Can customer rewards programs work for dealers?

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I don’t know which came first -- airline mileage programs or the bank vanity cards. But, there’s little doubt a vast array of businesses, large and small, have followed with their own kind of loyalty programs. That’s because they work!

The average American household belongs to 14 different loyalty programs. That’s the finding of a recent study by Loyalty One, a Canadian marketing and brand consulting firm. Appropriately named loyalty programs or customer rewards plans, it seems like just about everywhere I turn these days someone is offering me free Danish after I buy five coffees or a discount on everything I buy because I’m a preferred customer.

There’s no secret to any of this. Loyalty programs are aimed at accomplishing one thing – keeping the customer coming back and offering an incentive or reward for doing so. It works for everything from credit cards to haircuts, perhaps even boosted by today’s consumers who are extremely value-conscious in this economy. 

Creating a customer rewards program can take many forms. It can be for the best customers, or all customers. It can be based on points earned for dollars spent or require a number of purchases followed by a reward. It can be a cash-back plan or allow customers the option of either reward points or cash-back. How about allowing the customer to craft his own reward plan from a menu of options like free fuel or discounted service or accessory gift cards and so on. In fact, it could also be an exciting time for your staff as they innovate a program, because just about anything they can imagine might be included with only one essential – it must give something that the customer likes.

Growing in popularity is the type of loyalty program that delves into the socially-responsible arena. It’s an altruistic plan in which a donation is made to some admired program, like Make-A-Wish or Red Cross, for every purchase the customer makes. It has strong appeal to people who value businesses that demonstrate philanthropic motives – people see that as having “character” and they like to support that kind of business.

Finally, there’s even the paid-membership type of loyalty program. Starbucks and Barnes & Noble, for example, charge customers an annual fee of $25. The reward is that the “member” gets a 10 percent or higher discount on products every time they make a purchase. For the customer, the card easily pays for itself, and the $25 offsets administrative and promotional costs. In addition, the resulting e-mail or mailing list can be used over and over to promote specials, new products and events where, of course, the cardholder always gets his discount.
Today, when holding on to our current customers is so critical and we need to use every good tool to get it done, a loyalty program could be a winning strategy.

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