Loyalty is a fickle thing. While your customer has consistently serviced their vehicle with you, when they get that $19.95 oil change coupon from your competition, will it go in the trash, or will they choose to take advantage of it and defect to the competition?
Most consumers love sales and discounts. In fact, the whole reason negotiation exists in showrooms is the perception of a “good deal,” which is completely subjective and varies from dealer to dealer, as well as customer to customer. A whole new sector of business has sprung up that offers consumers advice on what a good deal is. Then let’s look at Black Friday — a cultural phenomenon where customers camp out for weeks to save $200 on a television. It’s surprising the lengths that some consumers will go to and the time they are willing to spend researching and shopping for that sometimes elusive “good deal.”
So what if your business decided to never have a sale again? Gone would be those customers that only come in to your business for that discounted service, or that customer that drives 100 miles to save $250 on a vehicle, that you’ll never see again.
But, we still want to keep our customers coming back. So, how do we continue rewarding our truly loyal customers and make them immune to competitor offers?
A fascinating article on RetailDive explored the tactic that many businesses are adopting – the premium loyalty program. Amazon has been extremely successful with this program. According to the article, it’s estimated that half of all U.S. households belong to Amazon Prime. Let that sink in a moment. Half of the households in the U.S. pay Amazon $99 per year for the privilege of buying merchandise from them. In return, they get special perks, including 2-day shipping, and that $99 expense is revenue generated before the customer has ever purchased a single item!
The article also states that Restoration Hardware chairman and CEO, Gary Friedman, recently announced that his company is adopting a premium loyalty program. Friedman stated that, “Our lives are filled with complexity – and we long to break through the clutter to find simplicity. We want to shop for what we want, when we want and receive the greatest value. So rather than navigating countless promotions, we’re changing things… because time is the ultimate luxury.” The company plans to charge participating customers $100 per year for membership. In exchange, members get a flat 25% discount on all regularly priced merchandise and 10% off of clearance items.
According to the article, the thought process behind a premium loyalty program is simple: customers that pay to join are more likely to continue to patronize the business because they want to get the most value from their investment (ROI).
The article further found that interest in premium loyalty programs is strongest among millennial consumers. Three quarters of respondents between the ages of 18 and 24 and 77% between the ages of 25 and 34 told LoyaltyOne they’d consider joining a fee-based rewards program, while 61% of 18-to-24 year-olds and 54% of 25-to-34 year-olds contend that fee-based rewards are better than free ones.
The beauty of a premium loyalty program is that customers no longer feel as if they need to search for the best price, or wait for you to have a sale. For members, any day they choose to do business with you, they save money. Premium loyalty programs also offer retailers valuable data on their best customers, which can then be analyzed and used to monitor shopping behavior and make more relevant and personalized interactions.
It’s all about how you treat your customers, and it’s about digging in and knowing them, working with them and delivering a better experience.
Getting your customer’s attention and engaging with them can be a tough task these days. There is so much competition from other marketers — customers are constantly barraged with messages from every side and in every way.
Social media reach has decreased, digital marketing is ever more challenging and direct mail sometimes goes straight into the trash. This leaves some dealerships pulling their hair out due to the lack of response from their customers and prospects.
However, dealers that think outside-the-box a little bit have had great success engaging with their customers. The key is to really interact with your customers and provide something they want that is not just a pure sales message.
In 2011, Howdy Honda set its eyes on Facebook and ran a contest requesting holiday cookie recipes from its fans in exchange for bonus service reward points. The contest’s goal was to engage their customer base while driving incremental service traffic through bonus service reward points. The contest was run for two weeks at the end of November and saw 48 recipe submissions. They then took these recipes and created an e-book which was downloaded over 900 times. Due to the response they received, they repeated the contest in 2012 with the same format and ended up increasing engagement with 68 submitted recipes and an e-book which was downloaded 1,728 times.
That’s incredible branding and engagement! Howdy Honda then further upped the ante and asked participants to add a story concerning the origin of the recipe, along with a sentence or two about the customer’s experience as a Honda owner. Then, in 2014, they added seasonal service coupons and a discount for submitting a recipe and further engaged the customers by allowing them to vote for the best recipe, with the prize being a $250 Howdy Honda branded gift card.122 recipe submissions were received and over 1,000 customer voted online. This time, rather than an e-book, they printed softcover recipe books and handed them out as gifts in the service drive. This, now traditional, contest was a winning success for Howdy Honda. It engaged their customers and promoted their brand.
