Many dealerships price prepaid maintenance programs (PMPs) high enough to shatter success from the start. Thinking that the real benefit comes from profit built into the plan along with forfeiture, they create a price point that’s prohibitive. While some new buyers will take the bait, the typical consumer, when asked to pay $895 for three years of scheduled maintenance, simply adds up the cost of nine or ten oil changes and a half dozen tire rotations and says, “Thanks, but no thanks!”
Successful PMPs are priced in such a way that even if a customer pulls out a calculator and – looking at the service menu – adds up the pricing for oil changes and tire rotations, the total represents at least an equal amount to what the F&I manager is charging them for the PMP.
Dealers who understand the full purpose and potential of PMPs price them well below the actual retail value. Instead of trying to turn huge profits in the F&I office, these dealers focus on the long-term potential of each customer. When incremental upsell can average over $90 per visit, dealers quickly see revenue increase. Statistics also show that up to 83% of customers will repurchase a future vehicle if the dealer can keep them returning to their service lane for regularly scheduled maintenance. With these two factors alone, even a PMP given away for free would more than pay for itself by the end of its contracted term.
With this type of program properly priced and executed, PMP sales penetrations can reach up to 50% or more, providing dealers opportunities to continually win over their customers.
Does your dealership sell PMPs? If your penetration is less than 50%, you could be pricing them too high.
What price range do you think is fair for a pre-paid maintenance plan? What would your plan include?
What percentage of customers return to your service lanes after purchasing a vehicle from your dealership? How do you track it?
Businesses grow either by new customer acquisition or by getting more business from their existing customers. For postcard mailings, advertising and even online marketing, many experts say a 1% response rate is good. When you compare the costs of marketing to new customers with the cost of marketing to existing customers, it’s much more cost efficient to market to existing customers – the old adage is, it costs five times as much to gain a new customer than it does to keep an existing one.
I’d like you to compare the costs of two recent marketing campaigns: one “general” campaign directed to potential new customers, and one targeted campaign to existing customers. Which resulted in the highest response rate? If you’re getting a high response rate from existing customers without the same revenue results than a campaign targeted to new customers, you may need to sweeten the offer. Not by offering one-time discounts or coupons, but by offering savings and rewards via a loyalty program, or offering “peace of mind” with a pre-paid maintenance program. These programs are designed to encourage existing customers to purchase more frequently.
Which group of customers do you think provides a greater return, new or existing? Why?
How do you track which group adds more to the bottom line?
What do you think would excite your customer more? A 15% discount on a tire rotation or being notified that they have been elevated to VIP status in your loyalty rewards program? You may be surprised that just as many customers respond positively to intangible rewards, such as an elevation in status, or feeling like they contributed to a good cause, as they do to monetary rewards. Think of that movie “Up In the Air” where George Clooney’s character was laser-focused on making the “10 million mile” club. And what did he get for it? A cool new card, a glass of champagne and a 1-800 number with an operator that greeted him by name. Some younger people are really into their social media status: think of people who visit restaurants so they can earn another badge on Foursquare, or shell out their own dollars to buy seeds to elevate their Farmville status.
Yet many marketers still focus on providing rewards only in the form of tangible points and dollars. This is key to every program, of course, but it wouldn’t hurt to include intangible rewards too. One example of this is the outdoor retailer, REI. The company uses social responsibility as a type of reward for its loyalty members, who become co-op program members. At the end of every year, REI pays them a dividend and outlines how program participants have contributed to the greater good just by being a member.
What do your customers care about? If you are involved in community activities that you’re proud of, maybe there’s a way to incorporate customer involvement through your loyalty program. In addition to discounts, you could do a promotion such as “for every dollar loyalty members spend, we’ll donate X amount to (your favorite cause).” Combining intangible rewards with tangible rewards is a great way to boost awareness of your loyalty program. This may encourage those customers that don’t respond to discounts or dollars in the same way they do to increased status or a good cause.
What other types of intangible rewards do you think customers respond to?
What suggestions do you have for incorporating intangible rewards into your loyalty program?
Americans are participating in customer loyalty programs more than ever, and their primary motivation is to save money, according to a recent survey conducted by Polaris Marketing Research Inc. More than 1,200 people were polled, with 93% saying they joined loyalty programs in order to save money. The second highest rated reason was “for the rewards,” with 91% of respondents saying that’s why they joined. “I am a loyal customer to that brand,” was the second to last reason, with only 66% of customers indicating that’s why they had the card. Bottom line? In order to entice customers to join your loyalty programs, start by offering significant savings and fun rewards, then work on building their brand loyalty over time.
What are your loyalty program members’ favorite savings?
What are their favorite rewards?
In the virtual world, merely unlocking the front door of your online store is hardly enough to bring in shoppers. Web surfers aren’t curious enough to open just any door—they need an incentive to come in and wander around, to tell their friends about what they see there and to come back for another look later. While great products/services and outstanding customer service are key to success, with a plethora of options open to consumers, smart and engaging incentive programs can be a big boost for business. Using points-based incentives to spur repeat customers capitalizes on two irresistible consumer forces: it is psychologically rewarding and it represents an evolution from the age-old idea of offering a reward to customers for engaging with a brand and remaining loyal.
The concept of incentivizing loyalty has grabbed a solid hold in the online marketplace and has become that “next big thing” that marketers always attempt to leverage. It may involve competing on social sites to earn badges, a top spot on a leader board, virtual currency, a claim to a geo-location, or simply a gift card. Recently, this phenomenon has evolved into a system for earning loyalty points, just as a shopper might earn reward points for using a credit card.
While loyalty incentives have been around for a long time (think airline miles and travel rewards), it has recently taken on a form to make almost anything inherently more engaging. Today, consumers can engage in more ways than ever with a brand, which means companies have more ways than ever to reward customers and visitors. Points can be offered for visiting a website, inviting friends to check out Facebook content, Tweeting the answer to a question, checking in at the store’s physical location, or using platforms such as Instagram or Pinterest to demonstrate engagement. By incentivizing such engagements, brands create a win-win strategy for both consumers and businesses. With more options than ever before, copious amounts of internet-powered competition and noise, customers need clear answers to, “Why you?” And it’s a fair question.
The key is to provide reasons for customers to pick one business over another, to return and to share a brand’s content. The services that enable these promotions and points programs today have enrolled hundreds of websites that are engaging with tens of thousands of loyalty-program members. Anywhere from 50 to 100 percent of these members have repeated their engagement with the brand’s site, and they tend to bring others to the site with them.
Loyalty is no longer is focused on a single transactional moment, and transactions no longer are solely monetary. Rather, loyalty programs can become sustaining social programs in which consumers are tweeting, posting, sharing to social streams, walking into stores and checking into geo-location sites. This “transactional network” interconnects the brand’s presence with the consumer’s social needs, creating valuable layers of contact and information, as well as a loyal population of fans.
Source: Loyalty 360, July 3, 2012. Author, Ranjith Kumaran
In what ways are you offering points to your customers?
What reasons do customers pick one brand over another?