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There are many benefits to having an automotive loyalty program at your dealership to increase business and customer retention. You must be mindful, however, of some dangers that exist if the program is not implemented and administered properly.
Loyalty programs seek to reward behaviors. For dealerships, automotive loyalty programs exist to reward customers for spending money at your dealership whether that’s in your sales, service or parts department.
In the behavioral theory of operant conditioning, the negative contrast effect exists. This effect happens when a customer is rewarded for certain behaviors and then those rewards are reduced or withdrawn. Customers are, in turn, less likely to exhibit the reinforced behavior in the future than if they had never been rewarded at all. The theory explains that the customer starts to view the desired behavior as work where they were only temporarily rewarded. In the long run, this could even make the customer feel like the behavior is a chore. For example, if you reward a child for washing the dishes for a period of time, then withdraw the reward, the child starts to view washing the dishes as a chore. This would decrease their desire to wash dishes, as there is no longer a reward to be achieved as a result of successfully completing the behavior.
If we extend this theory into the world of retail business and loyalty programs, the goal of the program is to incentivize your customers for being loyal. By implementing these rewards, you’re instilling in your customers an expectation of reward for a behavior. Let’s say you offer your customers a free oil change after every 3 purchased as part of a loyalty program. In the past, I’ve shared with you the “Endowed Progress Effect” which states that customers are more likely to increase the effort they put forth to achieve a goal if the goal seems more achievable. Conversely, the negative contrast effect would say that not only would removing this reward make your customers less likely to be motivated to complete it, they would make less effort to come in to your dealership.
The important thing to remember is that when implementing a loyalty program at your dealership, consistency and a commitment are required. By removing a reward system after your customers get acclimated to it, you could actually diminish the business you encouraged and achieved when you rewarded your customers.
It has been proven by countless businesses of all sizes that loyalty programs can increase service and sales revenue and customer loyalty. A loyalty program is a long-term commitment. If you aren’t consistent, your customers won’t be either.