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Mike Gorun

Mike Gorun Managing Partner/CEO

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GM Puts $4.2 Billion Price Tag on Customer Loyalty: What’s It Worth to Your Dealership?

 

General Motors recently announced a customer loyalty initiative to increase its customer retention rates from 52% to 58%. The car manufacturer has assigned a concrete value for every percentage point of improvement in customer retention rates: $700 million. If GM achieves their goal of 58% customer retention, it will add $4.2 billion in annual revenue to the bottom line.

 

Six percentage points may not sound like a lot, but 52% is the industry’s average and 58% would put GM in the same category as Toyota Motor Corp., the industry leader in customer retention rates. GM will soon be rolling out its rewards program, which will probably be similar to Toyota’s Rewards Points program and also to Ford’s Owner Advantage Rewards program, which both companies tout as a way of saying “thank you for your business each time you purchase parts or service from your participating dealership.”

 

It’s clear the car manufacturers are recognizing that customer loyalty is more than just a catch phrase: customer loyalty adds real dollars to the bottom line. If it can add $4.2 billion to GM’s ledger, what can it do for your dealership?

 

Earlier this year we released an e-book detailing the profits that dealerships realize as a result of enrolling customers in a loyalty rewards program. We analyzed more than 6 million repair order transactions in 72 dealerships, comparing loyalty program member spend versus non-member spend. The results speak for themselves:

 

Ÿ • Members visit service departments at least 1.6X more frequently during the year than non-members

Ÿ • Members spend $662.01 in service departments annually compared to $336.63 by non-members

Ÿ • Dealers see an average increase of $44 customer pay RO per visit, by members

Ÿ • The average customer retention rate of program members is $56.98% -- think GM would be happy with that?

Ÿ • Dealers sell an average of 15 additional units each month to loyalty program members who redeem their rewards points towards a vehicle purchase

 

Tom Wood Ford in Indianapolis, IN started their loyalty program in 2007. From 2008 to 2011, Service Manager Tom Kashman says his gross profit per month doubled. If you could double your service revenue, increase your customer pay RO revenue, and sell more units to loyalty program members, how much would that add to your dealership’s bottom line? Find out the real numbers that other dealerships have achieved by downloading our free e-book, The Hard Facts & Financial Impact Report: Auto Dealership Loyalty Programs and the Effects They Have on Profitability http://www.media-trac.com/resources/whitepapers.shtml

 

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