Oftentimes, businesses adopt a rewards program to thank their frequent customers and to encourage and increase the likelihood that they will return. While these are both excellent reasons to have a rewards program, a business must carefully consider how to structure the program and what to offer to not only promote engagement with their customer, but to also create meaningful incentives that make sense from a revenue standpoint.

If you don’t have a loyalty program, consider a recent study by Nielsen that surveyed 29,000 people in 58 countries. 60 percent of respondents reported that loyalty programs were available where they shop, and 85 percent were more likely to choose that retailer over another. The fact that most major retailers have loyalty programs should be enough to convince you that you should also have one. All of these companies can’t be wrong, or can they?

Where most loyalty programs fail is because they are not well thought out from the onset. There’s a balance that must be created between what makes sense for your business and what rewards will actually be attractive to your customers. It certainly wouldn’t make financial sense for a dealership to give away a car even to its most loyal customer, despite the fact that this would probably be a pretty desirable reward and would certainly ring the free publicity bell.

Here are a few things to consider when designing your loyalty program.

1. Reward activities that generate new business – There’s nothing more satisfying or desirable for a dealership than obtaining referrals from satisfied customers. We also know that word-of-mouth is one of the most effective forms of generating new business. Consider adding to your loyalty program an appropriate incentive for new customer referrals by existing customers. Loyal customers bring in a lot of revenue over their lives so why not encourage and reward those same customers for assisting you in your customer acquisition efforts? Religiously servicing their vehicles with you is great. However, by rewarding customers for generating new or conquest business – sales or service – you turn that loyal customer into a willing and proactive brand advocate.
2. Make sure your incentives aren’t at the expense of revenue –Take a close look at the profit centers of your dealership when selecting rewards for your customers. Don’t offer rewards to customers that eat into your profit centers. Recent statistics show that a well-planned dealership loyalty programs will work wonders growing revenues by offering only a 4-5% average loyalty “discount.” That is typically less than most direct mail teasers dealerships often send out. How the consumer perceives a smaller “reward” can be just as effective as a free oil change. But it is dependent on how it is packaged to the customer.  If you generate a lot of revenue from oil changes, don’t offer free ones. Many dealerships choose their rewards from those services that are the most popular with their customers. However, they also tend to be the ones that generate revenue for the dealership. Consider identifying services that aren’t generating revenue and offering those as rewards. This way, your customers are still receiving value for their loyalty but it’s not coming at the expense of revenue. Many of today’s good loyalty programs will tell you exactly, by labor Op code, what services each member is using and those they are not. It’s the ones they are not using that should be incentivized.
3. Choose rewards that promote engagement – The ultimate test of the health of your loyalty program is engagement by your customers. Again, monitor which rewards are being redeemed and which ones are not. Many times a small tweak of a reward will bring up its redemption and incremental revenue generation.  Your loyalty offerings aren’t set in stone. If customers aren’t taking advantage of the offered rewards, your loyalty program isn’t working. It’s one thing for the customers to generate the points through frequent visits, and quite another for them to be doing so in an effort to earn one of your offered rewards.

The bottom line is that you want your loyalty program to encourage and reward people for their loyalty. If you’re not offering rewards that are desirable, your loyalty program has no meaning. In addition, if your loyalty program is rewarding your customers at the expense of revenue, it’s being counter-productive. A well-designed loyalty program will increase revenue, not detract from it.

One of the challenges that dealers and managers face when analyzing their marketing budgets is sourcing traffic. Do you find anomalies in your sources when reviewing the sourcing of your store’s traffic? Is every customer being reported in your CRM as generated via a Walk-in, Billboard, Auto Mall or AAA?  AAA sounds great until you realize you don’t even have a program with AAA. So you take that source off and the first one becomes “Auto Mall.” And guess where most of your traffic comes from the next month…. You got it, the Auto Mall.

Dealerships have powerful resources available that, if used properly, can help them better manage their marketing dollars and use that money more effectively. Garbage in, garbage out, however. 

Wise dealerships have processes in place designed to source clients. Most will ask this question during the initial customer interview on first contact as part of the salesperson’s “Meet and Greet,” while others do it in the box during the initial write up. Some dealers also do this while the customer is in finance as well.  Quite a few dealerships, however, neglect to integrate this into multiple touch-points.

