What’s In Your Wallet – The Sequel

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Comment by Thomas Reidy on December 30, 2013 at 2:17pm

Amazing!

Comment by Mike Gorun on December 30, 2013 at 10:37am

Sorry Alexander, I guess I was typing to fast :)

Thomas, Yes. You're exactly correct. People are essentially spending $2500 for $400 worth of good and a metal card. In fact, the cards by themselves without any store credit remaining still sell for $1,000+ in aftermarket auction sites. The prestige factor is very simply having something that someone else doesn't. It gets attention when they whip it out at stores not only from fellow customers but from employees of the Starbucks. These are so limited that oftentimes neither of these people (customers and employees) have ever seen one. 

Comment by Thomas Reidy on December 28, 2013 at 4:41am

Mike, great info. Do I understand this correctly; people are paying upwards of $2,500 for a per-loaded card valued at $400 of store credit? (I don't get the prestige factor?) Excellent abstract on automotive rewards programs!

Comment by Alexander Lau on December 27, 2013 at 2:17pm

Great, but I'm Alexander, not Alexandra. Anyway, thanks for the data, very interesting. 

Comment by Mike Gorun on December 27, 2013 at 2:08pm

Thanks so much for your comment Alexandra.

We actually wrote a white paper on this subject in 2011, which you are welcome to access at:http://www.performanceloyalty.com/PDF/2012.02.13_HardFacts_whitepap...

Statistical service and sales transaction data verifies that dealership customers who are enrolled in specially designed rewards-based loyalty programs improve dealership service and sales performance. A multi-year, 72-dealership study that we conducted shows that customers who become active members in an automotive rewards or loyalty program visit their dealership every 4.26 months compared to every 6.82 months for those customers who are not participating in the program(general retail customers). This represents an increase in visit frequency of 60% annually.

Average annual member spend mirrors the increase in visitation with a 97% increase in overall retail spend. The study group, on average, realized a $325.37 per member annual increase in customer-pay spend, from $336.63 for non-members to $662.01 for members. Retail spend is defined only as customer-pay and excludes warranty, body shop, sublet, taxes and shop fees.

Furthermore, study results indicated an average overall retention rate of 56.98% for active members. According to recent research performed by an accredited dealer association, the national average for dealership retention is closer to 22%. Retention for the purpose of this study is defined as a member who visits a minimum of one customer-pay visit per 12 months.

Tom Wood Ford, Indianapolis, IN, started enrolling customers in a rewards-based loyalty program in 2007 and has over 13,000 members enrolled. Its member service visitation and spend ratios compare to the study averages: months between service visits for members, 5.28 compared to 8.43 for non-members; member spend $797.32 compared to only $504.20 for non-members.

“From 2008 through late 2011, my gross profit per month has doubled,” says Tom Kashman, Service Manager. “This is a huge number, one no one is going to believe, but the numbers don’t

lie. My belief is you cannot run a successful service operation without having some type of retention tool paying back the loyal customer,” he stresses.

Results for Richfield Bloomington Honda, Richfield, MN, show similarly healthy increases through its loyalty program. General Manager Tim Carter reports 2.87 months between service visits

for members versus 5.95 for non-members, with an average annual service revenue of $927.34 per member versus $417.30 for non-members.

Dealership loyalty programs also positively affect the new and pre-owned sales departments. Jim Crutcher, General Manager at Berge Ford, Mesa, AZ adds, “We couldn’t survive without this program. In fact, 39% of our total service business is due to this program, plus we sell an additional 30 new vehicle units a month to customers redeeming rewards dollars.” Compared to customers not enrolled in these programs, these dealers:

•See customers in service at least 1.6X more frequently during the year

•Enjoy almost 2X greater total service-spend per customer, per year

•See their customer-pay RO dollars go up nearly $44 per customer, per visit

•Thrive on retention of nearly 60% — nearly 3X the NADA average and better than many non-captive service OEM-branded loyalty program goals

•Sell on average 15 additional units every month to customers redeeming rewards benefits toward those vehicle purchases

I hope this helps. If you have further questions feel free to contact me via email me at : mikegorun@hotmail.com

Comment by Alexander Lau on December 27, 2013 at 7:57am

Customers want to feel special, but it's a hard use in the automotive sales process. Unless dealers are willing to give up less profits. I do not see that happening. Mike, no offense, but can you show me a successful case study of loyalty cards working in the automotive world and real, hard ROI numbers? Bench marks?