The share of U.S. new-vehicle dealerships with loyalty programs is hard to pinpoint. But Mike Gorun, whose company provides technology for such programs at more than 4,000 dealerships in the U.S. and Canada, offers a guess of 55 to 65 percent.
Gorun, CEO of Performance Loyalty in San Ramon, Calif., says dealers without loyalty programs are ignoring big changes in the marketplace.
Vehicles now require service less often, Gorun notes. Younger customers rely on social media and word-of-mouth more than traditional media to find service, he says, and competitors are luring these customers from dealerships with cheaper prices and more convenient hours.
All of these factors, Gorun says, increase the need for a dealership to drive traffic to its service department with targeted messaging. Performance Loyalty's technology, he says, analyzes and segments customers based on vehicle purchases and repair orders drawn daily from a dealership's management system.
"If [a customer] gets an oil change today, why would I want to send him an oil change offer or a coupon a month from now?" Gorun says.
"If we know that he or she is a younger customer, we might say, go to [the dealership's] Facebook page and get an extra 500 [rewards] points for telling us about your experience."
Gorun says his company generally charges around $1,200 to set up a basic loyalty program. Monthly fees start at $800 and go up to $3,600 for a dealership whose loyalty program has 100,000 members.
Performance Loyalty's clients include Granville Toyota in Vancouver, British Columbia, which operates an extensive customer rewards program.
Dealers should be patient when they start a loyalty program, Gorun says.
"We tell the dealer that we need a good six months to see what people are doing before we want to hit them with stuff," he says. "We want the proper message going out to the right customer."
Karl Schmidt is president of Retain in Massillon, Ohio, which administers loyalty programs for about 500 dealerships. He says the dealerships his company works with photograph buyers with their new vehicles and use those photos on their websites, in customer emails and in social media.
Awarding points or dollars for buying a car or having service done gives customers a reason to return to the dealership for service, Schmidt says.
That enables sales employees to stay in touch with those customers and maintain the relationship they began in the showroom, he says.
"That is a key difference from getting just a generic follow-up for service," he says.
Retain charges a dealership $600 to $900 a month for a basic loyalty program and an additional one-time fee of $30 per customer, on average, to provide personalized messages over the life of the vehicle.
Schmidt cites a National Automobile Dealers Association calculation that dealerships last year spent an average of $630 on advertising to attract a nonrepeat customer who bought a new vehicle.
He says, "To retain them with our program, you're spending $30 as a one-time charge."