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Add a Little Magic to the Experience

Discounts are a bribe. You are spending money to gain business and hoping it leads to more business. With a loyalty program, it is just the opposite. The customer gives us business and then we give them the “thank you.”

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It fascinates and amazes me that everyone in the automobile business doesn’t use a rewards program to thank their customers for their business. I don’t know the exact number who do, but over the course of visiting with more than 200 dealerships per year it appears to be a very low percentage of dealers who understand this concept.

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Every industry wants to keep their customers engaged and coming back to do more business, and some have figured out how to make this happen. How many people fly and don’t sign up for the airline rewards card? The same goes for hotels, grocery stores and gas stations. When you think about it, most of us have multiple rewards programs we belong to and get rewards from.

The psychology of these programs is pretty simple to grasp: “I’m going to spend my money with you and, in return, you will invest in me to get my future business.” This is a true win-win for both the customer and the business. Many consumers have stopped using cash all together, opting to put their purchases on a credit card connected to a rewards program. The entire loyalty equation is changing. People don’t buy from you today just because their parents did. The prices on most products are already bare bones due to increased competition, so consumers don’t just buy because of a lower cost. Customers don’t always come back because we treat them right. There is not a company today that doesn’t think they treat their customers better their competition does.  Customers know that, if you don’t appreciate their business, someone else will.

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In the cost-conscious world of the automotive industry, some dealers may look on a reward program as an extravagance. This is not and does not have to be the case. A small percentage back in rewards can add up quickly for the customer and, over time, all these visits will create numerous ROs. Think of it this way: A coupon for a $9.95 oil change will cost the service department $20 to $30, or more. Most likely, this will bring us a “price” buyer who spends money just for the oil change — and we’ll never see them again. That same money credited to a rewards program will, in most cases, bring us two or three ROs and, over time, a loyal customer who continues to use our dealership for all their automotive needs.

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The differences between a rewards card and coupons or discounts are significant. Discounts are a bribe. You are spending money to gain business and hoping it leads to more business. With a loyalty program, it is just the opposite. The customer gives us business and then we give them the “thank you.” The best part about this method is we have thanked the customer, but he needs to do more business with us to reap the reward.

Let me go over that one more time — when you use a discount or coupon, the cost is up front and final. When you use a loyalty program with rewards, the recognition is up front but the cost is down the road and is developing future customers, not one-time buyers. The reward will motivate your customer to return to your business time and time again.  The promise of a reward will cause your customer to pass up the competition to get the reward.

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A synonym for “reward” is “award.” Isn’t that what it is really all about? We all want to receive an award for the things we do. Awards are given to our top athletes, our top writers, actors, scholars and so on. The same principle must apply to our customer base. How are you awarding the customer for taking the actions you want?

Reward programs are an integral part of growing your business. They are easy for the customer to understand and cost effective. These programs answer two of our most important questions: “Why buy here?” and “Why service here?”  If we are not reinvesting back into our customers, we are wasting a golden opportunity to build repeat business.

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Jack Garrity

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