In 2009, dealerships (rooftops) and franchises (brands) in the U.S. diminished by approximately 8 percent — 1,603 rooftops and 3,300 franchises, the largest decline in the 19 years Urban Science has been collecting the data. As a result, over 3 million vehicle owners have become “orphans” in search of a new dealership to meet their sales and service needs.

While orphans are a customer retention challenge for OEMs who want to ensure they stay within the family, they are also a conquest opportunity for competitive brands — particularly if the customer’s dealership merely lost its franchise but is still in operation selling the competition. One thing is clear — everybody wants to give the orphans a new home.

Whether you are trying to retain orphans or conquest them, there are three things you need to focus on to improve your chances for success.

1. Factor in customer convenience

Customers want convenience. It’s important to assess how far they are willing to go when estimating the likelihood to keep or conquest an orphaned owner. Market assessments prove that each market varies in terms of the competitive landscape and proximity to the next closest dealer. As the map below shows, the next closest dealer may indeed be a competitor.

OEMs trying to retain orphans need to understand the proximity of their orphans to both remaining dealerships within their brand umbrella as well as the competition, and then use that understanding to communicate to orphans accordingly. In the map below, Dealership A (indicated by the yellow box) is closing. Remaining dealerships of the same brand are shown in light blue, dealerships of a sister brand within the same OEM are in red, and competitive brand dealerships are in green. The majority of the closing dealership’s customers (represented by the blue dots) would find one of the sister brand’s dealerships more convenient and, in some cases, competitive dealerships would actually prove most convenient. The parent OEM should take this into account when assessing the likelihood of retention, based on how it chooses to reassign those customers within the brand umbrella.

Finally, opportunities must be assessed on a market-by-market basis, given the differences in the competitive landscape for each. In the example below, the orange bar indicates the closing dealership and the green bar indicates the next closest dealer in the same brand. A relatively small change in distance of a .8 kilometre produces different results in terms of the impact on customer convenience. A .8 kilometre impact in customer convenience in Market 1, for example, has little effect. However, a .8 kilometre change in Market 2 affords the customer five other competitive options before reaching another dealership within the same brand. Additionally, it is important to note that the benchmark for convenience varies by market. In Market 1, customers drive an average of 11.75 kilometres to get to the closest dealership (Brand D), but only 5.8 kilometres in Market 2.

Ultimately, this may mean providing sales and service offers to compensate for the relatively greater inconvenience customers face to stay loyal to the brand or OEM. The competition, on the other hand, can capitalise on the greater convenience they might now have by proactively reaching out to orphans through increased local advertising or via direct mail campaigns to conquest lists which are available for purchase.

2. Develop a cohesive, targeted communication strategy

For brands trying to retain orphans, simply notifying the customer that their previous dealer has closed and introducing them to their new dealer is not enough. While some customers may be intensely brand loyal and therefore willing to travel a greater distance to stick with the brand, many will be won over by offers from the more convenient competition.

To improve their chances of retaining those customers, OEMs should create targeted campaigns based on the data and insight they have about those customers, and share that data and insight with the newly assigned dealer. This will arm the dealer with the information needed to create targeted retention campaigns. For example, most OEMs know whether a customer is brand loyal, whether they have just purchased a vehicle or are further along in the vehicle ownership cycle, and in some cases, whether the customer has traditionally gone to the dealer for service or not. OEMs can segment customers into actionable groups and develop relevant messages and incentives for those customers. For in-market customers, a variable purchase incentive amount, based on convenience and brand loyalty measures, may be a good approach. For more recent purchasers, OEMs might focus on variable service offers. In addition to corporate campaigns, OEMs should consider developing targeted, turn-key campaigns for dealers to leverage. By sharing rich customer data, insight and communication plans with dealers, proactive OEMs can create cohesive, targeted campaigns to keep orphans engaged with their brand.

On the flip side, brands looking to conquest orphans have employed many tactics to win them over. Some have offered trade-in incentives and service deals via local advertising and direct mail to purchased conquest lists. Others have proactively hired sales personnel from the closed dealership/franchise and actively worked their rolodex. Winning conquest strategies will also employ a targeted, comprehensive communication plan from both the OEM and dealers, taking into account relative convenience as well as any insight available regarding the orphan’s vehicle lifecycle stage.

3. Measure and optimise marketing plays

Once a strategy is intact, development of consistent metrics assessing losses and gains to refine marketing efforts is essential. Analysis of response rates from each campaign, and assessment of the distance customers are willing to drive for sales and service in order to inform the next round of messages and incentive offers, is just one of the many ways to measure success and identify if marketing tactics are working.

Whether you are looking to retain your orphans or conquest the competition’s, success will depend on making sure you take into account the customer convenience landscape by market, leverage available information to target the right offer, and continually optimise those offers over time.

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