. The biggest challenge in today’s business environment is, to stand out from the crowd and secure your customer base. Why do we hear everywhere UX, CX, and customer loyalty? First mover companies and thought leaders in the business sphere simply realised (yet again) that at the end of the day we sell to humans. Nothing will replace that solid customer relationship and connection which eventually will keep a business flourishing. The automotive industry is no exemption. An industry that traditionally sticks to the ‘good old ways’ when doing business, is struggling with the same: customer retention. We discover in this article why keeping customers with older cars is so important. Along the way, we will also give you the how — aka how to tackle the problem of low retention among older car segments.
The pain of Volkswagen dealers: Customer drop off with 3+-year-old cars
It is a commonly known fact among workshops that customers leave them after the warranty period ends in search of a cheaper place to service their cars. Additionally, it’s a problem that workshops have no hands-on digital system to keep track of the churn rate or to follow up customers trying to regain them back. The problem is that Volkswagen dealers are not there where their customers’ need is.
Revenue affected by car age segments at Volkswagen VAG
Based on Volkswagen VAGs segmentation, cars are broken down into 3 age segments:
Age Segment 1 accounts for cars between 1–4 years, Segment 2 for ages 4–8, and Segment 3 for ages 8+. These age segments are particularly interesting when we look at the aftermarket:
Usually, Segment 1 cars have approx. 38k km in with an active warranty over maintenance without wear and tear covered. This is the segment where 90% of the dealerships’ focus goes. On the other hand, money starts to flow out from dealerships when a car becomes 3+ years old (Segment 2 & 3) and the warranty ends. Segment 2 cars have an average of 38k — 77k km driven. Since warranty is the main driver of customer retention, people switch to independent and cheaper workshops. Customers become more price-conscious as their car’s worth half of the price and repair could become more expensive. Segment 3 cars which have driven between 77k to 154k+ km, starting to have their 2nd+ owner. This segment is the ‘sweet spot’ or the ‘gold-mine for every workshop due to its service and spare parts demand. The problem is, if customers have no loyalty to the workshop, they are a long time ago servicing their car elsewhere, in search of the cheapest option.
The bottom line is that Volkswagen workshops’ revenue increases exponentially with the age. The glue that holds the two together is actually loyalty. That’s the secret ingredient every workshop should strive for.
The older the car the more revenue
If the secret component of increased revenue is a loyal customer then the technology turning a regular customer into a loyal one is the connected car technology. By leveraging car data, at Connected Cars we are able to provide a digital aftermarket tool for workshops, to help to keep customers coming back even after the warranty ends.
Workshops are able to see cars’ real-time status, and seeing a constant flow of Service Leads they can provide a seamless experience to customers. Doing this simply by being at the right time with the right offer your workshop provides a service that is relevant and proactive towards the customer.
This is what our data provides also out of 4 years of experience and over 160000+ cars connected to workshops, globally.
Our comparison graph shows the difference in revenue between connected and non-connected cars broken down by age segment. While with Segment 1 cars the increased revenue comes from upsells, at Segment 2 and 3 it comes from loyalty. We can also see a huge difference between connected and not connected cars.
At the end of the day being busy without a clear goal is more counterproductive than what you are busy with. Since it takes approximately two Segment 1 cars to generate the same value as with a Segment 3 car, workshops should focus their efforts and resources better.
The takeaway
Dealers doing business with customer loyalty in mind is key. The road towards that starts first with understanding the significance of age segments. Doing marketing and aftersales based on that will help Volkswagen dealers target their marketing. In addition, using connected car technology will add the most important component of the maximized revenue, customer loyalty.
If you’d like to learn more and get a walkthrough in the Connected Cars Workshop tool, you can book a demo here.
