Loyalty programs are nothing new to retail. In the beginning, most consisted of simple punch cards or other basic means of tracking customer transactions. As technology improved, many programs became digitized with key tags, cards and other ways for retailers to keep track of these transactions, aside from purely manual means.
Then came big data, enabling retailers to track transactions and analyze consumer purchasing behavior and trends. This resulted in better consumer engagement and more relevant messaging.
However, according to an article on Venture Beat, consumer interaction with brands has now become fragmented, forcing companies to review their loyalty programs and interact with customers via a more multi-channel strategy, rather than just point-of-purchase.
With the explosion of social media, along with various websites and other media, the entertainment industry leads the pack in consumer engagement and tracking. For example, Marvel – the superhero megastar – recently added a loyalty program to reward transactions and engagement across the many channels their consumers use to interact with the company.
And Marvel isn’t the only company adopting this. The Ultimate Fighting Championship also have a thriving rewards program. It rewards fans for doing things they already do to interact with the company, along with things that the company wants them to do – such as to tweet and purchase pay-per-views STREAMING, rather than via their cable provider, so as to bring more profit to the UFC. In exchange, fans can redeem points for items such as signed merchandise and special access to live events.
The Venture Beat article further revealed that, according to Visa 2016 Bond Loyalty Report, loyalty programs are all headed towards personalization and experience. The report shared that, “brands whose representatives make members feel special and recognized have 2.7 times higher program satisfaction.”
Ultimately, this goal of making customers feel special and recognized has always been the point of a rewards program. The only thing that has changed is with the level of rewards some programs now offer, it has become harder to make customers feel special, as many rewards programs don’t have exciting, appealing or attractive rewards.
While customers do like discounts, free services and other normal rewards, some want something more. That could mean VIP treatment, exclusive experiences or other relevant rewards… something that gets them excited and makes them want to earn points in the program, rather than just earning them by default.
The more interested and engaged you can get your customers in your rewards program, the more likely they will be to patronize your business on a regular basis. Don’t simply throw a reward program at your customers and hope they buy in. Create some memorable or unique rewards that are above and beyond simple free oil changes or discounted services. They don’t have to be expensive, just tailored to YOUR customers.
Think about the actions you want your customers to take and transform your rewards program into one that incentivizes them for doing those things. Keep in mind that you can also use loyalty points in lieu of discounts when pushing a specific product or service.
If you need to ramp up tire sales, rather than offering discounts, why not offer extra loyalty points? The other use for loyalty points is to leverage them when customers have poor experiences. The hospitality industry is very good at this. Have you ever had a bad experience during a stay at a hotel then, when you brought it to the hotel’s attention, they apologized with extra reward points? This practice makes the customer happy without any loss of revenue through refunds.
Keep your customer engaged and motivated. They will visit more often and, typically, spend more money on each visit. And that’s all you really want your customers to do in the end.
Customer loyalty is something every business needs and desires. Some companies are spectacular at accomplishing it, while others struggle.
According to a study by DMA, perhaps we’re missing an important fact… not all loyal customers are the same.
DMA’s “Customer Engagement 2016” study, takes customer loyalty a little further. It narrowed the pool of loyal customers into four groups: Active Loyals, Habitual Loyals, Situational Loyals and Active Disloyals.
It’s rather interesting to take a look at this:
Active Loyals – According to the study, “Active Loyals” contains customers that are loyal to your company for both routine and special purposes. In the case of a car dealership, this would obviously include those that purchase cars from you and those that also service, with you regardless of any “deals” your competitor may have. They trust you, enjoy your service and don’t look elsewhere when they need anything related to their vehicle service or purchase needs.
Habitual Loyals – These are customers that may or may not have purchased their vehicle from you, but are your regular service customers. However, when it comes time to purchase their next vehicle, they will shop you against your competition to make sure they are getting a good deal. They’ll probably still buy from you, based on their previous great experience, but it’s not a guarantee. Treat them right. Be fair when it comes to a new purchase and you’ll win their business.
Situational Loyals – This group is the opposite of Habitual Loyals. They will shop elsewhere for service or parts if presented with a compelling offer. But will return to you when they’re ready to buy a new (or new to them) vehicle, due to the experience you provided. Of course, the lifetime value of a loyal customer is significantly higher when they are servicing with you, so this group is incredibly important to nurture and, hopefully, transfer into the group of Habitual Loyals. Service revenue is more consistent and vehicle margins are continuously decreasing so gaining this group’s loyalty in service is important.
Active Disloyals – This group has no loyalty whatsoever. They’ll bounce from deal to deal without the slightest concern over loyalty or experience. Sure, if they have a bad experience, they’ll probably not return. But regardless how great an experience you offer them, chances are it won’t change their minds. All hope is not lost, however. Just because these tend to be frugal people, doesn’t mean you can’t earn their business. While they may be the most unlikely to be loyal, people change. The key to winning this group’s business is consistency in marketing, customer experience and competitive pricing.
Customer loyalty is a finicky thing. Is it possible to narrow down customers into one of these four groups through data analysis? Perhaps. Transactional records and behavioral patterns can help you identify these people, but it will never be 100 percent accurate. In addition, these groups of loyal customers are dynamic. Individual customers can bounce from one category to the other with one single misstep or perceived wrongdoing.
Customer experience is really the buzz word of today. It pays dividends to pay attention to all your customers and ensure that they have the best possible experience at your store – regardless of how loyal or disloyal the customer may be.
You may think that simply because you offer an excellent customer experience, your customers will be loyal… but what is really happening? Is it possible that YOUR definition of a great customer experience differs from your customers?
