Dealerships today are continuously seeking new ways to acquire new customers. Endless services and platforms pop up almost daily that offer businesses new ways to reach out to the world and attract new customers – whether that’s through online media, social media platforms, mobile ads or database mining. The problem is that many businesses concentrate far too much on leveraging other companies’ data to identify, segment and target potential new customers; but ignore the most important data in existence – their own.
Loyalty isn’t something that can be bought and a well-designed loyalty program shouldn’t be expected to do that. A great loyalty program, in fact, shouldn’t be viewed as a customer acquisition tool at all. People shouldn’t start doing business with you simply because you have a loyalty program. If that’s the only reason they do, you’re probably having a tough time retaining customers in general. Loyalty begins with an interaction and then a soft relationship and is generally something that is earned and with proper engagement it will certainly grows stronger over time.
The best way to start earning customer loyalty is by focusing on first person data – yours. The data you collect from your in store systems can provide critical insights to drive better, and more frequent, marketing and messaging decisions. Mine it regularly and strategically. Your DMS and CRM are both full of information that will assist you in identifying the three main groups of people that you should be focusing on
- Your existing loyal customers: This is the group of people that have been doing business with you consistently over a period of time in some cases maybe even years. It may include people who have purchased multiple cars with you and/or people who are consistently servicing their vehicles with you, regardless of where they were purchased. Through your sales and service records, it is very easy to identify these people. These are your Tier 1 customers and the foundation of your business. Loose a Tier 1 customer and it is very difficult and costly to replace them not to mention their lost revenue.
- These existing customers whose loyalty you will need to earn through timely engagement: This group of Tier 2 customers include customers who have purchased vehicles from you but may or may not be utilizing your service department on a consistent basis. Identify these people by looking for service records of customers who are getting warranty work completed, but not regular service. There may also be customers who only get regular service when they bring their vehicle in for warranty work. Additionally look for customers who have inconsistent service records with you. Maybe they have their 10,000-mile service completed with you, but did not visit you again until their 30,000-mile service.
- New customers that you can begin earning loyalty from: This group includes everyone who purchases a car from you, (new or used) as well as all new service customers. Pay close attention to customers with really low mileage vehicles that were not bought from you. Chances are that you are the closest franchise dealer to them, so they have a high-percentage conversion into becoming a loyal customer. You may not have earned the vehicle sale, but that doesn’t mean you can’t keep the customer.
These are three very different groups of people and you must tailor your retention marketing and engagement activities appropriately. Think of these three groups in terms of relationships. You’re married to the first group. You’ve been on a couple of dates with the second group. You’re on a first date with the third group. As any married person knows, interaction on the first date is much different than after you’ve been married a few years. It’s natural to act different on a first date. You don’t know each other very well, but there is a potential for a relationship. As each date progresses – first date becomes a second date then a third date – each party becomes more invested in the relationship and more familiar with how they should act with each other, and what to expect.
Sadly, a high percentage of loyalty marketing has messages that assume the customer has already married them. Segment these three groups and tailor your loyalty marketing to be appropriate for each stage of the existing relationship. This will help you find increased success in progressing a customer down the path to marriage.
Imagine having customers so loyal that they are willing to pay you just to do business with your dealership. Do you think a customer that makes an investment in your loyalty program would be more or less likely to remain loyal to you and your brand? Three companies have successfully managed to accomplish this and in a very big way.
Movie theater chain, AMC, has a loyalty program called “AMC Stubs.” They charge their customers $12 per year to be a part of the program. In exchange, members earn points for purchasing that $20 tub of popcorn that they can use towards future rewards (like more popcorn). In addition, they waive service charges for any tickets purchased online and provide a VIP “red carpet” entrance for their best customers. If you were a moviegoer and paid to be a part of AMC’s loyalty program, the chances that you would patronize a different movie theater chain are greatly diminished. These consumers have essentially proven their loyalty with their wallets. AMC’s loyalty program isn’t any different from any other loyalty programs. Spend money. Earn points. Get rewards. Yet customers are willing to shell out $12 per year simply to be a part of it. It was definitely a risky move for AMC to make customers pay to be a part of their program, yet it makes sense. There are many companies that have loyalty programs. Let’s take the example of grocery stores. How many grocery store loyalty cards do you own? Does owning one make you more likely to shop there, or do you simply use loyalty card at the store when you were already planning on shopping there? The point of a loyalty program is not simply to reward customers for their business, but to also encourage future business. By charging the modest fee that they do, the customer is now more likely to choose an AMC theater when they go to a movie, rather than simply using the loyalty program when they ended up at an AMC movie theater.
The second company that does this is Amazon. Their Amazon Prime membership, while promoted as a membership, is considered by many experts to be a loyalty program. Their fee is definitely much more expensive; ringing up at $79 per year. For that fee, members receive free two-day shipping on any items fulfilled by Amazon, and access to a vast library of streaming movies and book rentals for Amazon’s Kindle e-reader. I guarantee you that the customer who spent $79 to participate in this program looks to Amazon first when shopping. Amazon has expanded into so many markets that one could just about fulfill all of their needs on the site. With free 2-day air, no sales tax in most states, and the fact that customers don’t have to wait long to receive their merchandise, it certainly creates a desirable value proposition. Amazon is now experimenting with same-day delivery service in several markets and recently announced delivery by drone (although they did concede that this was probably a ways in the future).
The third company we have all heard about is the Starbucks Steel Gift card. While it costs $450.00 to purchase, you do receive $400.00 in prepaid coffee products. Incidentally, it sells out within minutes each year that Starbucks offers it. The remaining $50.00 is put towards you very own Gold Starbucks Loyalty Membership. It is very similar to the American Express model which has been a huge success for many years. How many of you pay $450 for your American Express Platinum Card? While you are thinking about your existing loyalty program, or if you are contemplating a new program for your store, it might be wise to consider packaging some simple services into a pre-paid loyalty offering. Then watch what it does to your service spend and frequency of customer visit.
It’s certainly intriguing to watch, and an innovative idea. If you can get a customer to pay you for the privilege of doing business with you, or to be a part of a program that offers certain perks, you’re well on your way to creating an effective loyalty program that increases revenue from those customers