If the many changes in automotive loyalty can teach the industry at least one lesson, it is that little dings matter. Put another way, what costs the dealer little may be of tremendous value to the customer. A free fix on that first ding could translate to years of customer purchases while a free ice cream may not. As vehicle sales reach historic highs and brand loyalty accelerates at a similar pace, the automotive industry is finding such practices a critical feature for renewing customer visits, according to Lisa Biank-Fasig, senior editor for Colloquy.
As a result, automotive customer loyalty has taken on much greater emphasis than it had just ten years ago, and loyalty marketers have not lost sight of the opportunity.
At Performance Loyalty Group in San Ramon, California (which operates the LoyaltyTrac rewards programme) free 'ding repairs' and concierge services - and even a member-based cookbook (more on that later) - translate into higher spending, more visits and increased memberships. Some of Performance Loyalty's 963 US dealer clients count 70,000 to 80,000 members according to managing partner Mike Gorun: "We try to build in as much cross-marketing as we can, to increase that business frequency."
Earning brand loyalty
To appreciate the opportunity presented before automotive loyalty marketers today, it helps to know a few recent figures. One is 52.8. That is the percentage of vehicle buyers who are returning to purchase the same brands, according to a recent analysis by IHS Automotive. A key contributor to that loyalty: an increase in the number of models within brands.
Another significant figure is 4.4 - the percentage increase in sales of new cars and light trucks from January to June - a 10-year record, according to Automotive News. Overall sales of new cars and light trucks rose 3.9% in June, to almost 1.5 million vehicles.
A case in point
Combined, the figures sum up a rise in brand adherence that translates to significant opportunities in the transforming automotive loyalty industry. A good case in point is Howdy Honda in Austin, Texas. Howdy (via Performance Loyalty's LoyaltyTrac programme) has released a series of holiday cookie cookbooks filled with recipes sent in from some of its roughly 57,000 members. Each recipe comes with a personal or family story that often involves a Honda - a yarn that ties the Howdy Honda community together.
Members who send in recipes are rewarded service bonus points, while other members are encouraged to vote on their favorite recipes. Winning recipes earn prizes such as branded gift cards and iPads, while those who vote qualify for discounts and offers.
Such initiatives result in monthly growth, Gorun said, but even more important, the relevancy of the perks translates to enduring engagement. Dating back to 2002, less than 2% of active Performance Loyalty members have opted-out of receiving promotions and other benefits.
Which in turn translates to more spending and visits. At one Minneapolis-based dealer, the average spending for a non-loyalty customer is $207 per visit, while for a member it is $249, Gorun said. Fold in the higher frequency of members - four times a year compared with two times a year for non-members - and the difference is $996 a year for members compared with $414 for non-members.
"When you take it over 40,000, 50,000 members, it's a piece of change," Gorun said.
"One key to identifying effective perks in automotive loyalty is keeping it under the hood - members are more likely to appreciate benefits that involve dealer services," Gorun said. Complementary benefits help - one dealer who owns a golf course gives away free tee times, another made ice cream part of his benefits portfolio - but Performance's own redemption analysis shows they won't distinguish a dealership the way car services will.
Based on Performance's steady network review, Gorun recommends the following types of features:
- Ring a ding-ding
For a new car owner, few events hurt like that first door ding. A free ding removal is relatively inexpensive for a dealer, and it gets the customer into the door under happy circumstances.
- Concierge services
More common among luxury models such as Lexus, some dealers send a driver to pick up a member's car and bring it into the shop for service. This simple feature equals tremendous convenience.
- Make the biggies small(er)
Any discounts on large, factory-recommended services, such as a synthetic oil change, will appeal to members, particularly because they need to get the service anyway. A 10% discount is not a lot generally, but on a US$500 job, it is.
- Details, details
An ideal promotion for customers who have not been to the dealership in a year or so, a free detailing delivers substantial perceived value to the customer, while the cost to the dealer is low.
- Invest in mechanics
Dealers with good service records tend to have higher loyalty levels, according to Gravigny: "You need to invest in your service facility because the more satisfied they are with your service, the more loyal they will stay to your business."
- Lessons learned
Also important about these features is they can be applied to other industries. In the salon business, for example, loyalty points can be used toward low-cost services while bringing in lapsed customers - a free cut with colour, for example, or a brow wax with a pedicure.
"Of course, the promotion should reflect previous services the customer purchased," concluded Biank-Fasig. "Otherwise, the loyalty programme would get 'dinged' for bad targeting."