Tag Archives: DMS Integration

Understanding Rewards

In the Feb. 12, 2018, issue of USA Today, there was an article about how people respond to rewards. It covered a lot of ground, but the main thing I took away from it was that if people felt engaged in an activity they reacted in a much more positive way. The article was written by Jeff Stibel, who happens to be a brain scientist. Far be it from me to put an old car guy in the same paragraph as a brain scientist, but it did get me thinking about how little people understand about the concept of rewards to the retail customer. Stibel said, among other things, that rewards were “psychological tricks.” He also stated that “…paradoxically, people will pay more money and perceive a higher value if they have to do something to ‘earn’ a product or service.”

So, I wanted to apply some of this thinking to the car business and see how rewards shake out. First off, a “psychological trick”? As it pertains to his study, it was probably true but is that really how rewards work? Customers will see right through a bogus program. Many retail rewards programs aren’t very strong. A solid rewards program is not trying to trick the customer into doing business but thank them for their business in a meaningful way. Secondly, I couldn’t agree more that people perceive a higher value in a reward if they have to do something to earn it.

Coupons are a classic example of how this works. If you use coupons to drive your service business, there is really no customer involvement. Let’s say you charge $49.95 for an oil change and a tire rotation. You send out a coupon for $9.95 oil change to drive some traffic to your service drive. First off, you lost $40 on the coupon. Secondly, I guarantee that 80 percent of the customers are coming in just for the coupon. This will bring no extra business and you will probably never see them again. They didn’t earn it, so it is not very rewarding.

Now, let’s look at it from the rewards side. Same scenario, but instead of a coupon, the customer gets $40 in rewards points. Now the customer did something to earn it. He came in, spent $49.95 for the oil change and, in return, he received reward points he can use later. He earned them. An added benefit is the service department gets two visits instead of one.

Reward programs seem firmly rooted in the hotel and airline business but not very well received in the auto industry. I had lunch with a service manager recently and we were discussing reward cards for the service drive. He said he didn’t need them because he already had the customer in his service drive. Why should he send money if they are already here? I pointed out that I had used the same service department for all of my service work for the last four years and when I needed tires, I went back there to spend the $118 in rewards that I had earned during those last four years on a new set of tires. I also explained it was the first set of tires I had ever purchased at a car dealership and not a discount tire center. He said, “Well, maybe in some cases….” This perception is prevalent in the auto industry.

In another case, a dealer with a large chain of stores dropped his rewards program. He said he had more than $5 million in rewards points out on the street. He asked me what would happen if everyone redeems them at the same time? I think his exact words were, “If that happens, I’ll go broke.” Once again, this is a classic case of someone not grasping the concept of rewards. I explained to him his customers were redeeming points at less than 3 percent per year for the last four years, and I asked him how much service had he received off his program if the $5 million in points represented just 5 percent of all the service business he had written during that time.

People tend to have many different notions of what rewards are and how they work. In his article, Stibel said that “shopper rewards programs aren’t rewards at all.” Many in the auto industry look on them as just an unneeded expense. Used properly, however, they are a tremendous asset to any retail business. It is one of the key ways to keep your customer engaged in your business — and coming back — for a long time.

Jack Garrity

How to Build a Public Relations Position to Grow Customer Retention

“How would you create a ‘wow’ buying experience for the customer after they purchased their car? How would you set up a brand new profit center by developing a public relations manager?”

I have had a few calls from people about last month’s article about using the “Apple Experience” in your dealership’s service drive to retain customers. The main question that kept coming up was how to set up this type of program. This month, I will try to outline the steps I would take to develop this experience in a dealership.

One of the things I suggested was to get more Millennial and newly graduated college students into our business. How would you create a “wow” buying experience for the customer after they purchased their car? How would you set up a brand new profit center by developing a public relations manager? How would you get better penetration on F&I products? And, finally, how would you pay for it all? Let’s drill down on some of these things in a little more depth.

The first step is to advertise for recent college graduates. Let them know this is a manager-training program. You may want to hire more than one as the program grows. I would start their salary at $600 per week, plus commission. In order to offset this cost, I would have the company I buy my F&I products from contribute part of this expense. I’m sure they will have no problem with this because this person will be selling their products full time and the penetration should go through the roof. If you have an agent or customer retention company or, really, any other company doing business in your store, they can contribute as well. All of these people will benefit in the long run and what’s wrong with someone paying the dealer to do business in their store? Think about it: If that cost is split three ways, you are hiring a college grad in a management position for $200 per week. If it is split with more vendors, it will be even less. As this person gains more experience, they can be worked into other departments, and now your management program is up and running.

