Suppose a sales manager at a car dealership presents their month-end report — overall volume is average, but gross profit per unit is down, and CSI scores have dropped by three points. The blame is placed on the new hires for getting their new footing.
This is a common scenario. Every year across the U.S., dealerships lose a significant amount of potential profits due to staff turnover. It’s a silent drain on revenue, resulting in missed upselling opportunities and a decrease in customer loyalty. Fortunately, dealerships can implement actionable strategies to better retain employees and boost customer loyalty and profits.
How employee retention drives customer loyalty
Across the U.S., 73% of automotive salespeople stay in their role for less than two years. That’s significantly higher than the national average and highlights common mistakes, both cultural and economic, that dealership owners make in running their businesses.
Employee retention is increasingly crucial. When an employee leaves, customer loyalty is at risk. High-performing employees develop direct connections and trust with customers. Their departure can break that trust and rapport, requiring customers to start over with someone new and making the sales experience feel impersonal and transactional.
Retaining employees, however, fosters deeper loyalty, as they become trusted advisors. This increases sales and makes customers more resistant to competing offers.
Staff turnover also creates knowledge gaps. New hires often lack detailed product knowledge and familiarity with dealership operations, leading to errors and slower service. This can reduce customer confidence in the dealership. When key employees are retained, trust is built and customers feel more reassured about their purchase decisions.
The hidden profit drains fueled by high turnover
High staff turnover costs dealerships more than recruitment fees — it erodes profit in various ways. For example, in service lane upsell failure, when dealerships and auto repair shops fail to upsell additional services or repairs due to inexperience in sales or poor communication, valuable revenue opportunities are lost.
Tenured service advisors build trust and have access to a vehicle’s history, allowing them to recommend legitimate, high-margin customer-paid repairs and maintenance. Inexperienced salespeople or trainees tend to stick to basic services, leaving thousands of dollars in potential weekly revenue on the table.
Another hidden profit drain caused by high turnover is front-end gross erosion. Seasoned salespeople can maintain a high gross profit margin thanks to their confidence, product knowledge, and ability to build relationships and sell on value rather than price. New hires, on the other hand, often lack these skills and tend to lower prices to close deals, shrinking the profit margins on every vehicle sold.
High turnover causes a bloated floor plan cost. An experienced salesperson has the ability to turn inventory faster. However, high turnover can lead to inconsistent follow-ups and weaker closing ratios — both have a significant impact on slowing down the sales process.
Vehicles sit on the floor plan longer, resulting in interest costs and lost sale potential. All of these factors can impact a dealership’s profitability.
How to retain top-performing dealership employees
Dealerships have not been immune to the recent Great Resignation, a trend in which huge numbers of workers are leaving their workplaces for better employment opportunities and wages. Dealerships that invest in training and development programs see lower turnover and a high profit margin.
These strategies must be carefully planned and executed. Dealerships that succeed in keeping talent prioritize building clear career paths with progression opportunities, certifications and skill development. For example, a technician can advance from a lubrication specialist to a certified technician, then to shop foreman.
Each stage should include specific OEM certifications, pay raises and increased mentoring responsibilities. Higher salaries should represent opportunities for advancement within the dealership, not incentives to leave for other employers.
To improve retention, dealerships should also reward teamwork through team-based incentives rather than individual commissions. Implementing a monthly bonus pool for the service lane, based on department profit or CSI scores, effectively encourages collaboration. Pilot schemes are also useful for determining which initiatives are most effective, allowing for data analysis before a company-wide rollout.
Dealerships that regularly engage with key employees tend to experience lower turnover. This proactive approach involves structured conversations — not to be confused with performance reviews — between dealership owners and top performers to identify what motivates them, the challenges they face and potential reasons for them to leave.
These strategies foster trust and community in the workplace and have been effective for dealerships that have avoided high turnover rates. For example, Bozard Ford reported an average employee turnover of less than 5%, which COO Ed Roberts attributes to creating a people-first culture.
Employee retention as the key to customer loyalty
A dealership’s greatest assets aren’t parked on the shop front. They’re the employees who drive revenue and growth. Dealerships should view employee investment as essential to long-term growth and retention. The most successful businesses utilize the results of pilot programs and study them against key metrics, as well as publicly recognize the workers who have contributed to their success. Engaged, stable teams are the key to building strong customer loyalty.
Source – https://www.cbtnews.com/how-employee-retention-drives-customer-loyalty-at-your-dealership/