Oftentimes, businesses adopt a rewards program to thank their frequent customers and to encourage and increase the likelihood that they will return. While these are both excellent reasons to have a rewards program, a business must carefully consider how to structure the program and what to offer to not only promote engagement with their customer, but to also create meaningful incentives that make sense from a revenue standpoint.
If you don’t have a loyalty program, consider a recent study by Nielsen that surveyed 29,000 people in 58 countries. 60 percent of respondents reported that loyalty programs were available where they shop, and 85 percent were more likely to choose that retailer over another. The fact that most major retailers have loyalty programs should be enough to convince you that you should also have one. All of these companies can’t be wrong, or can they?
Where most loyalty programs fail is because they are not well thought out from the onset. There’s a balance that must be created between what makes sense for your business and what rewards will actually be attractive to your customers. It certainly wouldn’t make financial sense for a dealership to give away a car even to its most loyal customer, despite the fact that this would probably be a pretty desirable reward and would certainly ring the free publicity bell.
Here are a few things to consider when designing your loyalty program.
- Reward activities that generate new business – There’s nothing more satisfying or desirable for a dealership than obtaining referrals from satisfied customers. We also know that word-of-mouth is one of the most effective forms of generating new business. Consider adding to your loyalty program an appropriate incentive for new customer referrals by existing customers. Loyal customers bring in a lot of revenue over their lives so why not encourage and reward those same customers for assisting you in your customer acquisition efforts? Religiously servicing their vehicles with you is great. However, by rewarding customers for generating new or conquest business – sales or service – you turn that loyal customer into a willing and proactive brand advocate.
- Make sure your incentives aren’t at the expense of revenue –Take a close look at the profit centers of your dealership when selecting rewards for your customers. Don’t offer rewards to customers that eat into your profit centers. Recent statistics show that a well-planned dealership loyalty programs will work wonders growing revenues by offering only a 4-5% average loyalty “discount.” That is typically less than most direct mail teasers dealerships often send out. How the consumer perceives a smaller “reward” can be just as effective as a free oil change. But it is dependent on how it is packaged to the customer. If you generate a lot of revenue from oil changes, don’t offer free ones. Many dealerships choose their rewards from those services that are the most popular with their customers. However, they also tend to be the ones that generate revenue for the dealership. Consider identifying services that aren’t generating revenue and offering those as rewards. This way, your customers are still receiving value for their loyalty but it’s not coming at the expense of revenue. Many of today’s good loyalty programs will tell you exactly, by labor Op code, what services each member is using and those they are not. It’s the ones they are not using that should be incentivized.
- Choose rewards that promote engagement – The ultimate test of the health of your loyalty program is engagement by your customers. Again, monitor which rewards are being redeemed and which ones are not. Many times a small tweak of a reward will bring up its redemption and incremental revenue generation. Your loyalty offerings aren’t set in stone. If customers aren’t taking advantage of the offered rewards, your loyalty program isn’t working. It’s one thing for the customers to generate the points through frequent visits, and quite another for them to be doing so in an effort to earn one of your offered rewards.
The bottom line is that you want your loyalty program to encourage and reward people for their loyalty. If you’re not offering rewards that are desirable, your loyalty program has no meaning. In addition, if your loyalty program is rewarding your customers at the expense of revenue, it’s being counter-productive. A well-designed loyalty program will increase revenue, not detract from it.
One of the challenges that dealers and managers face when analyzing their marketing budgets is sourcing traffic. Do you find anomalies in your sources when reviewing the sourcing of your store’s traffic? Is every customer being reported in your CRM as generated via a Walk-in, Billboard, Auto Mall or AAA? AAA sounds great until you realize you don’t even have a program with AAA. So you take that source off and the first one becomes “Auto Mall.” And guess where most of your traffic comes from the next month…. You got it, the Auto Mall.
Dealerships have powerful resources available that, if used properly, can help them better manage their marketing dollars and use that money more effectively. Garbage in, garbage out, however.
