Do Dealer Loyalty Programs Work?
The short answer is “yes.” The long answer is “yes, but…” As in, yes, customer rewards programs work, but they often aren’t working up to their potential. This means businesses could be missing out on the rewards that loyalty and incentive programs could bring.
There are currently many popular customer rewards systems. Some of the most popular are:
- Dealer Dollars. In this system, a percentage of member purchases is credited to the members account, which they can apply for parts, service or future vehicle purchases.
- Discount Programs. With these programs, members are given discounts at the register for either all or some products, much like Costco does.
- Frequency Programs. Frequency programs track how often customers visit and spend to determine the level of rewards they receive. This form of program is driven by the frequency of the visit and will expire if the memeber does not visit in a predetermined period of time.
- Points Programs.With points, products and services are awarded points (often the dollar amount they’re worth), which can then be traded in for other products and services.
- Tier Programs. This system allows a dealership to customize its incentive program by creating levels customers can achieve via their many purchases. Each level gained provides them with access to goods and services not offered to non-members (think American Express) or those still on lower tiers.
All five of these are in use across most retail businesses today from Amazon to Sephora to Ford. Some use cards and others use apps, but the goal is the same: Build customer loyalty. It costs less to retain a good core membership group of customers than constantly trying to attract new ones. Even better, an avid customer is one who will advocate others for you, saving you even more in advertising and gaining you more in profits.
Just visit a dealership offering a loyalty program and hang around the cashier at vehicle pick up time and see how much conversation there is about their program especially by those customers who have not signed on yet and want too.
Making it Real
No lets look on the other side of the fence. The most significant area where loyalty programs fall short is that they just aren’t tangible enough for today’s customer. Cashback/Rebate and points programs like those found in many grocery stores usually fall prey to this shortcoming. While these systems are all good at generating data for the business and for customizing the ad experience for shoppers, the rewards are harder to feel in a constant real way.
The 21st-century shopper expects a lot more from a loyalty program. They want connection, interaction, and excitement. Frequency programs, like those punch cards given every time you buy a coffee or ice cream at a local shop, are a little more experiential but even they could be brought up a notch.
Take, for example, Sephora’s tiered system where climbing levels doesn’t just mean unlocking free shipping. For a Sephora customer, a higher level could mean a monthly gift, a beauty consult and invites to exclusive VIP events. These all make being a member something exciting and about more than just the shopping moment.
A good loyalty program focuses on making the brand part of the user’s life and lifestyle. It seeks to engage members in activities that make long-term memories and impacts. Like Coke connecting their brand to happy moments, an effective incentive program will attach itself to something unique and memorable for the shopper.
Dealerships can use a loyalty program to add a level of customer engagement that they are unable to offer with traditional emails or promotional marketing. Customer engagement is a must when offering any product or service irregardless of offering a loyalty benefit.
A loyalty program provides the opportunity to engage your customer at at many more touch points. For example, making special showings of new vehicles, especially the hard to get ones, for members who’ve unlocked levels via frequency. Recognition for attending special events or special occasions. Or it can be as simple as highlighting on receipts how much was saved up. Most good automotive loyalty programs will have a member communication component that will ways to remind the members they’re racking up points and how they can spend them.
Generally the cost of services provided through discounts and benefits is around 5% but the increase in member spend is significantly more. And remember Ford, GM, Nissan corporate see the value in their OEM programs so having a dealer branded initiative could prove a new level of retention.
Authored in part by Chana Perton