A customer may not want to reveal what brought them into the dealership because they had a poor experience with their first contact and are afraid they will get immediately ushered straight back to that person (which is often what happens). Maybe they didn’t get the answers they wanted to hear from the first person (i.e.: the price was firm, etc.). Regardless of why the customer doesn’t want to be honest, getting accurate information out of them is imperative in analyzing the effectiveness of your marketing budget. The reality is that what most customers report to the salesperson is different from what they report to the finance manager. Most dealerships will assume that the source reported in the finance department is most accurate since the customer has successfully completed a transaction and is less likely to have motivation to hide what originally brought them into the dealership. The purpose of multiple touch points and effective software is to increase the likelihood that credit for the traffic generation is accurately given to the proper source. If you don’t know the source, you won’t be able to analyze which of your marketing is effective.

Whether you actually have a giant inflatable gorilla or wavy tube guy as part of the décor of your dealership or not, I challenge you to add one (or both) to your CRM as sources. If you actually have one, install that. Don’t tell anyone; just add it as a source. Then sit back and watch what happens. It’s Interesting but a recent study conducted by Performance Loyalty Group indicated the majority of dealer customers were sourced simply from drive by traffic, and in some cases it was as high as 40%. It may be noted that none of the survey participants have an inflatable gorilla.

I guarantee you that you’ll start seeing customer traffic from the “giant inflatable gorilla,” regardless of if you actually have one or not. And this is a problem. How can you truly analyze your marketing spend without accurate results? Sure, Internet and some other types of leads go straight into your CRM so you know those are accurate. But I am sure that you also get plenty of showroom traffic that you may, or may not know the correct source for. Was it your website? Was it your radio ad?

You need to know this. Your software & database can be a more powerful tool for your store if you put timely and accurate information in it. It can help you truly analyze where your money is spent and can even help save you money by identifying poorly performing vendors. The use of unique call-tracking numbers in all of your marketing is also valuable in sourcing and is recommended for all of your marketing including traditional and online efforts.

Despite all of the software and uses of technology to assist in proper sourcing, you have to rely on your people to do their job and get you the right information. In the end, it will help you better manage your marketing dollars which, as a result, will help increase sales by making your marketing more effective. Salespeople are afraid to ask customers because they fear the dreaded “half-deal.” Their biggest fear is that they’ll have worked with a customer for hours and be right on the cusp of making a sale.  But then the customer says they submitted a lead on the Internet, or spoke to someone on the phone. They’d rather not ask and, if this were the case, they’d prefer that someone else discover it. 

In these cases, there exists “plausible deniability” for the salesperson. If the customer has never been in contact with anyone at the dealership or, if they have been and it goes unnoticed, they stand to get the whole deal. If someone does notice, they can truthfully deny knowledge of the customer’s previous interactions with your store. They still lose half the deal (potentially) but the opportunity to keep the whole deal is too tempting.

For this reason, you need to make sure that you have as many ways and as many opportunities as possible to properly source your marketing. If technology doesn’t accomplish this, make sure that customers are asked multiple times, by multiple people during different parts of the sales or service process. While the customer may not want to disclose where they came from in the beginning for reasons I’ve mentioned, once a deal is closed and they are in finance, they may be more willing to share accurate information.

This fear of “half-deals” is costing you money. You have software in your store to manage your customer relations and track activity. It also helps you make decisions that can cost (or save) you tens of thousands of dollars. Install processes in your store that mandate accurate sourcing from your salespeople and enforce them with real consequences.

If you don’t, you’ll probably find that a giant inflatable gorilla brings you quite a bit of floor traffic… even if you don’t have one.

The LA Times reported this month that, in an interesting move, AMC Entertainment, the owner of over 300 movie theaters including 25 of the 50 highest grossing theaters in the United States, is offering its most loyal customers a chance to own a piece of the company prior to their planned $368 million initial public offering. According to the article, in a letter to members, Chief Executive Gerry Lopez said “We’re offering this exclusive employee benefit to our AMC Stubs members to express our sincere gratitude for your loyalty.”

