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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