Rodger Lau, vice president of the six-franchise Jeffrey Tamaroff Automotive Family in suburban Detroit, said he knew that retaining customers was far more cost-effective than fishing for new ones.
Yet for weeks, Lau resisted trying an online tool that would plumb the dealership computer data and identify customers in the best position to buy or lease again. These customers typically have owned their vehicles for many months and have high equity in the vehicles. Equity is the market value of a vehicle minus unpaid loans.
After getting over his inertia last June, Lau said he used a software tool called Deal Activator from Dominion Dealer Solutions to send mailers to 500 prospects who had been Nissan customers of Tamaroff's store in Detroit's eastern suburbs.
Lau's main pitch: The prospects could, with a trade-in, buy or lease a new car for the same or lower monthly payment. The test was a huge success.
"We sold 32 cars from the mailer and got back 28 late-model cars as a result," Lau said.
"We turned around and retailed 16 of those trade-ins in the first 30 days at an average gross profit of $2,200 a car."
Software that searches through a dealer's roster of customers saves the sales staff a mountain of tedious work. The tools can instantly calculate the variables to determine a likely candidate for a sales offer, including the vehicle's residual value, the owner's equity, remaining term on the lease, interest rates on a new vehicle and factory incentives.