The second step is setting up the program. Everything we want sold should be laid out on an iPad. When the customer comes in for service, we pull them up, we have the date they bought their car and what they purchased in F&I at the time. We will know when they go out of warranty, or when their service contract expires. Did they purchase a prepaid maintenance package or other products, such as key fob coverage, wheel and tire coverage or ding and dent? The public relations manager can review the benefits of each product with the customer, even showing a short video on the value add for any of these products. If the customer doesn’t have time for a review, we can email a feature benefit presentation to them so they can look at it at their convenience. Think of a business development center for your F&I products. The public relations manager will make a commission off of each product he or she sells. We could also wrap it with an equity-mining tool and he or she could be commissioned on car sales, as well.

The third step would be the sale of accessories. Everyone wants to sell more aftermarket products. Tires, batteries and wiper blades could be advertised in a targeted marketing campaign. Sell bed liners to truck customers, and wheels, rain guards and window tint to customers on the anniversary of their purchase. The PR manager could get all the op code declines and develop a coupon campaign that could go out nightly. With all the information from the DMS at their fingertips, they can easily spot when a customer is ready for an upgrade. All of this marketing could be done on-line with just a little help from a graphics department.

Even the question of who manages and trains the public relations/manager trainee can be answered using one of your vendors. Any vendor who is currently in your DMS could easily work with your F&I provider to develop this program. They could hire, train and supervise and then, when you decide to promote them to another department, they could do it again. It really is a low-risk, high-rewards proposition for any dealership.

The last step is truly the public relations part of the program. This person will be the liaison between the service department and all the other departments in the store. If you have a rewards program, a customer Website, a customer app, weekly coupons, and a lifetime engine or powertrain component, all of this can be reviewed and sorted out either in person or through email communication. This person’s success will be based on their ability to develop a good relationship with the entire database and develop your store into the customer’s dealership for life.

Jack Garrity

Loyalty Versus Retention

Every business wants a loyal customer. Who doesn’t want a customer who is unswerving in their dedication to your business? Who doesn’t want to do business with someone who is as faithful to you as a customer that they would never think of purchasing something from anyone else? If only our customers were like our dogs, loyal to the end regardless of the circumstances. Well, we are never going to find customers as faithful as our dogs, but you get the point. Creating devoted customers does not happen overnight, nor does it always last a lifetime, but staunch allies can grow our business faster than any other factor we have. Their steadfast devotion to us is not only good for our business but they become advocates in the community that extends our message far better than any advertising campaign.

The question then becomes, how do you create loyalty? Here is where the quandary comes in. Before you can have any degree of loyalty, you need to design something that will keep the person engaged until they become a strong supporter of your business. What type of retention tools are you developing to create a steadfast customer whose loyalty will be contagious in your community? These tools are where retention comes into play.

In the automotive business, you see many different programs popping up designed to create retention. Unfortunately, not all of these are designed to create loyalty. Loyalty comes from a great customer experience. This customer experience needs to occur over and over again. Let me give you a few examples. One dealer gives away the first two oil changes free and one has lifetime oil changes. Which retention program creates more loyalty? One dealer gives a free tire rotation when you purchase a vehicle, and another gives you a rewards card that earns point toward free service for the life of the car.

Starting to get the picture?

Customers become loyal when they think you have gone the extra mile. The days of saying, “We’ll treat them right and they’ll come back” are pretty much over. Everyonetreats their customers right in this market.

Retention programs are not the answer to the problem but the tool for solving the problem. Picking the correct method of retention can go a long way toward developing a strong loyal following. The branding message that develops your loyal customer will, in time, create that raving customer.

Keep in mind that choosing your retention method is not a one-size-fits-all decision. A good CRM program is not necessarily a good retention tool — unless it combines a series of messages throughout your business. A factory rewards card isn’t branding you as someone different in the market place; every dealer has the same program. You don’t necessarily want loyalty to the brand — you want loyalty to your business. What is your message? How do you communicate that message to your customer? A combination of retention tools designed to deliver a unique message that your customer sees value in is always the best step.

That fact that loyalty is not created overnight can be perplexing to the average business. We all want instant gratification and, when we spend money, we want to see it go immediately to the bottom line. That’s why the rush to just grab the first thing that comes down the line is so enticing. That is also why it usually doesn’t work, and we wind up throwing good money after bad. Think of the things you are most loyal to — your school, your church, your favorite sports team, etc. Did it happen overnight? They all provided you with a great experience, a great memory and, over time, a dedication that is hard to shake.

So, where should we focus our retention efforts? In my experience, when trying to develop loyalty and retain your customers, it’s best to focus first on the service drive.

