LAWRENCEVILLE, GA -

Many automotive sales professionals mistakenly view car buying transactions as “one-offs.” They assume that the customer is unlikely to do business with their brand, or dealership, ever again.

But Black Book and The Appraisal Lane estimate that after factoring in the potential revenue from referral business, the lifetime value of a customer to a dealership is more than $50,000.

According to the joint white paper, titled, “The Value of Loyalty: Customer Lifetime Value in the Automotive Industry,” dealers can increase automotive customer lifetime value, or ACLV, by improving the trade-in process.

Black Book and The Appraisal Lane write that customer satisfaction in the automotive industry lags behind other industries.

The Appraisal Lane chief executive officer Jeff Risner said in a news release that customer experience is the most important “success differentiator” for dealers. The Appraisal Lane describes itself as a mobile app-based community of expert appraisers who put guaranteed cash offers on used cars.

“Lower margins, increased competition, and dwindling loyalty are eroding business,” Risner said.

He continued, “A better customer experience starts with a better trade-in process. By focusing on this, dealers can expand their share of a customer's lifetime value, improve CSI, and create future opportunities for sales, service, and referrals."

The two companies write in the white paper that using precise data to value a consumer’s vehicle is crucial toward building and retaining consumer confidence.

“Utilizing a 17-digit VIN decode helps dealers quickly and precisely appraise and value a customer’s trade-in,” said Black Book executive vice president, revenue Jared Kalfus.

He added, “In today’s data-driven environment, it’s more important than ever to have that precise valuation in order to maximize profit.”

The white paper also addresses how to eliminate pain points associated with the trade-in process, how to build trust with pricing transparency and how to increase consumer confidence by using the right data.

The white paper states that getting as much profit as possible, at the expense of customer satisfaction, is “the root of what ails the automotive customer experience today.”

The paper highlights CarMax as a company known for providing an exceptional customer experience. In addition to appreciating CarMax’s hassle-free buying process and vast inventory, customers like that CarMax will guarantee their appraisal and buy their vehicle even if they don’t buy a vehicle from CarMax.

“CarMax proves that when you bring value to consumers, they bring increased value to you — with the potential for higher returns on immediate transactions and higher returns in the future through repeat business and referrals,” the paper states.

It continues, “The lifetime value an automotive customer brings to brands and dealers can go much further than a single purchase.”

To come up with the “lifetime value of an automotive customer,” the paper calculates total lifetime gross per unit profit, including F&I, by determining the average number of car purchases a consumer makes in his or her lifetime, and the average retail gross per unit profit of the vehicles he or she buys.

The calculation then adds potential revenue for service appointments and extracts advertising cost per vehicle sold to arrive at total net automotive customer lifetime value, or ACLV.

The paper concludes by stating that automotive customers are valuable commodities to brands and dealers.

And their referrals are even more valuable, the report states.

That’s why it’s so important to offer an exceptional trade-in experience.

“Dealers can do this with consistent valuation methodologies, pricing transparency, data backed by science, and personalized appraisals,” the report states.

The report concludes, “With lower margins and volume, increased competition, decreased brand loyalty, and changing buyer behaviors, customer satisfaction is — and will continue to be — the single most important success differentiator for businesses in our industry.”