This ingenious idea does more than just offer its loyalty program members a special perk typically reserved for employees. It allows them to become stakeholders in the business. Nothing reinforces and strengthens loyalty more than when you own part of a company. These customers have been given an opportunity to achieve something that the average household wouldn’t be able to. Considering that many people don’t have investment accounts or stockbrokers which would allow them to buy minimal shares without incurring fees or requiring initial deposits to fund the account, the ability for the normal consumer to own a piece of the pie is attractive.

Disney runs a similar program that allows investors to purchase stock directly through them investing a minimum of $25 per month. Once the account has enough to purchase a share, Disney purchases it at the current market price for them and credits their account. As dividends are earned, they get reinvested into additional stock. One cannot argue with the level of loyalty in which Disney enjoys, that’s for certain.

Getting creative with how you reward your loyal customers is a great investment. As loyalty programs continue to flourish in retail, consumers now expect them. Sure a free bucket of popcorn is great but a owning a piece of the company is fantastic. Many of these loyalty members won’t buy stock in any quantity that would even register them on AMC’s ownership radar after the sale. There may even be limits to the quantities a single customer can purchase. Regardless, this is a creative way to get your customers invested in your company’s success with minimal cost.

Creating loyal customers is a challenge that businesses face continuously and also one that many business neglect. Without retention, a business cannot grow unless it’s acquiring new customers faster than it’s losing them and, for the most part, that’s a pricey growth strategy. AMC Entertainment has offered a loyalty program for years and the addition of offering those loyal customers this perk strengthens the sincerity of the program. This helps to elevate their reward program from one that is expected or normal to one that adds sincerity to their message of appreciation.

This is certainly not a replacement for providing a great customer experience. Treat them poorly and it won’t matter if they own a share in your company. 

In the October 2013 edition of Dealer magazine, I examined a phenomenon that occurred last Christmas. Partnering with luxury shopping site Gilt.com, Starbucks offered an ultra-exclusive steel metal loyalty card for sale on their site for $450. The loyalty cards came pre-loaded with $400 in Starbucks credit and there were only 5,000 available. You might think nobody would want to pay $450 for a loyalty card that they could get for free, but you’d be wrong. The cards sold out in 6 minutes generating $2,225,000 in sales. Almost immediately, these cards were listed on eBay and have sold for $2500 and up. In fact, even a year later, cards with no pre-loaded credit are still selling upwards of $625.

This month, Starbucks again offered these metal loyalty cards for sale. However, this time they only made 1,000 of them.  According to an article in USA Today, “the company made a ‘deliberate decision’ to make even fewer metal cards this year.” Group president, Cliff Burrows, is quoted in the article as saying “It’s now more special. We’ve elevated it to a new level.” This gift bestows upon the owner an instant Gold level status within their rewards program for a year. To maintain that status after the year, they must make purchases that would earn it just like anyone else.

With 5,000 metal cards already in circulation from last year’s sale, you’d think that the novelty of the card would have worn off and that those that wanted one would have found it by now. Introducing 1,000 more into the market simply means that 6,000 people will now own a metal loyalty card. That’s really not a lot considering that the card is good at any Starbucks location worldwide. To put it into perspective, if the cards were only sold in the United States, that would mean that, on average, only 120 people in each state would own one.

The demand for these cards; and the prestige that one gets form being able to whip out this metal card while the baristas and other consumers gawk; is apparently still very strong. This year’s stock of the 1,000 cards sold out in seconds, according to NBC News. The article goes on to say that the Gilt.com website received 2.5 times the traffic it did on Cyber Monday. Within 30 minutes of the cards going live there were over 11,000 people signed up on a wait-list to purchase one.

The Starbucks loyalty card program is one of the strongest in existence. “Our Starbucks card had its best holiday season in history, as measured by any metric, with more than $1 billion loaded during Q1, the most ever loaded onto any kind of Starbucks card.” Said CEO Howard Schultz.

These new metal cards are currently selling on eBay for upwards of $1,700+ dollars; and that’s before a single card has even been shipped by Gilt. With Christmas quickly approaching, the demand for these will only increase as people scramble to find that one-of-a-kind gift. The fanaticism and demand for these exclusive, hand-made loyalty cards, is testament to the strong brand and loyalty program that Starbucks has been able to develop over the years. For a company to transform its loyalty card from one that is hardly top of mind other than at the point of sale, to that of a coveted status symbol, is phenomenal.