I see a lot of stores offering lifetime powertrain and they are calling it a retention program. Yes, there might be some form of retention in having the customer call to get an authorization number for service, but overall most of these programs will let the customer go anywhere for their oil changes and maintenance. The problem with this is retention begins and ends in the service lane. Lifetime powertrain as a stand-alone retention tool is not enough. It mostly helps us sell more cars — that’s not a bad thing, but to have people talking about our business like they do Amazon Prime it’s going to take a lot more than this to move your numbers to the next level.

To start the process of developing loyal customers for your business, you need to lay out a comprehensive plan that is ongoing and develops a branding message that separates you from your competition. It might not be one retention tool but several. Lay out the plan in advance and make sure you have total buy in from your management team. Look at each department and see what type of retention tool you are using to create loyalty. It is very important to have a way to measure your results, but the best measurement is say to yourself, “If I was the customer, is this program so special that I can’t imagine ever wanting to shop any place else for my automotive needs?”

Jack Garrity

Add a little Magic to the Experience

I find it fascinating that everyone in the automobile business doesn’t use a rewards card to thank their customers for their loyalty. I don’t know the exact numbers who do but in the course of visiting over 200 dealerships per year it is a very low percentage.

Every industry wants to keep their customer engaged and coming back. How many people fly and don’t sign up for the airline rewards card? The same goes for hotels, grocery stores, and gas station. When you think about it, most of us have multiple rewards programs we belong to and get rewarded by.

The psychology of these programs is pretty simple to grasp. I’m going to spend my money with you and in return you will invest in me to get future business. This is a true win, win for both the customer and the business. How many people have stopped using cash all together so they can put their purchases on a credit card that is connected to a rewards program? The entire loyalty equation is changing. People don’t buy from you because their parents did. The prices on most products are already bare bones so they don’t just buy because it cost less. They don’t always come back because we treat them right. Customers know if you don’t appreciate their business, someone else will.

In the cost conscious world of the automotive industry some may look on reward cards as an extravagance. This does not have to be the case. A small percentage back can add up quickly for the customer and over time all of these visits will create numerous RO’s. Think of it this way, a coupon for a 9.95 oil change will cost the service department twenty or thirty dollars or more. Mostly like this will bring us a price buyer who spends money just for the oil change and we never see them again. That same money credited to a rewards card might bring us two or three RO’s and over time a loyal customer who continues to use the dealership for all of their automotive needs.

The difference between a rewards card and coupons or discounts are pretty significant. The latter is a bribe. We are spending money to gain business and hoping it leads to more business. With a loyalty card it is just the opposite, the customer gives us business and then we give them the thank you. The best part about this method is we have thanked the customer but he needs to do more business with us to reap the reward. Let me go over that one more time, when you use a discount or coupon the cost is up front and final. When you use a loyalty card the recognition is up front but the cost is down the road and is developing future customers not one time buyers.

The synonym for reward is award. Isn’t that what it is really about? We all want to receive an award for what we do. We give awards to our top athletes, our top writers, actors, and scholars. The same principle must apply to our customer base. How are you awarding the customer for doing the performance you want?

Reward cards are an intricate part growing your business. It is easy for the customer to understand and very cost effective. It answers two of our most important questions, why buy here, why service here. If we are not reinvesting back into our customers we are wasting a golden opportunity.

The Realistic Expectations

You are thinking that you need a retention program to move your business model to the next
plateau but you are not sure of what to expect? I have been training and installing retention
programs for dealers for close to 10 years and here is what I know.

A Golden Rule in the creation of a Loyalty Program is to never start a retention program unless
you are 100% committed to it. What I mean is that you are going into it with realistic expectations, you are looking at it as a long-term program and that you will work to ensure it
becomes a culture in your business. When you open the doors each day it will be a priority and
the way you conduct your business!

Let’s talk about the realistic expectations. There are immediate short-term gains, but you must
be patient to realize the long-term success of your program. I will break down into 3 categories
what you should be looking for. These categories are Sales, Service and Repeat Buyers.

Sales: Immediately, you will be offering a greater value-add to your customer in the buying
experience which, if properly implemented, should result in higher front-end gross profits,
added sales volume, higher CSI scores, more referrals and additional tools to make it easier to
close more deals. You want to think of the benefits you offer as a “Why buy here instead of
from my competition?” Most importantly, it will set you apart from your competition. They
simply will not be able to compete with you on VALUE. Some common components that make
up the benefits that you could offer each sales customer are Engine Guarantee, oil changes, tire
rotations and car washes. These each have a high perceived value and help to overcome price
objections. You couple these benefits with what you already are providing, such as Gourmet
Coffee and Snacks, Children’s play area, shuttle service, pick-up and delivery service, etc. and
you have just moved to a new plateau in how you value your customer. It is like the verse in the
bible, Luke 6:38,and I am paraphrasing, “Give and you shall receive”.

