In a world filled with loyalty programs, it’s always interesting when I talk to a dealership that harbors doubts. The cost involved in having a loyalty program is minimal compared to the revenue generated. However, at times it seems as if dealers are intimidated by the effort it would take to administer one.
Loyalty program benefits and results are wide-ranging and go far beyond simply giving away free or discounted products or services. A recent study by Forrester, names a few:
- Just 51% of consumers that did not belong to a loyalty program reported that when they liked a brand they tended to stick to it. However, this increases to a healthy 64% if the consumer belongs to a loyalty program.
- 48% of consumers who belong to loyalty programs reported that price is LESS important to them. This falls to 43% for those that do not belong to a loyalty program.
- Consumers who belong to loyalty programs are willing to pay more for convenience (50%) than consumers who do not belong to a loyalty program (36%).
- 52% of consumers who belong to loyalty programs “often tell [their] friends and family about new brands, products, or services,” versus 33 percent of people who don’t belong to a loyalty program.
It would seem logical that the primary motivation for joining a loyalty program in the first place is for discounts or to earn freebies and that may, in fact, be true. However, at some point after joining, consumer perception shifts away from price towards brand and convenience.
Consumers tend to shop at a particular grocery store because they get used to it. They know where everything is located within the store so it makes their time spent grocery shopping more efficient. The more they shop there, the more convenient it becomes for them. For example, Whole Foods is a very popular store, yet there are not a lot of them to shop at – only 360 stores across the entire U.S. and the United Kingdom combined. Compare that to Kroger, with 2,641 stores in just 34 states. Kroger can dominate a market simply by being convenient; whereas Whole Foods is seeing sales decreases. What is Whole Foods doing to build sales and increase loyalty? They’re introducing a loyalty program.
The bottom line is that loyalty programs help increase business and also increase the revenue generated by that business. They help retain customers, build branding and gain free marketing via word of mouth. Whether you do it yourself or have a third-party assist you in administering it, loyalty programs pay off in more ways that you realize.
I’m sure you’ve heard the phrase “Work your pay plan.” It doesn’t matter whether you held a position in sales, service, or parts, this advice has always been considered good. Towards the end of the month, when Sales Managers need those extra units sold on the weekends in order to hit bonuses from the manufacturer, they throw cash bonuses at the salespeople. The same thing happens in the service drive when it comes to tires or other service goals. It’s easy to see how a little extra cash might help motivate staff to work a little harder to achieve a sales goal. Recently a Nissan dealership in the San Francisco Bay Area provided a $30.00 incentive to the service writers for each pre-paid maintenance plan they sold in the service lane. They quickly sold over 250 plans in one month generating over $50,000 in plan revenues. But just as importantly they easily retained those 250 plus customers for another two years of service. However, the next month there was no sales incentive and those same service writers sold only 14 plans. So it is easy to see how engaged employees can either help or hinder a far more important goal… customer retention and loyalty.
The Temkin Group’s 6 laws of Customer Experience infographic contained two laws that, were they not next to each other, could be overlooked as being connected.
“#4: Unengaged employees don’t create engaged customers
#5: Employees do what is measured, incented and celebrated.”
There are three types of employees: unhappy, satisfied and engaged. You notice that I left “happy” off of that list? It’s very simple, really. Your employees are either not happy with their job (whether you know it or not); are satisfied with their job (whether you know it or not); or are an engaged employee. It’s fairly easy to identify a person who is unhappy with their job. They are typically going to underperform or perform at minimum acceptable levels; they may or may not have attendance issues… you see where this is headed? Hopefully, you know how to handle those types of employees. The trick is to be able to tell the difference between someone who is engaged with your company and someone who is simply satisfied with their position. The reason it’s so important is that, as the Temkin Group points out in their 4th law, if your employees aren’t engaged with your company, they cannot create engaged customers.
The difference between someone who is simply satisfied with their position and someone engaged, is that an engaged employee will be a brand advocate. They are emotionally invested in the success of your business. They work harder to make sure that the customer experiences the same feelings they have, and are just as disappointed when things don’t go right for the customer. They also go above and beyond to make it right. They may not have the best solution, but the fact that they are going to bat for the customer means that they care.
If you subscribe to the 5th law described above, there could be an opportunity to include some incentives for customer experience. Many dealerships reward sales reps for perfect CSI surveys, so this idea isn’t foreign. It’s simply that once the perfect survey is rewarded, the incentives stop, so the salesperson moves on to the next customer. The same idea could be carefully implemented long term. Whereby excellent customer service experiences are rewarded or, at the very least, celebrated.
Identifying engaged employees, transforming satisfied employees into engaged ones, and turning around some of those unhappy employees, greatly increases the chance that your employees will then transfer that engagement to your customers. This creates better and more memorable customer experiences. Customer loyalty is based on the law of reciprocity. Provide those excellent customer experiences by having employees who want to give them, and your customers will reward you with their loyalty in return.
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
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.
Today’s technology-driven plans make it very easy for dealers to customize what is offered in a PPM. Plans that provide the product (value) important to the local market will appeal more to buyers, making their presentation and sale in the F&I office or service lane more profitable and successful for the dealership.
It is these plans’ ability to retain a customer’s service business and then create upsell opportunities for additional customer-pay repair order (RO) business that make them like a money tree. These programs can triple the likelihood of the customer continually returning for service – a big growth over the 18 to 20 percent of customers who do traditionally return with a PPM’s incentive.
By converting PPM owners’ prepaid maintenance work to additional legitimate service needs, the additional retail parts and labor can produce healthy additional business. Some dealers report an additional $150 to $350 of up-sold retail customer-pay business per RO as a result.
Every plan will experience forfeiture. It results when a customer terminates the plan early or for whatever reason does not use the plan. In some PPMs, the third-party administrator holds this dealer-funded reserve. It is from this reserve that the administrator would often take up to 60 percent of the value of the cancelled services as part of its fee structure. Today’s self-managed plans enable the dealer to processes forfeiture through the general accounting ledger and add the reserve to their own bottom line.
For more information about the benefits of Pre-Paid Maintenance Programs, visit http://ow.ly/bN7Gj
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