Tag Archives: marketing

It’s All About The Customer

I’m reading a book called the Everything Store. It’s about how Amazon started and I recommend it highly. The idea behind the Everything Store was to develop an e commerce business that would sell everything, and they did. My main take away from the book was not how great Amazon is as a company although I think that question was answered years ago, it was the underlying concern of developing for the customer, what they needed at any cost. The old adage, the customer is always right, came to mind often.  Many of the programs they developed started with:  “What does the customer need?”  and “How do we develop it?”.

This got me thinking about some of the meetings I had last week with three service managers. The first one was with a service manager who didn’t want to do prepaid maintenance. The F&I department wanted it, the General Manager wanted it, and the F&I manager said they had customers requesting it. The service manager said, I don’t want it and I don’t need it. Good example of the tail wagging the dog.

The second meeting was with a large group who had developed an app for their customers and it had totally flopped. The main problem they said was no one signed up for it and no one used it if they did. After a few questions it became apparent that the reason it wasn’t what they had hoped it would be was because it was designed to promote things the dealership was interested in and not anything the customer was interested in.

The third meeting was with a service manager who had a customer first attitude. He had developed a great rewards program to thank every customer who used his service drive. His retention numbers were some of the highest in the zone. He was constantly surveying his customers to see what their needs were and developed programs to cater to those needs. His latest resource was a customer app for every customer in his data base. It offered a history of their car, any recall notices on the vehicle, how many points they had on their rewards card, every coupon and every special that was available to them. The app could remind them when they needed a service like an oil change or 30K checkup. He had even gone so far as to add a valet service so if the customer didn’t have time for a service visit they could use their app to have the car picked up and delivered back to them.  He wasn’t done there, he was working on a way the customer could redeem their points off the app and actually pay for their service using their app.

To say which meeting I was the most excited about would be too obvious. Customers have longed been overlooked by many businesses. The brick and mortar companies for too long took their customers for granted. As e commerce continues to develop, the old attitude of, I’m not doing that I can’t make any money on it, will no longer be the right answer.

The factory seems much more in tuned to what the customer wants. They are trying to develop rewards programs, subscription marketing, CSI to improve the facilities and customer surveys.  However, we can’t depend on the factory to do our job. E commerce is moving too fast. It’s not always just about price. How much do you think free delivery cost for each order? Or and unlimited return policy? Ask a customer if he would rather buy something on Amazon Prime or purchase something in your service department? We need to create the same type of environment in our stores that wows the customer every time they come to do business with us. We need to constantly be working on our branding message. What separates us from the pack? Forever and ever we heard that the customer is always right. We have heard it so many times that it’s become just lip service to many.

Develop programs based around the customer. So many times we ask ourselves how much money can I make on this or on that. When we should be putting ourselves in the customer’s shoes and looking at how we do business through their eyes. Toy r Us, Kodak, Sears, and hundreds of other companies couldn’t figure out how to make their customers remain loyal. Go above and beyond his expectations is a good place to start.

Factory Rewards Programs Versus Dealer-Owned Rewards Programs

Customers like to be rewarded and the more you reward them, the more loyal they become.

One of the OEMs has an new loyalty program in which their dealers will soon need to decide whether or not to sign up for it. I commend the OEM for recognizing how important it is to design this program for their dealers. Their reason for starting it was to “incentivize customers to spend more money, more frequently.”

A friend of mine asked me to look at the program and compare it to the dealer-owned program he is currently using. Here’s how they stack up.

How easy is it to join?
OEM: Every customer is not automatically enrolled. They have to sign up and join the program.

Dealer Owned: Every customer (new and used) is enrolled in the program as soon as they buy a car or come in for a service visit.

Is there a cost to the program?
OEM: Yes, some dealers will pay $1,000 a year, and all will pay 2 percent of every repair order of a member. This money will be used toward the rewards points and the OEM will match at 1 percent. After five years the points will expire, and the dealer will not participate in the reserve.

Dealer Owned: The dealer decides how much he wants his points to be worth, and how much he wants to spend to administer the program. The two biggest differences seem to be the money for the points reserved stays in house and all of the reserve belongs to the dealer.

How do members earn points?
OEM: Customers can earn points in a variety of ways. Enrollment, CPO purchase, vehicle purchase, customer pay service and the in-vehicle safety and security service, to name a few. They earn a different voucher for each component.

Dealer Owned: The dealer designs how he wants the points to be used, when he wants them to expire and how to combine them to be the most effective.

How do members redeem points?
OEM: The member has to download a voucher, which has an expiration date on it, bring it to the service drive, present it to the service writer, who then looks it up and redeems it. This voucher then needs to be submitted to the OEM for redemption before it expires. If it expires, the dealer has to pay for the points again.

Dealer Owned: The customer comes in, redeems his points on his app in front of the service writer.

Can I customize the program?
OEM: No, dealer-specific enhancements are not available at launch.

Dealer Owned: Yes, the rewards program can be tied into your digital marketing and your app with the intent to drive customer behavior. You can also enhance the program by adding other features like prepaid maintenance or bundling products to the rewards card.

Is Training Offered?
OEM: Training will be available only on a special website.

Dealer Owned: In-house monthly training for all service and sales staff.

So, as I see the breakdown, there are benefits to both. The good thing is the customer will win in the end no matter which program you use.

One word of caution, if you decide to go with a factory program, since the dealer does not participate in the reserve, you might want to ask an administrator to keep track of the points you are giving out to your customers. The breakdown is two to one, dealer cost versus the OEM. You need to make sure your customers are redeeming at least 66 percent of their points or you will be losing some serious money.

In the pilot program, only 20-some percent of the points were redeemed. Another benefit of having an independent administrator overlooking your program is, unlike a dealer-owned program, every dealer in town will have the same rewards program. You can greatly enhance your branding opportunity by not only tracking point usage but also adding other features to your factory rewards card to separate you from the pack. The cost to administer this is a fraction of what the benefits will be.

Creating loyalty to your business is not always easy. As you can see, there are a variety of ways to accomplish it. One person wants to have their own branding message and control over that message. The other person wants a more traditional footprint in their marketplace. The important thing is, we are now building our business on repeat customers who appreciate our service.

 – Jack Garrity

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