John Carmichael, Chairman and CEO of City Buick/Pontiac/Cadillac in Toronto, is a convert. In fact he is almost evangelical in his enthusiasm for CRM - Customer Relationship Management. "You can gain a whole bunch of instant loyalty by getting into this," he says. And he speaks from experience.

We'll let him tell the story just as he told it to us.

It was 1993 when I first read the book One to One Futures, by Martha Rogers and Don Peppers. It was about managing your customers one at a time and it struck a chord. Now it has become a bible for us.

We had gone through a downturn in '88-89, but we were coming out of it. Like a lot of dealers, we were trying to gain an understanding of how to build a relationship with the customer that amounts to more than just waiting for them to come into the store. Coming out of a recession, you come to understand just how vulnerable you are.

At the end of the day, our whole issue was, "how do we get to know our customers - in other words build a relationship with them - and how do we respond to what they are telling us so that we can keep them as customers?"  That's where it all began.

In the eighties, you could run an ad and fill your showroom; you couldn't make a mistake. We spent a fortune in newspapers and on the radio and in mass marketing - the old shotgun approach. Then we hit the slump in the nineties and we began to think about how much it costs to bring somebody new in, versus the cost of keeping a customer - even one who is unhappy.  

So we started calling customers, talking to them one at a time.

Building relationships, one customer at a time

That's when my wife Kerry got involved. She had been in real estate and she understood customer relationships. She had an interest in the company and got turned onto the fact that we could build this business in a way that would benefit us in the longer term.  

You can build a dealership with bricks and mortar but that's only a small part of the equation. Building relationships is the large part of the equation.

What we did was really basic: nothing slick, nothing fancy, a lot of hat-in-hand. Very humble. We wanted to know whether we were doing it right or not, and we wanted it warts and all. We weren't looking for bouquets.

We phoned lost customers, whom we hadn't seen in a long while.  People would hang up on us. They'd tell us we were a bunch of jerks - "you screwed me for this or that" - and we would say, "Hold it, before you hang up. I understand that we've let you down.  But tell me, I want to know... I'm hopeful I can recover you as a customer, but if I can't, at least I can do something better for the next guy."
 
So we were able to build a model where we quantified the cost of holding somebody, even somebody who was angry with us, who knew the brand and knew our name. We found it was far less expensive than trying to reach someone who had no idea who we were.

For sure, the greatest payback came from our existing customer base, even ones who hadn't been in during the last six months.  We had a much better chance of bringing those folks back than we did somebody who has been away for 18 months.
 
Learning CSI by the book

CSI was just becoming the buzz-word of the day when we got started. I guess you could say we were early adopters.  We bought in early to the idea that if we improved CSI, it would improve the growth of our business. 

From reading the book, and developing our own understanding, we started to apply a CSI thought process; we decided to go to the people we were servicing every day.  We weren't selling anything - it was more a passive approach than anything else.  "We are just calling you up to make sure we did it right, and if we didn't then let us fix it."  We started to aggressively pursue every single customer that was in our service and body shop, then applied the process to new and used car deliveries, then came back to service again.

By then, satisfied with the success of the passive approach, we began to use the CSI calls to become more productive in terms of booking service appointments, and doing some prospecting for sales. That was all within the first year-and-a-half.

Formalizing the process

Our approach was very much ad hoc at first, but within the first year we got aggressive about building systems, and we put some money into it.  Kerry took it on as her project, and we hired a couple of people for the phones. Initially, we were just using our ADP database, but after some research to establish compatibility, we were able to link it with a commercial Gold Mine contact-manager program, using software called Auto Nugget, which we developed ourselves.
 
We then had a database that allowed us to keep all our customer comments, and all the history of the communication and the relationship. It wasn't just a three-line thing; it was everything that was said, every wart and pimple, and that's what really drove it.  Gold Mine became the foundation and we started to expand on it it. We even hired a professional to come in as a consultant from the call-centre world. 

Matching the person to the job

Along the way, as we did more and more service stuff, we noticed that the people who were doing a good job on the CSI side were very empathetic by nature. They bought into the customer's feelings and they'd say, "Well, I'm going to get this fixed!"  I started getting e-mails from my own people saying, "You won't believe what you did to this poor guy." But they weren't doing a very good job of booking service appointments.

One day it occurred to me that if we found some sort of personality test that could tell us how these people think, versus somebody who might phone a cold list and book an appointment, they would be two totally different people. The light went on for all of us.  So we hired a consultant and tested our people and that was exactly the case. If we were going to do the appointment bookings and pre-sell service over the phone, we decided, we would need to do it with a different type
of person.

We found a couple of real ice-in-their-veins types, with no emotion whatsoever. We called it the Norman factor. Norman was a car jockey who wanted to become a service advisor, and when we tested him he showed no fear at all; not  about making the call, nor about dealing with rejection. The word just wasn't in his vocabulary.  We hired him, and after three-to-six  months it was phenomenal what started to happen.  We could see an incredible gain in our service business. 

With that knowledge we brought in a consultant who helped us hire some of the right people for the call-centre, and to drive its productivity. He worked with us for about six months and our numbers really started to jump. 

Clearing the hurdles

By far the biggest hurdle we had to deal with was organizational resistance. It was huge. And it was a control thing.  Service advisors, for example, didn't have confidence in unskilled telephone people making calls to book appointments and sell service.  We put our call operators on the floor to shadow service advisors and learn from them but it was still difficult to gain their confidence.  At the end of the day it happened because we mandated it.
 
Over the years, we tried consolidating our call-centre with some other dealers, and we tried contracting it outside, but neither approach worked as well for us. Now it is back in-house - back where it started. We have six people working it, and we pay them an hourly rate. Of course, we have much better data management today.
 
CRM has become a norm, a way of life for us. It's where we put our focus and our energy - more there than anywhere else.  I've got more faith in that than I would in a newspaper ad, hands down. I know how it will work.

It's a tough sell getting car sales representatives to manage databases.  But if they ever figured it out and got committed to it, they would never look at a showroom floor again. Go upstairs, sit in an office and just call.

The call-centre operation serves different parts of the business in different ways. For example we do our CSI calls for both new and used vehicle delivery, and certainly any time somebody is in here for service we call them to make sure that we have looked after them. If not, we respond. On the sales side, we make a variety of different customer contacts to draw people in - perhaps a promotion or a private sale. We might send a mailer to them, for example, then follow up by phone to confirm their invitation and try to ensure we get them into the store. Lease retention is all driven by telemarketing and database management.
 
And there is still a lot more we can do. Although there are a lot of hurdles, with privacy and anti-spam regulations and the like, e-mail is the next frontier.

Benefiting the bottom line

Because of our CRM focus, we have been able to cut back significantly on advertising and some other expenses. Most sales people will tell you that if you don't have an ad you're not visible, and if you're not visible you've got no customers. But today, there is a tonne of customer contacts that come through the captive finance companies and the banks, as well as our own databases. If you work the lists day in and day out and get good at it, you can build a thriving business out of it.

In our case with CRM, we saw the business growth.  When I look at other dealers now, and see them growing their customer-paid labour sales, I recognize that they are finally getting the same religion we got. But they are doing it ten years later.

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