Fixed Ops Journal - August 2017 - 39

FIXED OPS JOURNAL

 Vendors: Invest to retain customers
RICK POPELY

LOYALTY
continued from Page 38

Three of every four vehicles the dealership
sells have currency attached, with most selling at or near full sticker price (the dealership
generally sells 55 to 60 new cars and trucks a
month). Some have a combination of currency and a cash discount, or customers can opt
for a cash discount only.
"When you're financing a $40,000 vehicle, a
discount of $1,000 isn't going to make a lot of
difference in their payment," Shorman says.
"But it gives them a lot of peace of mind when
they leave with $1,000 of currency on their
card and they know they can come in for their
next couple of services and not pay anything."
Toyota in Canada does not provide two
years of free scheduled maintenance for new
vehicles as it does in the U.S.
Shorman estimates that Granville Toyota
has awarded $2.5 million Canadian - roughly
$2 million U.S. -in currency since launching
the program nine years ago.
On customer-pay service work, Shorman
says, the dealership's labor sales per repair order have increased 20 percent and parts sales
15 percent since the loyalty program launched.
"It actually is pretty impressive," he says. "If I can
stop cash discounts and
create currency, I win no
matter what."

Opposing view
Bill Housholder is fixed
operations director of Ganley Management Co. in sub- Housholder: No
urban Cleveland, which playing favorites
oversees the 29-dealership
Ganley Auto Group. He says he also opposes discounts, and sees most loyalty rewards programs
as a form of discounting.
"I don't think they drive loyalty [among
dealership customers] the way a lot of people
think they do," Housholder says. "Customers
aren't going to come in more often when they
only need an oil change once a year, just because we have a loyalty program."
The only Ganley dealerships that have loyalty
programs, he adds, are its Nissan stores that belong to the automaker's One to One Rewards
plan, which is tied to other factory initiatives.
Ganley's Ford and Lincoln dealerships
dropped out of those brands' loyalty programs, Housholder says, because they cost
the stores money without noticeably improving service business or customer loyalty.

foj@autonews.com

he share of U.S. new-vehicle dealerships with loyalty programs is hard
to pinpoint. But Mike Gorun, whose
company provides technology for such programs at more than 4,000 dealerships in the
U.S. and Canada, offers a guess of 55 to 65
percent.
Gorun, CEO of Performance Loyalty in
San Ramon, Calif., says dealers without loyalty programs are ignoring big changes in
the marketplace.
Vehicles now require service less often,
Gorun notes. Younger customers rely on social media and word-of-mouth more than
traditional media to find service, he says,
and competitors are luring these customers
from dealerships with cheaper prices and
more convenient hours.
All of these factors, Gorun says, increase
the need for a dealership to drive traffic to
its service department with targeted messaging. Performance Loyalty's technology,
he says, analyzes and segments customers
based on vehicle purchases and repair orders drawn daily from a dealership's management system.
"If [a customer] gets an oil change today,
why would I want to send him an oil change
offer or a coupon a month from now?" Gorun says.
"If we know that he or she is a younger
customer, we might say, go to [the dealership's] Facebook page and get an extra 500
[rewards] points for telling us about your experience."
Gorun says his company generally
charges around $1,200 to set up a basic loyalty program. Monthly fees start at $800 and
go up to $3,600 for a dealership whose loyalty program has 100,000 members.
Ford's plan, he says, forces dealerships to engage in "discounting discounts. If you keep cutting your margins, that is less money you have to
do the things you need to drive your business."
Ford Motor Co. spokeswoman Sherrice
Gilsbach says the automaker's Owner Advantage Rewards program enables dealerships to
compare the costs of future discounts with
those of discounts at the time of service.
"Often, dealers say the earned discounts are too
expensive, only to truly find out that their own unmeasured discounts are even more costly and do
not drive repeat business," Gilsbach says.
She adds that more than 1,800 Ford and Lincoln dealers and 4.7 million vehicle owners
are enrolled in the program. Members visit
participating service departments 37 percent

Performance Loyalty's clients include
Granville Toyota in Vancouver, British Columbia, which operates an extensive customer rewards program. (See related story,
Page 38.)
Dealers should be patient when they start
a loyalty program, Gorun says.
"We tell the dealer that we need a good six
months to see what people are doing before
we want to hit them with stuff," he says. "We
want the proper message going out to the
right customer."
Karl Schmidt is president of Retain in
Massillon, Ohio, which administers loyalty
programs for about 500 dealerships. He says
the dealerships his company works with
photograph buyers with their new vehicles
and use those photos on their websites, in
customer emails and in social media.
Awarding points or dollars for buying a car
or having service done gives customers a
reason to return to the dealership for service, Schmidt says.
That enables sales employees to stay in
touch with those customers and maintain
the relationship they began in the showroom, he says.
"That is a key difference from getting just a
generic follow-up for service," he says.
Retain charges a dealership $600 to $900 a
month for a basic loyalty program and an additional one-time fee of $30 per customer, on
average, to provide personalized messages
over the life of the vehicle.
Schmidt cites a National Automobile
Dealers Association calculation that dealerships last year spent an average of $630 on
advertising to attract a nonrepeat customer
who bought a new vehicle.
He says, "To retain them with our program, you're spending $30 as a one-time
charge." 

more often than nonmembers, spend 21 percent more and spend $31 for every dollar they
redeem, she says.
But Housholder asserts loyalty programs
create different classes of customers, and can
lead to resentment among those who don't
get the lowest prices or the most perks.
"We just need to continue providing better
service than anyone else in the marketplace,"
he says. "Customers have told us that when
someone does a good job, most of those customers will not leave you for a couple of dollars to get a better price."
A loyalty program, Housholder adds, won't
persuade customers who have gotten lousy
service to come back: "The key is to not allow
them to have a bad experience." 

AUGUST 2017

PAGE 39

Table of Contents for the Digital Edition of Fixed Ops Journal - August 2017