In an attempt to transform things away from a strictly seasonal promotion, the dealership added a summer picnic grilling recipe book along with the same contest, voting and prize for the winners. This year, they’ve also added a design contest for a new Howdy Honda tote bag.
Howdy Honda set out to do what every great marketing strategy desires – to engage its customers and market to them in a way that, well, doesn’t feel like marketing. Part of their success is their loyalty program and their membership base since adopting their loyalty program in 2008 – which is a little over 63,000 members — and they are adding an additional 400+ each month due to the success of their promotion. This is a fantastic way to engage a captive membership base.
Every year the dealership has run these promotions it has increased customer engagement. The trick in implementing any contest or promotion is to make it engaging and one that fits your demographic. In addition, as with any branding play, ensure that you are consistent with any deployment. Howdy Honda customers look forward to these engagements as is evident in the increased engagement year after year. You may not see massive viral success in your first attempt. But, remember, with a consistent and committed strategy, you too can win the war for your customer’s attention. And that, my friends, is the recipe for success.
The average U.S. household now belongs to more than 18 loyalty programs, for a total of more than 2 billion memberships. That’s an awful lot of loyal customers. But, all these programs and cards can have an unintended effect: customer loyalty fatigue.
Most consumers do still participate in their ‘favorite’ loyalty programs, and for many businesses, it’s a proven marketing tool that adds revenue to the bottom line.
So what is it that turns customers off? Some of the most common reasons are “I always forget to bring my card,” “the coupon I got in the mail has expired,” “restrictions on merchandise,” “not getting good discounts,” etc. For the most part, it seems that customers just aren’t perceiving much value in their customer loyalty programs.
To combat this customer loyalty fatigue, make it a priority to create a loyalty program that stands out from the rest, and is perceived as valuable by your customers. Here are a few tips on how to accomplish this:
First, you may want to consider adopting a mobile app where customers can store their cards on their phones. People may not have their loyalty cards with them all of the time, but they will always have their phones. Apple’s Passbook, for instance, allows consumers to add all types of cards to it, including loyalty cards. This makes it easy for consumers to always have – and access – their loyalty membership when they visit your dealership. In addition, ensure that there is a way to access and/or credit a customer’s loyalty account when a transaction is completed –even if they do not have their cards with them. It’s also a good idea to have a system that can look up the customer via their name, phone number or perhaps even their vehicle’s VIN or license plate.
Second, a loyalty program is only as desirable as the potential it offers its members. Make sure that the rewards you are offering are desirable, worthwhile and attainable, or you may find customers become apathetic about your program. Rewards can include much more than simple freebies or discounts. Consider offering experiences, front of the line passes or other VIP perks for those customers who show their loyalty through bringing you their business. An excellent way to figure out what your customers are interested in is simple – ask them. You may get some unrealistic answers, but I promise that you’ll get some great ideas that you can then implement. The best part is, by doing this, your customers are engaged and feel included in both the program and the process. For a customer to see a new reward appear that was something they suggested is priceless and further strengthens their loyalty.
Third, consider offering coupons with no expiration dates. While the coupons you send may be relevant and desirable offers, there’s nothing more frustrating for a consumer than when they are ready to use a coupon and find it just expired. Whatever you’ve chosen to offer a customer, make it “no strings attached.” You don’t have to send the offer to every member. You can segment the membership list into types of members and then market to them as sub-groups. Consider going through your loyalty program and sending a coupon to all members who haven’t earned any points in the last 6 months. This is a great way to re-engage the customer and potentially recapture their business.
Loyalty programs can be an excellent customer retention tool and help increase revenue while rewarding your customers for taking actions that benefit your dealership. Examine what you’re doing now and how it can be improved for a better customer experience. As a result your customers will be more engaged as they will perceive more value in your program.
According to a study by Colloquy, there are 3.3 billion loyalty program memberships in the United States, which averages 29 per household. Yes, loyalty programs are everywhere. From grocery stores, to gas stations and fast food restaurants, chances are high that a store you’re about to enter for the first time has a loyalty program. And the one thing that most of these programs have in common — they are based on transactions. In fact, a study by Cap Gemini found that 97 percent of loyalty programs are transaction based – meaning a customer earns points or rewards based on spending money with the store. But what is loyalty, really?