Service: If you are like most Dealers you probably fall somewhere in the range of 30 to 40%
retention currently (as measured only by NEW vehicle sales and reported by your OEM based
on 2 service visits within the first year after purchase). A properly designed, value-add,
retention program will double your current percentage of sales customers that are using your
service department. Rewarding your customer each time he services with you gives you a great
opportunity to up-sale at the next visit through “found money”. It is a more honest way of
conducting business in that the customer begins to feel that you have a vested interest in taking
care of them by keeping them safe and operational. Each visit is an opportunity to prepare for
the next visit and set realistic expectations on what services will be needed. You can expect
your absorption rate to move closer to the gold standard of 100%, an increase in the number of
repair orders daily and more customer dollars spent per RO. In every case where we have
conducted an audit of who spends more, we find that the customer that is a member of your
retention program spends anywhere from $12 to $226 more per visit than a non-member
customer. An increase in repair orders results in more labor hours and more parts being sold.

Repeat Buyers: A customer that bought from you and serviced with you during their ownership
cycle will return to you for their next vehicle approximately 86% of the time vs. a customer you sold and who never serviced with you returns to repurchase less than 25% of the time. It is a
reality that it is much easier to resale a vehicle that you originally sold new and serviced. You
want this trade-in as it is much more valuable than an auction vehicle! The typical time this
type vehicle stays on your lot is approximately 2 weeks. By installing a well thought out
retention program you are guaranteeing that you will increase your % of resales and receive a
highly valuable trade-in as a part of the deal. You have created a “Pre-Owned Vehicle Factory”.

-Roy Olive

Keep Customers Engaged and Motivated for the Long Term

 

Retention is great for every business, and no one has better retention than the National Football League. Teams like the New York Giants have a 10-year waiting list for season tickets. We can probably never achieve that level of retention in the automobile business, but we can do much better than we have been.

Automotive business has been strong for a long time. Can’t we forget about retaining customers when so many people are just wanting to buy a car? Th e best way to grow our industry is not to sell more cars, but to retain more customers. Anyone who has been in this business for any length of time knows how cyclical it can be. Sales will go up and down, but a good service department never has to deal with down cycles.

We can talk all day long about all the things dealers think they are doing to build retention. Most programs, however, are just like throwing darts against the wall. If you don’t have a way to track it, a comprehensive program that works for every department and a plan for long-term success, you are probably wasting your money.

Customers want to be engaged. Easier said than done. We need to give them reasons to come back. How do we get them excited about doing business with us long term? Let’s lay out a program that will keep your customer engaged and motivated year after year.

First, we need to provide customers with reasons not only to buy here but to service here. A valid lifetime engine program can accomplish this and, in many cases, can be reinsured to offset potential liability. Next, couple this with an oil change program sold in F&I. Unlike prepaid maintenance, an inexpensive oil change program can double retention for three to five years.

Next, look at the digital side. Dealer Websites are generally good, and so are dealer mobile apps. From a retention standpoint, though, a personalized Website for each customer and a customer-centric mobile app are more successful in engaging the customer. This allows you to customize your message to each person in your database. Blanket CRM reminders work, but a better method is to create customized graphics with service specials, birthday greetings, service reminders, announcements of community events and all other direct communication you want to have with each customer.

How do you thank a customer for doing business with you? A nice note from the dealership? A call? A picture of them in the showroom? Th e airline and hotel industry have shown us for years what works. Copy this type of program and you can’t go wrong. Everyone wants to be rewarded. A customer likes it when they think, “I spent some money with you, but you are reinvesting some of it back to me as a thank you.” What keeps a customer more engaged: $100 off a set of tires or a box of cookies?

Retention is often overlooked on the service drive. Why not take the same oil change program you developed for F&I and sell it to everyone who uses your service department? Approximately 80 percent of customers who buy a car do not buy prepaid maintenance. Here is a great second chance to capture them again — and when you do, they will be loyal for up to three to five years. Finally, use your database to keep customers. More and more people want to shop from the comfort of their own home. Develop an online store to keep your customer always thinking of you for their automotive needs. Offer the oil change program and service contracts. Allow them to shop for tires, batteries and anything else they might need, but often buy elsewhere.

This is the path to successful retention. A program like this will create a retention rate of 75 to 85 percent. It is cost effective and, in most cases, highly profitable. More important, you can track it, see what is working, where it is breaking down and tweak it each month to get the best results. Most dealerships have a lot on their plate and the meat and potatoes of the business consumes most of the day. Retention is easy to overlook, but in some cases you are picking up dimes as you walk over dollars.

– Jack Garrity