In mid-1995, AOL and Prodigy were launching what most believe was the first foray into providing automotive purchase and product review data to the public via what we now know as the Internet. The Internet has become such a way of life today for everyone it almost hard to imagine we did not have it a mere 18 years ago. Today, dealerships utilize a plethora of Internet-based sales and service tools to assist them in building sales, increasing service revenue and communicating with their customers. It is very difficult to find a dealer today without a web presence, yet in the early 2000’s, many dealers still did not embrace Internet sales or even have a website; they were slow to adapt to the changing times. Just think of the business those stores lost by not choosing to adjust to the changing demands of the consumer. The same holds true for dealers who fail to see the importance of maintaining a loyal customer base and related financial impact of improving customer retention.

Long before vehicles had air conditioning, an enterprising fuel station operator set out a sign offering free ice water with every fuel fill up. At a competing gas station the attendants marveled at the sudden loss of their business. Likely few motorists stop for ice water offers any more, yet similar marketing tactics still win customers away from competitors. A powerful tactic utilized today is loyalty and retention marketing. With almost every licensed driver belonging to at least one retail loyalty program, a dealership that does not have a true customer retention initiative today is once again once again could be categorized as a slow adapter.

These programs work to engage customers’ business long-term. They do so by offering customers benefits for dollars spent in the showroom, and parts and service departments. In turn, program members redeem these benefits in the form of future services and vehicle purchases.

Unfortunately, discerning consumers are not always loyal customers. This reality should cause dealers to make sure they’re continually engaging each customer with some form of loyalty initiative – and that this initiative is designed to deliver long-lasting value to program members so they continue to use the dealership’s services and shop at their showroom long after the warranty has expired.

The good news is that both local dealership and OEM brand loyalty rates are increasing. Both J.D. Power and Capgemini’s 14th Annual Cars Online Study, show increases in most OEM brand loyalty rates. Contributors include increasing satisfaction with post-sale communications, service contract value and the buying and service processes. Dealership based post sale retention programs build on this initial satisfaction at a local level – and engage those customers long after the initial transaction is forgotten and continue to deliver a value proposition to those customers who choose to participate. A recent study by MediaTrac LLC revealed that over 90% of new vehicle purchasers will choose to participate in a retention program simply if asked.

Enduring Retention Practices

Best practice requires that enduring loyalty programs are:

• Transparent: Today’s vehicle and service customer want transparency, into how the dealership itself operations, as well as into how a loyalty program works. Plans should give members 24/7 mobile, desktop and tablet technology access to program guidelines and processes, rewards status and redemption, vehicle history and ongoing dealer promotions.
• Convenient: If you make it difficult for customers to do business with the dealership, they will shop elsewhere. Loyalty programs should be easy to understand and use. They should be offered at no cost to interested new-car buyers. Participation should be easily accessed by scan or email address.
• Flexible: The best programs are customer centric. Flexible plans give the dealership multiple options to fine-tune plan mechanics and plan incentives to match brand and market mix.
• Interconnected: If convenience is important to consumers, then enduring loyalty programs must engage with them via smartphone, tablet, web and related technologies. Rewards statements, dealership promotions and service notifications should be automatic and delivered using the channel preferred by the member.
• Engaged: Car buyers want to hear from their dealership after the sale. They want to know about new vehicles, service specials, vehicle driving tips, maintenance schedules, car clinics and OEM notifications – and they want to be connected via their preferred communication channel, whether e-mail, text or phone. Well-crafted emails and other communications that help the dealer and customer engage frequently over time will promote program longevity and use by reminding members of program value on a consistent basis.

Operator best practices

The right retention program is also convenient and beneficial for the dealership. Dealers using them can expect to see a significant increase in service visit frequency and annual service spend, while seeing overall retention rates nearly three times the NADA average. With most OEM’S like Nissans One to One program now placing significant financial incentives on longer term customer retention the financial impact for the dealership can be substantial.

The right programs must be easy for the sponsoring dealership to use, or it too will fade away. Enduring ones are:

• Hands-off: Software-based loyalty programs handle processes, administration and point redemption. They provide member dashboard access not requiring dealer involvement. Hands-off means program monitoring and reporting is a clickable process. Program campaigns are administered, monitored and reported via software too.
• Engaging: Loyalty program members say they want regular, relevant vehicle-related news from their dealer. Whether news and promotions are distributed to them through the dealer’s loyalty member portal or directly to their smartphone, laptop, tablet or desktop email inbox, consistent member communications refreshes share of mind, reinforcing the dealer-customer relationship. Communications are highly customized to the individual recipient and vehicle. Its “sell” is subtle yet reinforces program value.

Finally, we should never dismiss the reality that customers will not abide with a business that treats them with indifference. Technology and programs alone might do their jobs functionally yet fail greatly. Thus, it is critical to obtain employee buy-in of the retention program and train them to represent the dealership, its products, its staff – themselves – and the loyalty program in the most authentic and uplifting engagement possible.

“Without polite, courteous, knowledgeable, efficient and empowered staff to help the customer, what chance is there of a customer wanting to repeat their experience with your company or brand?” noted the Wise Marketer, a customer loyalty research publisher, stressing the point.

Employees of this caliber are themselves loyal – management appreciates them, recognizes them and gives them the training and tools to grow professionally, do their jobs more efficiently and engage with customers seamlessly. A loyal employee base is the foundation upon which an enduring customer loyalty program is built, so start there. If using a loyalty program service to help create, implement, manage and assess the dealership’s effort, seek their employee loyalty training advice. Some best practices here are:

• Involving sales and service staff in the program evaluation process.
• Obtaining their opinions and observations as program value is considered – the front line is mostly likely most attuned to the local market.
• Orienting them toward program processes so they know how to describe why it is of value to a customer, how they will use it to accrue rewards to toward future purchases, and then can promote it with genuine confidence and belief in the program when discussing it with customers, whether formally or while chatting with them in the customer lounge.
• Customizing loyalty member communications if possible so they appear to be sent by their sales associate, by name, to continue that affinity.
• Hosting a recognition event for staff, based on total program usage or other benchmarks, to reward their commitment to it and help reinforce why the dealership’s loyalty program benefits them too.

No doubt, the automotive retail landscape is changing. The vehicles sold are superior in quality, longevity and maintenance economy. Incentivizing customers to choose the dealership and its services over alternatives is a proven way to retain business – and following best practices keep these smart buyers enduring loyal customers.

About the author: Mike Gorun is the managing partner and founder of Performance Loyalty Group, Inc., a company he started in 2003 after nearly 25 years in operational management positions for Ford, Nissan and General Motors. You can reach Mike at mgorun@dealer-communications.com.