Implementing a Quality Customer Rewards Program
Tim Doyle’s business requires constant travel. As such, he spends a ton of time in Hilton hotels, or on American Airlines flights.
And Doyle, the president of consulting firm Dealer Rewards, has become fiercely loyal to those brands.
“For one reason only: I like the perks,” he explains. “I like all the benefits, which do sway my behavior.”
Most days, Doyle devotes time to helping businesses like car dealerships influence the behavior of as many clients as possible, in an effort to keep customer retention high. Doyle knows that, if a dealer can retain even 5 percent of customers through a rewards program, that can translate into significant gross profits each year.
“There’s no doubt in my mind that these things change behavior,” Doyle says of customer
rewards programs. And “just a small increase in customer retention can mean hundreds of thousands—if not millions—to dealers.”
Doyle, who founded Dealer Rewards in 2001, breaks down how to establish a valuable customer rewards program.
As told to Kelly Beaton
How can a business expect customer loyalty when the customers deal with a new face every four months when they show up? One of the hot buttons in the industry is heavy turnover. So that’s one thing; at the very least, put an infrastructure in place that rewards customers for buying a vehicle, having it serviced, or having warranty work done. That way, even if there isn’t a personal relationship because of turnover, at least there’s some monetary incentive.
A dealer’s customer rewards program must be simple. It’s got to be simple for customers. You can’t expect them to remember to bring in a card, like they might do at a grocery store, because they go to the grocery store once per week. What we do with our dealers is have an in-house currency, so, when a customer buys a vehicle, or services that vehicle, they’re earning dollars back at the dealership to spend in various departments. We also have parts managers that want to offer separate rewards for the wholesale and fleet parts customers; obviously those programs offer less generous earning percentages for the fleet and wholesale customers, but it does keep them loyal.
Offer rewards benefits that are easy to reach. I’ve seen rewards programs where points only accrue toward the purchase of a vehicle, and that’s fine. But you’re going to lose a lot of customers’ interest, because maybe they’re thinking they just bought a car and aren’t going to be in the market for another three, four years. So you’ve got to have short-term benefits; we also offer a service reward benefit—dollars that can only be spent in the service department.
Replace discounts by adding a rewards program. Advisors offer discounts too often, or the sales department is giving away free services to get customers back. So, without a rewards program, many dealers probably spend an inordinate amount on promotions for the service department. Just rip that Band-Aid off. I’ve had many fixed ops managers tell me, just by stopping discounts, it saves them $20,000, $30,000 per month in service. People will pay full price, and, with the rewards program, they pay full price.
The psychological aspect of rewards is also valuable. I’ve launched campaigns where we’ve targeted customers who haven’t returned to a dealership in 12 months; we let those customers know we miss them, and, more importantly, that their rewards are about to expire. People are motivated not to waste the rewards dollars they’ve earned. With those campaigns, sometimes we’re getting 20, 25 percent response rate just from an email campaign.
Use a rewards program when negotiating a vehicle sale. At some point, a salesperson can stop knocking a vehicle price down if you’ve got an in-house currency at your fingertips. So, at some point, the salesperson can hold the gross and say, “Alright, I can’t go any lower, but I’ll tell you what: we’ll load your service account with $100 in service rewards.”
Use your rewards program to calm upset customers. Like the one that’s angry and screaming, that’s going to ruin your reputation on Yelp. You say to them, “Look, I’m sorry, we blew it. Your repair bill today is $150, but we’re going to double your rewards on that.” Well, that customer is still paying $150, but you’ve given them a bonus on their rewards account. And you haven’t given them anything, really, if they’re so mad they never come back. And those are the clients that, four months later, get an email from us saying, “You have $48 to spend on your rewards account.” Then, if they’re not mad anymore, they’re like, “Well, I do have $48, so I’ll go back there.” That, to me, is a great way to retain customers.