Business Sense & Sensibility

Imagine, for a moment, what it would be like to have your community love you. Not because of what you sold them, but because of the impact you’ve made in their daily lives. Especially in the automotive industry where the stereotypes are frankly, against us.

Let me take you back to the early 2010s, where a dealership group in Mishawaka, Indiana did just that. They made some drastic changes which lead to their local competitors even calling the GM and telling him he would fail, how badly they’d beat him, and how much of an idiot he was.

It didn’t stop him.

That group chose transparency, no-haggle pricing, and tackled inefficiencies in their sales and F&I process. Their GM will tell you, all of these changes were great, but their best decision was building an intensive loyalty program that brought their community together.

Some of their results include: their collision center grew over 400% covering expenses for each rooftop and still net profiting over $1mil per year, 40% of the work is off-brand, less than $150 ad spend per car, lack of “buying seasons,” higher profit margins per sale, low turnover rate as employee satisfaction is high, and with their savings they give back to the community in ways such as having a department pack lunches for schools in need every Thursday. As they’ve been dealing with supply chain issues, they’ve had customers wait on new vehicles, they’ve pre-sold inventory out 6 months at least, and their used inventory is here and gone again quickly. They didn’t even raise prices as their profitability in the past has set them up for potential market issues and they’re still making good money.

Building a customer loyalty program takes some thought and effort to be effective but doing so can propel your business into long-term profitability and enhance your customer experience.

I firmly believe that the Automotive Industry has the most unique opportunity for developing loyalty programs. We sell more than just a car, we sell the symbol of the American Dream, the American Spirit – we sell Freedom.

Do you remember how it felt to get your first car?

Do you know how many album releases are first blasted on speaker systems?

Or how exciting that first date is when driving them in your vehicle?

Or the first ride home from the hospital with your child? Being both terrifying and exciting.

Dropping your child off on their first day of school?

That family trip you worked hard for or the one your parents took you on?

Now, go out and look at all the local businesses and schools, the majority of those people drove their car there.

That means endless possibilities to bring everyone together.

You and your dealership can be more than just a part of the community but can differentiate yourself as a leader by bringing the community together through a thoughtful loyalty program. Sure, you can find loyalty programs to buy into that basically offer access to online outlet malls, but that doesn’t improve the businesses right next to you. Instead, reach out and partner with the local businesses that will help make continual, small positive impacts in the daily lives of your customers.

I’m talking, go to the golf clubs and see if they’ll even give a hot dog and chips to the people that buy from you, maybe even free driving range time on certain days.

Go to the reputable grocery stores and see about a discount or special that can be exclusive for your customers. Think of what they’ll say on a summer cookout when that loyalty special helps them afford the event for their family or friends. I bet they’ll mention your program and speak highly of you.

Go to the local coffee shops in the area, the local kid play areas, maybe art/science/history museums.

Go to the better gas stations around you and see who will be a partner. Even a few cents is a big deal.

Think of ways that as a dealer you can add to that loyalty program as well. Auto deductible reimbursements benefits are a cost-effective way to alleviate stress from auto-related incidents and drive your fixed operations, covering the whole household of the purchaser not just the vehicle they bought from you. Oil and service programs have been implemented in many shops as well, some even do monetary or percentage discounts for repeat business.

Go to anyone who will partner with you locally that will be able to directly benefit your customers and bring the community together. By offering discounts or specials at these places, your customers are far more inclined to frequent them and spend more money than they normally would. This is the intentionality that consumers notice and appreciate. This drives loyalty and loyalty drives profits.

We’ll breach the topic of the largest portion of the population, millennials, a different time, but it is important to note their affinity for loyalty programs. 96% of millennials say brands should find new ways to reward their customers. 81% are encouraged to spend more because of loyalty programs. Over half, 52%, prefer to shop with places that align with their values. Jon MacDonald (Founder of “The Good”) says that loyalty programs rank #1 in importance when millennials choose companies to support, this is even over brand authenticity and trustworthiness. Better yet, 75% highly favor brands that give back to society/their communities, which is why I would suggest developing a program from your community.

For loyalty programs in general, 83% of customers are more likely to purchase again because of the program. Furthermore, when choosing a business to support, 69% is determined by whether a company even has a loyalty program. 76% believe that a loyalty program strengthens their relationship with the business.

Why is this important then?

According to Murphy & Murphy, a 5% decrease in customer defection rates can increase profits by 25-125%. They also found that a 2% increase in customer retention has the same effect as decreasing costs by 10% and that repeat customers spend on average 33% more than a new one.

Think of the lower costs of acquiring new customers due to referrals and loyalty. The average ad spend last year was $592 on a new car, that’s a HEFTY chunk of gross. Buttle’s studies show that loyal customers become avid referrers of your business, enabling you to lower that expenditure over time.

Let’s even look at new and existing probabilities, selling to an existing customer has a success rate of 60%-70% on average, while selling to a new prospect is 5-20% (Charlton). Hell, it costs about 6-7 times more to acquire new customers than to retain an existing one (Hisaka). Furthermore, the longer a customer is loyal, the more they buy as their trust increases (Murphy & Murphy). Customer experience and loyalty programs increase these rates, raising loyalty, and effectively driving profitability.

And guess what, companies that developed customer experience found those initiatives attributed up to 25% more retention and revenue than sales or marketing initiatives (Murphy & Murphy). Loyal customers are also not as easily influenced by price or availability, think market restraints due to COVID. They would much rather wait or pay more for the quality customer experience and effort that you put into them.

But where do we usually find info on developing customer experience? There’s a lot of great technology out there, a lot of great ways to be more efficient and direct, but over the long-term, I think it would be far more beneficial to invest in your customers first than keep investing in programs that promise quick returns or upselling and cross-selling options. Those may raise revenue, but do they really benefit your customer first and build loyalty or just one-time sales? It’s apparent that loyalty is the endgame for great business, but that means we need to play the long game to get there.

The status quo is the bane of our industry. We’ve been fighting the stigma of the “slimy 80s salesman” for over 40 years. If the recent “Great Exodus” didn’t bring you pause, I hope this article will. The fact is, people don’t want to suck it up and accept poor business practices, being effectively gaslit into purchasing decisions, wasting time, and being disrespected. If you want to plan for the future, Millennials and onward are not accepting of the business techniques of the past. They’ve shown us, they will leave you and bash you vehemently on multiple channels. Therefore, our goal is to meet them where they are, see what they value, and create ways we can resonate with them.

However, the industry has been moving in a positive direction. Notably of recent, with Carvana layoffs, many groups and vendors have opened positions. Even better, some companies we wouldn’t even usually associate with the automotive industry have given discounted or free services to help with their job search.

Great business sense today can simply come from sensibility. That doesn’t mean it’s going to be a walk in the park, but that it can be worth it. Our goal with customer experience initiatives and loyalty programs can be summed up by Reinatz & Wener, “[to] build true attitudinal and behavioral loyalty, with efficiency and effectiveness in profits.” An effective loyalty program with great customer experience initiatives and modern marketing creates advocates for you, your business, and your brand. If you haven’t started on anything yet, start today. Build your company for tomorrow.

Thank you for bearing with me through all the percentages and data, I know it can be dry, but I hope you see the value in investing in your customers and the real impacts it can have for you and your business by putting people first. Next time we will be breaching the subject of the American Consumer, Millennials as a group, and more to help give some ideas on where efforts can be pointed to make an impact as you develop or challenge your programs.