At its most basic, customer loyalty could perhaps be summed up as follows:
Given the choice to go to any retailer which offers the same product or services, the customer would choose your store over your competition.
Then comes the much broader question:
Why would they choose you?
The growing sentiment is that customer experience is the next battleground for businesses. Customers like to feel appreciated. And, with so many loyalty programs, it seems as if every retailer is – in a sense – incenting a customer to spend money with them.
However, simply spending money with a retailer – even if they choose the same retailer every time – does not a loyal customer make. True loyalty is really reflected in how the customer feels about the company and how they chose to describe the company to their family and friends.
And, to help develop this loyal customer, wouldn’t you agree that there are some things a customer could do besides spend money that deserve to be rewarded? For example, rewarding a customer for a referral. Whether that reward is straight cash (as it is in most cases), or some quantity of reward points, the fact is that the customer behaved in a way you wanted them to – and so you rewarded them.
According to the Cap Gemini study, only 25 percent of loyalty programs reward customer for any form of engagement.
One company that has great success at rewarding customer engagement, not just transactions, is the Ultimate Fighting Championship. Their loyalty program rewards members for almost every type of engagement – transactional or otherwise. Follow them on Twitter, post a tweet that mentions their account, like them on Facebook, subscribe to their newsletter, visit their website, subscribe to their online services, and, of course, buy their fights, and you will be rewarded. This list is far from all-inclusive. But their fans love the program and the UFC.
Another example is the pharmacy chain Walgreens, which offers the Balance Rewards program. In addition to rewarding customers for transactions, Walgreens encourages customers to live healthier lifestyles with integrated options that allow customers to connect fitness trackers to their Balance Rewards accounts and actually earn points by exercising. According to Walgreens, 80 million of their 103 million members participate in this offer. How is that for loyalty program engagement?
Those are only a couple of examples of how businesses can become more innovative with their loyalty programs. Rather than having “just another loyalty program” like everyone else, figure out what behaviors you want your customers to show.
In the case of car dealerships, that could include referrals for sales and service, posting online reviews, social media interaction and engagement, attending dealership sponsored events such as owner’s clinics… the list is never ending.
The point is that true loyalty lies in customers that choose you over your competitor AND who are engaged with your business at the same time. Accomplish that and you won’t have to worry about your customer bailing to your competitor because they offer a $19.95 oil change special.
In addition, the more engaged the customer is with you, the more they’ll visit, the more they’ll talk about you to their friends and families and the more they’ll spend. And that’s exactly what a loyalty program is supposed to accomplish.
It’s a well-known fact that retaining customers is less expensive and can be more profitable than acquiring new ones. The reality is essentially, customer churn keeps your dealership stationary. Many dealers blast sales messages across every medium possible – traditional, mailers, and digital; hoping that someone, somewhere will see it and decide to buy a car from them. According to NADA, dealers are still spending upwards of $640 per sale to bring in business on the sales side. And therein lies the problem.
Why spray and pray with your traditional advertising, hoping that the small percentage of people who actually pay attention to your marketing will convert into a sale? Even if you’re the best targeted data marketer in the universe, conversion rates on non-customer lists are low. The fact is that your single largest source of opportunities in both sales and service is sitting right there in your DMS and CRM!
Every dealer’s CRM and DMS contains tens – if not hundreds – of thousands of customers who have touched the dealership in some way, sitting there ripe for the picking. Tracking down opportunities can be as complex as precisely targeting and mining your DMS or CRM with a little help from some vendors. Or, as simple as pulling lists of customers based on search queries and hitting the phones. How many orphan owners does your CRM have? Is anybody following up with those previous customers? With an average 70% turnover rate in sales, chances are good that the salesperson who sold that customer their vehicle no longer works for you. Yet, rather than stay in touch with, follow up and potentially get a second sale from a previous customer, most dealers buy more leads, or increase ad spends, in order to fortify and increase sales. A better strategy is to follow up with customers in your database to ensure that they are revenue contributors for as long as possible, while also working to acquire new customers. Dealerships are great at the second part but many fail at continuously working their existing customer base.
Consider shifting some of your focus towards customers who are statistically ready to trade-in that vehicle they bought from you 3 years ago, or who have a college- ready child who needs a vehicle. You may be surprised by the results.
Only then will you start gaining traction and seeing growth. Until then you’ll simply be running in place.