Wise dealerships have processes in place designed to source clients. Most will ask this question during the initial customer interview on first contact as part of the salesperson’s “Meet and Greet,” while others do it in the box during the initial write up. Some dealers also do this while the customer is in finance as well. Quite a few dealerships, however, neglect to integrate this into multiple touch-points.
A customer may not want to reveal what brought them into the dealership because they had a poor experience with their first contact and are afraid they will get immediately ushered straight back to that person (which is often what happens). Maybe they didn’t get the answers they wanted to hear from the first person (i.e.: the price was firm, etc.). Regardless of why the customer doesn’t want to be honest, getting accurate information out of them is imperative in analyzing the effectiveness of your marketing budget. The reality is that what most customers report to the salesperson is different from what they report to the finance manager. Most dealerships will assume that the source reported in the finance department is most accurate since the customer has successfully completed a transaction and is less likely to have motivation to hide what originally brought them into the dealership. The purpose of multiple touch points and effective software is to increase the likelihood that credit for the traffic generation is accurately given to the proper source. If you don’t know the source, you won’t be able to analyze which of your marketing is effective.
Whether you actually have a giant inflatable gorilla or wavy tube guy as part of the décor of your dealership or not, I challenge you to add one (or both) to your CRM as sources. If you actually have one, install that. Don’t tell anyone; just add it as a source. Then sit back and watch what happens. It’s Interesting but a recent study conducted by Performance Loyalty Group indicated the majority of dealer customers were sourced simply from drive by traffic, and in some cases it was as high as 40%. It may be noted that none of the survey participants have an inflatable gorilla.
I guarantee you that you’ll start seeing customer traffic from the “giant inflatable gorilla,” regardless of if you actually have one or not. And this is a problem. How can you truly analyze your marketing spend without accurate results? Sure, Internet and some other types of leads go straight into your CRM so you know those are accurate. But I am sure that you also get plenty of showroom traffic that you may, or may not know the correct source for. Was it your website? Was it your radio ad?
You need to know this. Your software & database can be a more powerful tool for your store if you put timely and accurate information in it. It can help you truly analyze where your money is spent and can even help save you money by identifying poorly performing vendors. The use of unique call-tracking numbers in all of your marketing is also valuable in sourcing and is recommended for all of your marketing including traditional and online efforts.
Despite all of the software and uses of technology to assist in proper sourcing, you have to rely on your people to do their job and get you the right information. In the end, it will help you better manage your marketing dollars which, as a result, will help increase sales by making your marketing more effective. Salespeople are afraid to ask customers because they fear the dreaded “half-deal.” Their biggest fear is that they’ll have worked with a customer for hours and be right on the cusp of making a sale. But then the customer says they submitted a lead on the Internet, or spoke to someone on the phone. They’d rather not ask and, if this were the case, they’d prefer that someone else discover it.
In these cases, there exists “plausible deniability” for the salesperson. If the customer has never been in contact with anyone at the dealership or, if they have been and it goes unnoticed, they stand to get the whole deal. If someone does notice, they can truthfully deny knowledge of the customer’s previous interactions with your store. They still lose half the deal (potentially) but the opportunity to keep the whole deal is too tempting.
For this reason, you need to make sure that you have as many ways and as many opportunities as possible to properly source your marketing. If technology doesn’t accomplish this, make sure that customers are asked multiple times, by multiple people during different parts of the sales or service process. While the customer may not want to disclose where they came from in the beginning for reasons I’ve mentioned, once a deal is closed and they are in finance, they may be more willing to share accurate information.
This fear of “half-deals” is costing you money. You have software in your store to manage your customer relations and track activity. It also helps you make decisions that can cost (or save) you tens of thousands of dollars. Install processes in your store that mandate accurate sourcing from your salespeople and enforce them with real consequences.
If you don’t, you’ll probably find that a giant inflatable gorilla brings you quite a bit of floor traffic… even if you don’t have one.