A recent article on Business2Community covered how a study by American Express of 11,000 people across the globe, found that roughly 2/5 of consumers believe that, while companies are helpful, they don’t do anything extra to earn their business. Only 7 percent of Americans reported that they felt companies exceeded their expectations; 31 percent reported that companies missed their expectations; and 59 percent believed that companies DID meet their expectations. Hey, 59 percent isn’t that bad, right?
Not exactly. Consider this: The fact that a consumer got a mediocre (meaning not great but not bad) experience at your business probably won’t elicit any sense of loyalty. When you go to the movies, you EXPECT the movie to play just like you expect your oil to be changed in the service drive. Perhaps the movie is a little out of focus, or doesn’t start quite on time, but the problem is fixed fairly quickly. That doesn’t mean you had a BAD experience — but it certainly doesn’t mean you had a great one. Would that prevent you from returning to that movie theater? Maybe, maybe not. But what if a BETTER movie theater opened up not too far way… one with couches instead of chairs. Ottomans to rest your legs on. That might cause you to change your mind, right? It’s the same thing with consumers. They may not abandon you because they had an O.K. experience. But, if a GREAT experience comes along elsewhere, they just might.
In the same study, 22 percent of consumers felt that companies take their business for granted. And, 75 percent stated that they have spent more money at a business because of a good customer service experience. Which group do you think is more loyal? Well, according to the study, 13 percent report that they would spend more money with a company that provided excellent service. And, a full 35 percent said that companies that do provide excellent service have earned their business. But wait… 44 percent of the respondents EXPECT excellent service and do not believe they should have to spend more to get it. So which is it? Will they spend more for it? Or do they simply feel as if a great experience is expected?
Well, both. Regardless of price, consumers will spend more for great service — but also expect it. And not only do they expect it, they are vocal about their experiences. When customers do have great experiences, 44 percent will tell other people. BUT, if they have poor experiences 56 percent are more likely to.
How much influence does customer experience have on purchasing decisions? A lot. 55 percent indicated that they did not follow through with a purchase due to poor customer service. Imagine losing out on 55 percent of potential sales or service business. And it can be something as simple as being placed on hold on the phone. How long are Americans willing to wait? Well, we all have limited attention spans and that proves to be the case in this study — 19 percent are willing to wait up to 5 minutes and 29 percent up to 10.
Customer service and experience are key customer acquisition and retention drivers. Regardless of any other factor, consumers expect great experiences, prompt responses and personalized treatment. Any less than that — while you may have their business for now, they’ll jump ship to your competition the second they offer a better experience than you do. Analyze, review and make changes that acquiesce your customers. Stop focusing on what YOU think is the best customer experience and start focusing on what THEY do. Only then will you earn their loyalty and reap the benefits.
If you’ve ever worked in automotive retail, you know that there are constant internal struggles going on between employees and their departments. The structure of most dealerships actually encourage this – similar to how a salesperson’s pay plan incents them to sell cars.
The most obvious friction oftentimes occurs between sales and service. While in theory, everyone is on the same page, how many times have you heard a sales or used car manager complain about what they feel are excessive reconditioning costs on a newly acquired unit, decreasing potential front end profit? I’d guess that’s nothing new to you. Used car managers are paid based on the profits they bring in on sales. Service managers are paid based on service revenue. So each has their own motivation for maximizing one or the other.
Well, does it have to be like this, or is there a better way?
Automotive News recently ran a story reporting a Mercedes-Benz USA initiative that will immerse corporate executives within retail dealerships so they can better understand how the decisions they make on a corporate level impact operations at the dealership level. Similar to the butterfly effect whereby a butterfly flaps its wings on one side of the world, eventually causing a hurricane on the other, decisions made that impact others can have consequences that the decision maker can’t predict or would never see.
This initiative also aims to help corporate executives identify and fix problems with customer experience, processes and financial considerations, including co-op money and incentives.
By putting their executives in dealerships, Mercedes-Benz isn’t doing anything new – at least in business. Most businesses – especially those in the hospitality industry – require cross training as part of their management curriculum. Restaurant managers will, throughout their training, work in each and every department in the restaurant – from cashier, to greeter, bartender, server, cook, etc. By having the knowledge of what it takes to do the job, as well as how difficult it is, the manager is better able to prioritize tasks in times of need and also identify traits that would make for good employees in certain positions. In addition, the manager can be sympathetic and more objective when making decisions, whether they be departmental, or more specifically position or staff-based.
How many times have you hired a General Manager and made them work as a porter for a few days? Probably not too many. Well, think about this for a second – one thing that’s consistent across every new or CPO manufacturer survey is the cleanliness of the vehicle upon delivery. Don’t you think it would be valuable for a GM to know if there is friction in that process that is extending the time it takes for porters to clean the vehicles properly; or if the dealership is staffed adequately to handle volume; or if the porters have the supplies they need to do an excellent job? Absolutely it would.
Now let’s revisit our first example. What if you had the service manager work with the used car manager for a week – visiting auctions, inspecting potential trade-ins – and then had the used car manager work with the service manager? Do you think they’d both have a better understanding of the challenges they both face? I bet they would.
The same logic applies to every position in your dealership. Do you want salespeople to understand why the F&I process sometimes takes so long? Let them shadow an F&I manager for a couple days. Perhaps they won’t complain about why it’s taking so long for their customers to go into sign paperwork anymore. Or, even better, maybe they’ll figure out ways to speed up the process on their end, thus making the entire experience smoother and more enjoyable for the customer.
Regardless of how many years of experience your managers have, unless that experience is at your specific store, your processes, staff, resources and facility vary by individual and by department.
Consider adopting a training process embraced by almost every other retail sector in existence. You may well find that you create a closer and more efficient team and a better working environment which, in the end, will translate into a better customer experience. And the end result of that is more money in your pocket.