Good afternoon,

I wanted to share another blog post Paul Long wrote, in regards to the value customers find in staying loyal to your brand. 

Have a look, and see what your customers may be thinking when they walk into your dealership.

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What do I get for staying loyal to your organization?

Have you ever heard that?  Maybe, maybe not.  But customers are thinking it all the time.  Shrewd customers can quickly tally a Pros/Cons list in their heads, and determine why they should do business with you instead of your competition. The good ones will even calculate the Value Proposition.

The Customer Value Proposition is an important piece to the puzzle which is your loyalty initiative.  If the Customer sees no Value in your Proposition for doing business together, they will shop elsewhere.  However, if they see a strong payback, they will likely stay loyal, or at least consider the cost for defecting.

For example, during a recent $200 hotel stay, I earned about 2,000 rewards points, or 10% payback for my business.  I choose to be loyal to this hotel chain because I feel the payback is pretty strong, plus I get airline miles—a double payback.  That’s a good Value Proposition to me.

On the same trip, I earned about 3,000 flight miles for a $700 ticket—a 23% payback.  In addition, although I felt the ticket price was high, I thought about my costs for defecting—losing Elite status, not adding to my bank of miles, and bag fees (I don’t pay bag fees on this airline because of my loyalty).  Adding up everything, the Value Proposition was there for me to drop the $700.

What’s your Customer Value Proposition?  Is it tangible? When you add all the elements up, does it pass your personal smell test?  Would you stay loyal to your organization if you were a customer, or would you be shopping around?  At minimum, your Customer Value Proposition should be 3% of what a customer spends with you.  If a customer spends $20,000 with you, their payback should be at least $600 over the life of your relationship together.

In addition, the incentive or reward should be easily attainable, and within a realistic time period.  For example, I can redeem my hotel rewards after only four stays.  That’s attainable.  If you require a $1,200 threshold before a Member can redeem for a reward, and your awards go away after 1 year, you’ll have high breakage (non-redemptions), which can be good.  Then again, that $600 Customer Value Proposition is no value at all.  And that’s bad.

That’s extreme, however, designing a loyalty program is a delicate balancing act between Customer Value Proposition, Redemption and Breakage.

Start with your Customer Value Proposition, and I’ll repeat my question:  “What do I get for staying loyal to your organization?”

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What do you think? Are you offering attainable rewards for your customers, and giving them great reasons to come back to your dealership? I've heard many dealerships that don't offer much in return for their customers, but some don't realize they're already giving value (whether it's a free oil change after four changes, or free tire rotations). Sound off in the comments, and let me know your thoughts.

Will Michaelson

Sales Associate

re:member group

Phone: 952.224.8002

email: will@remembergroup.com

www.remembergroup.com