Starbucks has proven once again that customers want to feel special. B offering an elite limited edition loyalty card, they’ve transformed 6,000 people into brand advocates while generating publicity that money can’t buy.

In the past, the right mixes of traditional and media buys wrapped up in the bow that is your demographic was all it took to catch consumer’s attention and bring them into your dealership. Then Al Gore invented the Internet and everything changed. Not all at once, mind you, but it did and still is. Attracting attention to your business today is more difficult than ever. It will continue to get more difficult and your options will continue to expand. The youth of today are growing up and these young people are becoming the consumers that brands are courting.

The discussion around Millennials and how to effectively market to them and create loyal customers has been going on for years. Those Millennial are in or nearing their thirties now and we have Generation Z replacing them in marketers’ minds. Millennials used to be a Rubik’s Cube that could be solved with enough study. However, as the digitization of the world has increased, reaching Generation Z has become a more daunting task then ever.

Chegg, a student hub that is a leading provider of homework help for high school and college students, released a study during Advertising Week in September 2013 titled “Engaging the Made-to-Order Generation.” The results were generated through an online survey of over 4,000 college students. According to the study, college students consume an average 47 hours of media per week. While that might not surprise you, consider that 32 of those hours are via online or from their mobile devices. Mobile device use has grown 250 percent since 2011 and 84 percent of college students say they use a smartphone; and which 43 percent of those reported that they’d used it to make a purchase within 30 days. Tablet use has also doubled from 16 percent in 2011 to 34 percent in 2013. The young people of today are heading online for just about all of their activities; including communication, media consumption, shopping and information.

The consumers of tomorrow are migrating to technology to satisfy that instant gratification desire they’ve become accustomed to. As a result, technology companies are adapting to accommodate them. Transparency is increasingly demanded and companies are meeting those demands. You would think that for the generation that made “selfies” a trend it would be difficult to win over their business. However, according to the study, that would be wrong.

The study found that college students are eager to give their loyalty to a company and to also become a brand advocate. In fact they were pretty forthcoming on what they’re looking for in order to back a company.

• 88 percent said it was important that companies give back to the community.
• 84 percent are willing to advocate for brands that reward their loyalty.
• 82 percent were willing to be frugal in some areas so that they could spend more in others.
• 80 percent expect real-time customer service
• 80 percent said that it was important to buy from companies with responsible business practices.

Generation Z is decisively willing to award you their loyalty. However, they have what may seem to be some pretty steep demands in return. When you drill it down to basics, the formula is simple: Do the right thing. Pay attention to your customers needs. Give back. Show them that you appreciate them.

These young consumers aren’t any different than consumers of the past. What’s changed is that information is instantaneous and expectations have evolved along with it. These young people expect to be treated right and appreciated by businesses that care. 

They want to feel special by receiving discount offers and coupons. They like free stuff like everyone else. The students surveyed reported that they “notice timely communication and appreciate gentle reminders.” They’re loyal but they expect that loyalty to be rewarded.  The only difference between Generation Z and past generations is that technology has opened up a world of near instantaneous communication and information.

Long gone are the days of sending a letter and waiting a response. Today, young consumers expect your business to be available via any communication channel they choose whether that’s phone, e-mail, chat, text, or social media. Be there for them and they’ll be there for you... and be pretty impressed.

Generation Z is not the Rubik’s Cube that we think it is. They are there, ready and willing to be courted by a company that is willing to adapt. Don’t think for a second that they are asking businesses to adapt to them. They are a product of technology just as text messages are.

They simply want a business that understands and utilizes the same technology that they do.  

Would your customers get a tattoo of your brand?

A recent article on Forbes told the story of Swiftwick, a sock company that had such a fervent following that customers had been getting their logo tattooed on themselves. According to the article, this company does little to no advertising. It acquires new customers mostly through recommendations and word-of-mouth advertising. The writer interviewed Chris Cooper, the first customer to get the logo tattoo to find out why. His answer was that it wasn’t only because he loved the socks but that he also connected with the company. “Most of the people I work with… wouldn’t know what my tattoo stood for. But I have a connection to the product. I know the people behind it, their attitude, and I like the company”, said Cooper. The article goes on to explain how Swiftwick “visibly support(s) charities, events, and trade shows that move their employees and their customers.”

