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Mike Gorun

Mike Gorun Managing Partner/CEO

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Build Loyalty with Five Metrics: #5—Member Repurchase Intent

 

Dealerships with the most effective loyalty programs drive results in five key areas: marketing responsiveness, sales-to-service conversion, service visitation, retail member spend and member repurchase intent.

 

This is the final blog in a five-part series where I explain how loyalty programs improve each of these metrics. Last week I touched on retail member spend.  This week’s topic is member repurchase intent.

 

This metric measures the number and percentage of loyalty program members who purchased their second vehicle from the host loyalty dealership. Dealers say that loyalty programs, which allow members to apply their rewards dollars toward vehicles purchases, truly work. Driving repeat sales is easier when using incentives redeemed from an existing customer base.

 

An analysis of member repurchase habits in 72 dealerships with loyalty programs revealed the following:

 

  • ŸAverage number of member new vehicle re-purchases per year per dealer: 126

  • Ÿ Percent of members who have re-purchased a new vehicle from the original selling dealer: 12.4%
  • Ÿ Average number of member pre-owned vehicle re-purchases per year per dealer: 58
  • Ÿ Percent of members who have bought a subsequent pre-owned vehicle from original selling dealer: 4.7%

 

How do these figures compare to your re-purchase rates from customers who are not members of loyalty programs?

 

More information on this topic can be found in our free ebook, “The Hard Facts and Financial Impact Report: Auto Dealership Loyalty Programs & The Effects They Have on Profitability.”

Bryan Armstrong
If your not retaining, your filling a bucket with holes.
Chris Costner
I agree Bryan. What I am not convinced of however is a "loyalty program" that gives customers bonuses, points or dealership bucks to use is what drives loyalty. I think it can certainly drive "satisfaction" but "loyalty" involves an emotional connection bonuses, points or dealership bucks cannot. "Satisfaction" and "Loyalty" both have a significant fundamental difference in my opinion. I believe a "loyalty program" can only get you 50% of the way there.
Jeremy Alicandri
I'm not sold on these programs. I think they create a huge liability for the dealer, and if they are promoted by the dealer and the customer discovers that the programs offer no value, then the programs are a complete disaster for the dealer.
Mike Gorun
Thanks for these comments. I would like to first address Chris’ comments. I appreciate what you’re saying but in my opinion this is slightly backwards. Points don’t drive satisfaction. Satisfaction drives the accrual of points. If you’re dissatisfied as a customer, you’re not going to come back and have the work done over and over again. If you don’t have the work done over and over again, you don’t accrue points. I do agree absolutely that satisfaction and loyalty are two separate things; there’s no doubt. But a dealer that has a high CSI, a high satisfaction, is going to have customers that are loyal. There’s no doubt and they go hand in hand. But loyalty doesn’t drive satisfaction, that’s where I disagree. Maybe there’s some truth in that it only gets you 50% of the way there, as the satisfaction does drive the loyalty, but loyalty doesn’t drive satisfaction. Some dealers aren’t even half way there, but the proof is in the numbers. And people are coming back – and maybe it’s only the satisfied ones that are coming back – we don’t know that as we are not measuring satisfaction. Jeremy, to address your point; customers aren’t going to participate in programs that don’t have value. If they don’t participate, there’s no liability. The liability is controlled by promoting redemption and by expiring points. So the liability for the dealer is really minimal, if any. The facts speak for themselves – they show that people who are using these points, do see value and do return more often and spend more. Even though they might not like the concept of the points – it is part of the way consumers do business now. Look at it from a consumer’s standpoint -- they get points everywhere they go – they are expecting it – from their credit card to grocery stores to pet stores to airlines. I think the facts do speak for themselves. Our comprehensive study of 72 automotive dealerships and over 6 million repair order transactions from December 1, 2010 through February 29, 2012, found that customers choose to stay longer, spend more and repurchase more often at dealerships that reward their patronage. The study shows that auto dealership customers enrolled in rewards-based loyalty programs visit their dealership every 4.26 months versus every 6.82 months for non-members. Average annual member spend mirrors the increase in visitation with a 97% increase in overall retail spend. Furthermore, according to the study, retention of members is nearly 60% – almost three times the NADA average and better than many non-captive service OEM-branded loyalty program goals.
Jeremy Alicandri
Thanks Mike. I should state that I'm not totally against these programs, but I am a skeptic about their effectiveness. Indeed if a customer does opt in to the program then the dealer will have some type of point liability to fulfill that may not offer any value (for the customer). Moreover, for loyal service customers that will service with the dealer anyway, then isn't this just decreasing margins? Finally, if a dealer's competitors aren't using such program, then why not implement other service marketing programs and processes?

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