A Case for Dealer-Branded Service Retention Programs

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By Mike Gorun

Dealers using loyalty programs or prepaid maintenance (PPM) programs designed specifically for their dealership’s client demographics and geographic location enjoy significantly higher levels of  customer retention and service up-sell. In addition to an increased program ROI, dealerships that utilize a personal dealer-branded PPM see continual increases in vehicle repurchase intent.

In fact, because these plans are captive service plans – meaning the customer is required to return to your store for service — they retain far more customers than similar non-captive OEM-branded plans and are significantly better than NADA retention averages in general.

The evidence for dealer-branded retention programs is strong. This proof emerges from a recent 72-dealership study by LoyaltyTrac, which examined 1.7 million repair order transactions over a period of more than two years at dealerships that engaged in a dealer-branded loyalty rewards program.

According to the study, retention of members – those customers who voluntarily opted to use the program — is 56.98%, compared to the NADA average of 20%. OEM loyalty programs that seek to brand the OEM rather than the individual dealerships have hoped to increase retention to 55% with an array of less effective incentives, internal OEM branded loyalty programs and market saturation advertising.

A recent survey by DME Automotive revealed similar results. “Both prepaid and OEM-provided maintenance plans have a powerful impact on dealer service retention,” DME said. In fact, the automotive marketing company noted these plans drive retention to as much as 60% versus typical post-warranty rates of 22% to 40%.

The LoyaltyTrac study also found that those customers that were engaged and joined a dealership branded loyalty-rewards program:

  • Visited their service department more often, every 2.87 months compared to every 5.95 months for customers who did not join the program.
  • Spent $982.34 in retail service annually compared to $384.55 for non-loyalty members.
  • Spent on average $235.01 on a customer-pay RO compared to $191.32 for non-loyalty members.

The evidence seems clear: Loyalty and prepaid maintenance (PPM) programs improve overall service business, drive the customer back more frequently, provide a new source of service lane revenue and ultimately influence vehicle repurchase intent.

Mike Gorun is Managing Partner and CEO of Performance Loyalty Group, a division of Media Trac. Read the full article here.

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