McKenzie Stephens
Solutions Strategist
January 22, 2015

What Auto Dealers Can Learn From Retailers About Customer Loyalty

Customer loyalty programs are everywhere it seems, from mom and pop shops to giant retailers, and from credit card issuers to the airlines and hotel chains. Now customer loyalty programs are infusing auto dealerships. The reason is simple: it cost five times more to acquire new buyers than it does to retain current customers, according to General Motors (Dealer Marketing Magazine, “The Right Customer Loyalty Program for You,” by Michael Brown, December 12, 2012).

Dealership loyalty programs do more than support sales. They also bring revenue into service departments. Performance Loyalty Group research shows that customers who have a dealership loyalty-card visit the service department twice as often as other customers and spend twice as much on service—$662.01 annually compared to $336.63, as reported by Rene Wisely in “Consumer Car News” on edmonds.com.

Some individual dealerships choose to create their reward programs in-house, but many turn to a third party provider for guidance on defining program requirements, developing functionality, and implementing the final program. These programs typically are points-based and rewards range from discounts on oil changes all the way to discounts on a new car purchase.

The best dealerships offer other benefits as well, and extend those to all customers. These benefits include making loaner cars available while a car is being serviced and dealer-branded newsletters with driving tips, maintenance reminders, and suggestions for using loyalty points. In other words, these dealers bind the customer closer by taking care of them.

Clearly, loyalty programs deliver value to auto dealerships as additional sources of revenue and potential new car sales. And they provide value to program participants, who benefit from the discounts and the opportunity to use their points at selected retailers. In fact, when local dealers implement rewards programs, they sometimes make arrangements with local retailers to honor rewards points similar to the large, national rewards programs.

Whether your business is a car dealership, a small retail shop or in financial services, such as a credit card issuer, there are factors that cross industries and must be considered before creating—or revamping—a customer loyalty program.

Look at your margins. Customer loyalty programs add value, both real and intrinsic, but they also cost money. Industries where margins are slim, such as grocers (where margins hover between 1 and three percent), need to carefully assess costs against potential benefit. Auto dealer service centers, with higher margins, typically do well with loyalty programs.

Be sure your loyalty cards are secure. Consumers are increasingly sensitive to card security. Ask your loyalty card provider about security. Although a loyalty card breach doesn’t usually have the serious consequences of a credit card breach, it still is a matter of concern.

Continue to offer benefits beyond your loyalty program. Be sure to explore additional avenues for keeping customers coming back (and referring). And don’t neglect customers who haven’t joined your loyalty program. The unexpected perk makes a big impression. Just like the best retailers (think Nordstrom), auto dealerships need to go the extra mile to ensure customers are happy—and win their loyalty.

Dealer loyalty programs are a win-win, but they need to be carefully considered. Take the time to really know your customers (would a dealer loyalty card resonate with them?), choose your card provider carefully, and keep in mind that a loyalty program is a means, not an end. Loyalty is earned, and must be earned, every day.

Do you have channel partners? Check out our blogs on supporting their success, and securing their loyalty.

Are you interested in starting a customer loyalty program, or beefing up one you already have? Contact an expert at Marketing Innovators to learn more.

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