An interesting statement that was made in the article by Swiftwick CEO Mark Cleveland was an extension of the saying we’ve all heard countless times… “People do business with people they like.” His take on creating a company that resonates with its customers begins with this philosophy but extends it to “People do business with people they like, so hire people who are worth liking!” In addition, the article illustrated how Swiftwick protects their company culture no matter what it costs.  “Culture is the most difficult thing to build and the easiest to tear down. It takes years to acquire and you can lose it in 10 seconds,” says Cleveland.

Getting to the point in which your customers are so connected with your company that they are willing to get a tattoo of your logo is a spectacular vision. You don’t have to be a huge company or brand with millions of fans to accomplish this. Before you look for that customer, ask yourself if any of your employees would get your logo tattooed on them. Even before that, would you get your own logo tattooed on your body?

Companies and brands like Apple and Disney have millions of fans worldwide because their focus is on everyone that is involved with or connected to their company – from their CEO to their employees to the consumers – they understand that to truly create a culture and experience that engenders a cult-like loyal customer base you must have buy-in from everyone.

Swiftwick seems to have captured the essence of their customer base by ensuring that they have a clear vision of their culture, hire people who compliment and support it, create high quality products which they then deliver to their customers with exceptional service.

By making their vision reality, they’re able to create clearly defined core values to compliment their mission, vision and culture. The “About” page on their website says it all in the “Living It Out” section:

1. We have fun, enjoy our jobs and make Swiftwick a company that is easy to do business with.

2. We display positive attitudes and hearts of service internally and with our customers.

3. We are a company that is ready, willing, and able to quickly adapt to change.

4. We value the growth of our team by training, teaching, and coaching so that everyone understands their responsibilities.

5. Whatever the job, we show initiative in our work and finish what we start.

6. We value good communication by listening attentively to our consumers, our distribution partners and to members of our team.

7. Each person at Swiftwick is empowered to identify problems, discover the solution and follow it through to completion.

8. We bring to market high quality, innovative products with technology and features that set us apart from our primary competitors.

9. Protecting our assets is the responsibility of everyone at Swiftwick.

10.Working safely takes priority above getting the job done.

When you can define yourself and your culture this clearly, you’re well on your way to earning the privilege of seeing your company’s logo tattooed on a customer’s body.

I am sure many of you will have heard the saying “If you love something, set it free. If it comes back, it’s meant to be.” While this may be good advice for relationships, it’s certainly not good advice for business. A recent whitepaper examined how many companies focus too much on share-of-market and the resulting damage. Market share has always been the leading measurement of success. The article examines why using only this measurement is faulty, and why a focus entirely on market share is actually bad economics.

The focus on market share, according to the article, is a result of feeding our egos. It’s certainly an easy measurement. One could assume that capturing market share is an indication that their business is not only successful, but also growing. As I, along with countless other experts have said in the past, it is much less expensive to retain and sell to current customers than it is to acquire new ones.  In addition, existing customers spend 67 percent more with a business than new ones do, according to Inc. magazine. If it costs up to five times more to make a sale to a new customer; yet it’s easier to sell to an existing customer; and they also spend more; why do we continue to focus on new customer acquisition?

According to the article, there’s a feeling of accomplishment in market share growth and new customer acquisition, whereas “focusing our attention on customer relationships often makes us feel like we’re doing less – even though we’re usually accomplishing more.” Marketing to new customers is actually the “fun” part and acquiring new customers often generates more income for sales reps than retaining existing ones.

Customer retention, on the other hand, is considered the “trench work.” There is less sense of satisfaction in upselling an existing customer and, typically, the compensation is lower for sales reps. Therefore focus and quotas tend to be based on new customer sales, rather than on customer retention sales and actions.

Have you ever examined your fixed ops revenue to find out what percentage is derived from existing customers versus new ones? How much of your sales are from repeat customers or referrals from them? By focusing your marketing efforts and growth strategy on new customer acquisition, you are leaving money on the table. Your existing customers are the “low hanging fruit”, according to the whitepaper. It’s certainly understandable for salespeople to focus more on new sales than retention. It’s much easier to be fed leads and wait for ups to come to the dealership than to follow-up with past customers. Yet, the truth is that by following up with your existing customer base, your success ratio will increase. Assuming the customer had a great experience at your dealership, you’ll have already established rapport and trust with them and will typically see higher gross profits than you would from a new customer.

