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.
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.
A little over a year ago, the founder of a credit card payment processing company made an unorthodox move that resulted in some very mixed reactions and a whole lot of media attention. Dan Price, founder of Gravity Payments, cut his own salary by 93% (from $1 million to $70,000 per year). He did this so he could pay every single employee the exact same amount – $70,000, regardless of if they were the janitor or the receptionist, or how long they had worked there.
The story is not completely perfect and does come with some bumps in the road – his brother (and co-founder) sued him and there was also much speculation in the media about how successful this move would be.
However, it seems to have been a good decision in the long run. According to this story on HumanResourcesOnline, revenue and profits have doubled; new customer inquiries jumped from 30 per month to 2,000 per month; customer retention rose from 91% to 95%; and only two employees quit. Add to that the 4,500 resumes the company has received since this initiative and it would seem that the company is thriving with sales, happy customers and very happy employees. In fact, the employees are so happy that in July 2016, they collectively bought their boss a $70,000 Tesla!
I am pretty sure that any business would love to enjoy similar demand, growth and employee engagement to that of Gravity Payments. However, few businesses are in a position to pay every employee an annual salary of $70,000.
However, the point of this story is really that this particular leader’s personal sacrifice was the ultimate act of appreciation. One that immediately showed his employees that he valued them. In response, the employees increased productivity and worked even harder to ensure their customers were happy. The Telsa, while a grand and generous gesture, was simply a small part of this story. The message here in essence is that engaged employees who feel valued and trusted are the cornerstone to your business’s success.
While many people assume that money motivates everyone, several studies in fact prove that simply showing an employee they are valued and appreciated motivates them more than any amount of money ever could.
Another great example is Doug Conant, the previous CEO of Campbell’s soup. When he took charge he did a tremendous amount to change company culture, including making a commitment to celebrate employees at all levels for their individual contributions and achievements.
During his tenure, he wrote over 30,000 handwritten thank-you notes to individuals that worked for the company. Past employees still contact him to this day and express how much that gesture meant to them. A single, handwritten note showed that employee that he appreciated them and their individual achievements. In so doing, he made these employees want to work harder, better and achieve more.
In our industry, where with each passing month sales staff are on a continuous roller coaster of hero-to-zero, it’s more important than ever to ensure that employees feel appreciated, valued and recognized, not just because of their sales numbers, but also for showing up and working hard. Even something as simple as personally handing out paychecks and thanking each employee can instill a sense of worth and show employees how much they are appreciated.
In doing so, perhaps… just perhaps, they’ll become more engaged, more productive and you won’t have to have a continuously running “Help Wanted” ad.
Performance Loyalty Group is privileged to have been included in not one, but two recent Automotive News articles outlining the success our auto dealer clients experienced using our products to gain and retain customers, build stronger relationships and drive more revenue.
The first was in May 2016, and highlights the spectacular results H&H Chevrolet experienced with our UltraCare Prepaid Maintenance Program.
The second was in July 2016, and illustrates the innovative way Howdy Honda leveraged our LoyaltyTrac loyalty and retention platform – along with some great creativity – to engage with their customers on social media.
Thanks to Automotive News, Hannah Lutz, Alex Kwanten, as well as H&H Chevrolet and Howdy Honda, for all of your efforts.
Read the following articles to find out what makes our tools so powerful that TWO or our auto dealer clients were recently featured in Automotive News due to their outstanding success:
- May 16, 2016 – “Charging for Prepaid Maintenance Trumps Giving it Away”
“Some dealers think freebies such as complimentary maintenance plans are good ways to boost customer retention. But the efforts are wasted if the free services go unused.
One Nebraska dealership has found success by charging for what it had been giving away. The idea: Make sure customers have “some skin in the game” when it comes to maintaining their vehicles.
H&H Chevrolet in Omaha began experimenting with complimentary maintenance in 2010, but committed to it seriously in 2013 by offering complimentary UltraCare prepaid maintenance plans from third-party provider Performance Loyalty Group.
“We saw our retention go way up” with the free plans, CEO Steve Hinchcliff says. Indeed, 88 percent of customers returned for service at some point. But, he says, “a large number of people weren’t actively using the plans, or forgot about them after the first visit.”
Customers who visited regularly often spent little. “Some customers would only want the free items,” Hinchcliff says, even if more work was needed. “That was discouraging,” he says. The average service upsell was little more than $65.
GM began offering a complimentary maintenance plan in 2013 to owners of most new 2014 Chevrolet, GMC and Buick vehicles. But in early 2015, after finding that customers didn’t use the program as often as expected, GM cut the number of free annual service visits in half to just two in 24 months.
