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
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.
The LA Times reported this month that, in an interesting move, AMC Entertainment, the owner of over 300 movie theaters including 25 of the 50 highest grossing theaters in the United States, is offering its most loyal customers a chance to own a piece of the company prior to their planned $368 million initial public offering. According to the article, in a letter to members, Chief Executive Gerry Lopez said “We’re offering this exclusive employee benefit to our AMC Stubs members to express our sincere gratitude for your loyalty.”
This ingenious idea does more than just offer its loyalty program members a special perk typically reserved for employees. It allows them to become stakeholders in the business. Nothing reinforces and strengthens loyalty more than when you own part of a company. These customers have been given an opportunity to achieve something that the average household wouldn’t be able to. Considering that many people don’t have investment accounts or stockbrokers which would allow them to buy minimal shares without incurring fees or requiring initial deposits to fund the account, the ability for the normal consumer to own a piece of the pie is attractive.
Disney runs a similar program that allows investors to purchase stock directly through them investing a minimum of $25 per month. Once the account has enough to purchase a share, Disney purchases it at the current market price for them and credits their account. As dividends are earned, they get reinvested into additional stock. One cannot argue with the level of loyalty in which Disney enjoys, that’s for certain.
Getting creative with how you reward your loyal customers is a great investment. As loyalty programs continue to flourish in retail, consumers now expect them. Sure a free bucket of popcorn is great but a owning a piece of the company is fantastic. Many of these loyalty members won’t buy stock in any quantity that would even register them on AMC’s ownership radar after the sale. There may even be limits to the quantities a single customer can purchase. Regardless, this is a creative way to get your customers invested in your company’s success with minimal cost.
Creating loyal customers is a challenge that businesses face continuously and also one that many business neglect. Without retention, a business cannot grow unless it’s acquiring new customers faster than it’s losing them and, for the most part, that’s a pricey growth strategy. AMC Entertainment has offered a loyalty program for years and the addition of offering those loyal customers this perk strengthens the sincerity of the program. This helps to elevate their reward program from one that is expected or normal to one that adds sincerity to their message of appreciation.
This is certainly not a replacement for providing a great customer experience. Treat them poorly and it won’t matter if they own a share in your company.