Don’t wait for sales to decrease before you begin retention and loyalty marketing. Ignoring your existing customer base will increase your defection rate and detract from any growth you may have experienced through new customer acquisition. It’s your loyal customers that keep your business in the black when sales are down. If you fail to pay attention to them now, they may not be around when you need them.

Anyone who gambles – whether they are a casual gambler or a professional gambler – realizes that casinos aren’t in business to lose money. In fact, casinos must generate a ton of revenue just to keep the Las Vegas strip lit up 24 hours a day. It really doesn’t matter which game you choose to play. Every game is designed to be in the house’s favor; although some offer a better chance of winning than others. According to this article, blackjack has the best odds and slot machines the worst.

Why would I bring up gambling odds and the fact that casinos are in business to make money not lose it? A recent study was commissioned by Caesar’s Entertainment – owners of casinos in four continents for over 75 years - and was conducted by the Harvard Business School. Based on the results of that study, Caesars Entertainment said “the best way to engage our customers in our sustainability journey is by engaging our most valuable asset: our employees.” They go on to say that the “customer loyalty and satisfaction…is directly linked to employees’ level of participation in sustainable activities at work.”

To create employee engagement, Caesars Entertainment created the CodeGreen strategy in which they enlisted employees to donate both money and time into conservation projects. They then share the results of these efforts not only with employees, but also with customers. In doing so, they found that it created a “positive impact on customers’ perception…” In fact, revenue and customer satisfaction levels both increased in direct correlation to the percentage of employee participation.

In reality, casinos are no different than any business. They need to generate revenue and continuously find strategies that assist them in that goal. Successful businesses recognize that customer satisfaction is key to revenue growth. While creating an outstanding customer experience is definitely important, many businesses focus solely on that. They neglect the other components necessary to a successful growth strategy as I outlined in last week’s blog article.

Employee engagement programs don’t have to be as detailed and global as asking employees for donations or volunteer hours. There are some very simple activities that you can hold for your employees that are just as effective but take much less management.

Some examples of employee engagement activities include:

• Employee picnics or luncheons
• Movie nights
• Internal dealership newsletters
• Monthly and annual staff awards and recognition
• Team building activities
• Holiday parties
• Celebration of employee birthdays on a monthly basis

All of these will help you accomplish the goal of having more engaged employees. Engaged employees are typically more satisfied with their positions. That translates into higher retention and customer satisfaction.

“Happy employees mean happy customers. And happy customers mean a happy business.” Caesars Entertainment couldn’t have said it any better!

I’ve written many articles about the different types of loyalty and how each can affect your business’ growth and revenue. However, I’ve never written an overview of how all these components fit together in a holistic manner. Hopefully, this blog article will help put the pieces together so that you better understand these concepts more globally.

Internal Service Quality:

It all begins with your internal service quality. Components of this include:

• Workplace design – A well-designed dealership will maximize space to create a more efficient environment for employees and customers.
• Job design – This doesn’t just include job descriptions but practicality. Ensure that the right employees are responsible for things that they have the knowledge and experience to handle effectively. And that all positions complement each other and generate the most efficient work-flow possible.
• Employee selection and training – By having a hiring process that enables the best selection of employees with the highest chances of success in a given position, you can create a team of people that are effective. Experience and knowledge must be considered along with a candidate’s ability to work well with others. Ongoing training also assists in maximizing employee efficiency and productivity.
• Recognition – By recognizing employees, you reinforce positive behavior and provide other employees with examples to follow. This also assists employees in better understanding your expectations of them, and it lets them know that they will be recognized for good work.

Paying attention and implementing programs and processes for these areas, can help increase employee satisfaction. Employees that are satisfied with their jobs tend to be more productive. This can then create a need for fewer employees, thus lowering your fixed expenses for staffing, reducing employee turnover and increasing employee retention.

External Service Value:

External service value should include a results-oriented service concept focused on providing an excellent customer experience through efficiency and communication. Customer recognition programs, such as loyalty programs, reinforce to the customer that you value their business.

If employees do their jobs in the most efficient manner possible, while the company rewards that hard work by providing a great work place, a positive environment is created. In this type of environment, employees care about customer service and experience which translates to higher customer satisfaction.

