The Volkswagen Group
Case Study: Volkswagen Loyalty
From launching cars to keeping customers
Situation
VW grown to 3rd largest UK car brand – need to move from acquiring customers to keeping them too
But the natural focus is on launching new cars, not on customers
Insight
Insight 1 – from customer immersion, people angry about cost of servicing. Management had been aware but not realised the importance, and problem off-puttingly hard to solve.
Insight 2 – from parallel with Rolls Royce Aero Engines’ move from selling jet engines then servicing them, to ‘power by the hour’. If in VW’s shoes, change how cars paid for.
Solution
Many useful outputs. One example is creation of service plans changing cost from ~£550 over 3 years to £200 one-off initial payment. Customer pleased and will now service in the dealer network for whole period. Analysis showed retention uplift when service in the network high, and business case showed investment in reducing servicing prices paid back. For VW, solution from a 3 year ownership-cycle business case, not previously considered
Result
VW retention rose from 42% to 56% over 3 years. About half of this is attributable to new models being introduced, so could assume the balance affected by loyalty-related initiatives and other improvements. The value of this is approximately 7% of 90,000 private car sales per year, or £79m pa turnover. In addition, penetration of finance sold through VW has risen, as have sales of the fixed price servicing package, producing additional revenue.