A Case for Dealer-Branded Service Retention Programs

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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