Higher customer satisfaction then leads to an increase in customer loyalty and customers become brand evangelists. Loyal customers are essential to any growth strategy.  They generate revenue from repeat business in service and sales. They also lead to increased retention and generate customer acquisition through referrals. All of this, of course, leads to revenue growth and profitability for the dealer.

My goal has always been to help dealerships see value in each of these areas and assist them in improving through education. Every one of these components is equally important.

I’m sure you’ve heard the saying that you are only as strong as your weakest link. Usually this saying is in reference to a team. What I’ve outlined is no exception other than it is also applicable to your processes. A weak link in process can be just as damaging as a weak link in your team. Take a moment and do an honest assessment of these areas of your dealership. The pieces for the puzzle are all right in front of you. It’s up to you to complete it.

I came across an excellent blog article recently that discussed the different forms of loyalty that exist in the car business. In this article, the author described three levels of customer loyalty: Brand loyalty, dealership loyalty and salesperson loyalty. He described these three different types of loyalty as follows:

Brand loyalty: The focus here is on customer loyalty to a specific vehicle brand. Manufacturers’ entire marketing efforts are designed to retain current owners and convince owners of competing brands to switch. They use many different ways to build this loyalty including quality comparisons, performance, safety, comfort and practicality. This is important for brand market share but also just as important in assisting franchises by driving customer interest and traffic.

Dealership loyalty: Loyalty to a dealership is built through providing an excellent customer experience, treating customer right and being consistent in efforts to recognize and reward frequent and repeat customers.

Salesperson loyalty: Salespeople that stay at a specific dealership for any length of time have the ability to develop relationships with customers that can last a lifetime. They can even get to the point where they no longer have to assist new customers as their referral and repeat business keeps them busy with a constant, steady flow of business.

These are all valid and excellent points. The author of the aforementioned blog placed these different types of loyalty in order as sort of a funnel from the top down. I believe that it’s important for dealerships to recognize the importance of all of these areas but to also realize that, from a business point of view, there is a definite hierarchy that management must recognize in order to create a loyalty strategy that maximizes success.

This is the order I believe accomplishes this best.

Dealership loyalty: By far the most important type of loyalty to a dealership must be loyalty to that dealership. This is the only type of loyalty that a dealership can directly influence. Dealerships must build a base of loyal customers, and then service those loyal customers in order to survive. The less customer retention a dealership has, the more focused on customer acquisition they must be. A solid and growing base of loyal customers will assist dealerships in growth and make customer acquisition less important. If your dealership has a 30 percent defection rate, it will always need to replace that 30 percent with new customers, just to maintain the status quo. Decreasing defection through customer retention allows a dealership to grow. Dealerships will only accomplish this through providing an excellent customer experience in all departments. They can also reinforce and reward repeat customers through rewards programs and recognition.

Salesperson loyalty: Dealerships can assist in this effort by building employee loyalty. Providing a great work environment, with basics such as training to help increase the salesperson’s abilities, along with a company philosophy that reinforces positive attitudes and behavior, can decrease your employee turnover and increase longevity of employment. This allows relationships to be built and serves to reinforce to the dealership’s customer that your dealership is a great place to do business with. Ultimately, however, dealerships cannot control an employee. Turnover does happen, and the last thing any dealership wants is to lose customers because they are more loyal to a salesperson than to the dealership. Too often salespeople take their customers with them which is why dealerships need to focus on retaining their staff.

Brand loyalty: Manufacturers focus almost entirely on brand loyalty and conquest. A dealership’s sales revenue is dependent on both new and used car sales. Most dealerships carry multiple brands in their used car inventory and would be more than happy to sell a customer a pre-owned vehicle of a competing brand. Not only is brand loyalty affected in this manner but a recent study by ADP showed that 63 percent of online shoppers began their research with the intent of purchasing a specific brand. Only 20 percent of those shoppers actually ended up purchasing that brand. While a dealership can certainly reinforce brand loyalty through new car sales and leasing retention, this is where they have the least influence.

The bottom line is that every dealership must focus on loyalty at all levels, but just as in all facets of business, focus must be prioritized to maximize efficiency. Place the order of importance on items where you have the most influence at the top, to those that you have the least at the bottom.  By doing so, a dealership can maximize its efforts in creating a loyal customer base that will sustain the dealer and assist in its growth.