The dealership’s experience parallels that of General Motors.
With that in mind, and after surveying its customers, H&H in August 2015 began selling the UltraCare plans. H&H charges an average of $255 per plan.
“We thought that it might make a difference if the customer had some skin in the game,” says Hinchcliff.
- July 4, 2016 – “Honda Store Finds Recipe for Success: Cookbooks Help Stir up Service Traffic”
“For Howdy Honda’s customers, creativity in the kitchen can lead to discounts in the service drive.
Five years ago, the Austin, Texas, dealership began using social media to gather customers’ favorite holiday recipes while boosting service traffic.
Howdy Honda uses a tool through Performance Loyalty Group’s LoyaltyTrac program to engage customers on social media. The dealership has 63,251 LoyaltyTrac club members and adds 400 to 450 members each month. The dealership retailed 4,470 new and used vehicles in 2015.
LoyaltyTrac integrates into the store’s dealership management system to increase customer retention by giving customers loyalty rewards based on their engagement and awarding them with discounts or coupons as they build up points for having their vehicles serviced at the dealership.
Howdy Honda offered 10,000 bonus service rewards points to customers who posted holiday cookie recipes on its Facebook page during the last two weeks of November 2011.
The dealership put all the recipes together and offered them to customers in a free e-book.
Since then, Howdy Honda has published cookbooks every year. In 2014, service advisers handed out holiday cookbooks printed by Performance Loyalty Group in the service lane.
Last year, the dealership changed course, putting together a summer picnic grilling cookbook. Customers could purchase it for $2, with proceeds going to a local food bank.
But submissions slipped, so Tina Fajardo, the dealership’s marketing coordinator, said she plans to launch another holiday cookie campaign, with a printed and digital cookbook, in November.
“We’re always trying to find different ways to connect to the community,” Fajardo said. “In Texas, homestyle cooking is a big deal. [We thought] how much fun would it be to gather those [recipes] and bring the community a little bit closer while advertising Howdy Honda?”
For more information about UltraCare, LoyaltyTrac or any of the other products Performance Loyalty Group offers to help auto dealers gain and retain customers, build stronger relationships and drive more revenue please click here or call us at (866) 744-5525.
This common saying is certainly one that everyone knows. And, whether it’s true or not, has endured time. Why? Because someone cooking for you is an intimate act that is satisfying and elicits fond memories. In essence, this act accomplished on a regular basis is supposed to be the recipe (pun intended) to win the love of a man, or woman. The gender of a person has little to do with what it takes to win their hearts.
That being said, this simple saying can easily be transferred from the realm of interpersonal relationships to the world of business. How? Every time a customer visits or interacts with your dealership, you are essentially feeding them.
Customers have appetites for quality products and excellent service. Just look at the hoards that stand in line for hours (or sometimes days) for every new Apple product. With each commercial, tease, leak or ad, Apple caters to that appetite. But why do consumers do this? Well, Apple has created a brand trusted by the masses. Consumers believe the product(s) Apple develop will be of exceptional quality and that they will receive an excellent customer experience while using them. The food in this equation is multi-dimensional.
Let me explain:
Apple is, by nature, a very secretive company when it comes to product releases. However, there are usually numerous “leaks” for any product offering, which culminate with a very short period of time between the customer entering the restaurant (the official announcement) and the main course (product release). These leaks serve as teases to their customers and whet their appetites for the product or service. Without these, customers would be left in mystery, with little information to help in the buying decision, and a rather short period to decide whether they want to plop down the typically premium price, or perhaps wait.
Once the main course is served, all preconceived notions, hopes, wishes, dreams and speculation end and reality sets in. Either the product or service lives up to the expectations of the customer – or they do not.
Customers are constantly fed either the appetizers (your marketing) or main courses (the actual customer experience). How they perceive or experience both can weaken, or strengthen their loyalty. If the experience is everything that it was hyped up to be, and the product fulfilled their expectations, they will probably get in line a little earlier the next time and be less skeptical or trigger-shy.
All dealerships advertise. The messages that you put out there whether it is about price, experience, or other unique selling propositions, whet the consumer’s appetite and get them to visit your dealership. Once there, their actual experience can either reinforce your marketing messages or convince the customer that you made false promises and are insincere.
Make sure that the food you are feeding customers – whether it’s the appetizer of the main course – fulfills all of your customer’s expectations and you’ll find that with each visit, they love your restaurant that much more.
And when the food is great, people tell their friends. Which is exactly what you want.