Fixed Ops Journal - August 2017 - 38

FIXED OPS JOURNAL

BUILDING LOYALTY

 Rewards for service customers: Retention tools or risky discounts?

RICK POPELY

foj@autonews.com

"We wanted
to attract them
back to our
service
department
and ultimately
give them an
incentive to
visit us again
for their next
vehicle."

dealership's best customers return
for service after the factory warranty
expires and eventually buy another
new vehicle there. Dealers, fixed
ops managers and automakers are searching
for the Holy Grail that builds such loyalty.
Some manufacturers - including General
Motors, Ford and Nissan - work with their
dealers on customer loyalty reward programs.
Some stores buy software and other tools for
loyalty programs and have the vendors install
them in their dealership management systems. (See related story, Page 39.) Other dealerships create their own loyalty programs.
Benefits can include points or dollars for
each service visit that customers can redeem
on future visits or apply to the purchase of a
new vehicle. Some programs offer other special discounts, a VIP lounge, free loaner vehicles or a combination of those perks and more.
Advocates of loyalty programs say they promote higher retention, greater service sales
and happier customers.
But skeptics counter that a loyalty program,
whether from an automaker or a third-party
provider, can cost a dealership more than it
generates in benefits.

Among the more successful in-house loyalty programs is the VIP Club offered at 22 dealerships owned by Sheehy Auto Stores in the
Washington, D.C., area.
Vince Sheehy, the group's president, created the club 10 years ago after studying several
programs. Frank McCarthy, the group's sales
operations manager, says the goal was to "create a long-term relationship with the customer and build loyalty to the Sheehy brands.
"We wanted to attract them back to our service department," McCarthy told Fixed Ops
Journal, "and ultimately give them an incentive to visit us again for their next vehicle."
Instead of basing the program in the service
department, Sheehy stores sell VIP Club
memberships through their finance offices
when customers buy vehicles.
Customers pay a nonnegotiable fee of
$1,085 to join (new Toyota cars and trucks
come with a slightly lower fee because buyers

PAGE 38

AUGUST 2017

Members only

Frank McCarthy,
sales operations
manager, Sheehy
Auto Stores

get two years of free maintenance through the
automaker's Toyota Care program). Service
customers who bought their vehicles elsewhere are offered VIP memberships during
service visits.
The membership fee covers seven years of
oil changes, tire rotations, a 5 percent discount on other service, loaner vehicles, a discount on annual detailing and other benefits,
and 300 VIP Bucks toward the purchase of another vehicle from a Sheehy store.
Members also earn a VIP Buck for every $10
of paid service that can be used toward a vehicle purchase (up to $800). Sheehy says the retail value of the benefits package is $3,525.
About half of Sheehy's new- and used-vehicle buyers join the VIP Club, which has more
than 86,000 members. Nearly half of service
visits are by VIP members. McCarthy says
one-fourth of VIP repair orders include the
purchase of service items beyond what is covered by the loyalty program.

"It's a phenomenal retention tool," he says.

Currency converter
Doug Shorman, general manager of Granville Toyota in Vancouver, British Columbia,
says his dealership uses a loyalty program
based on homegrown ideas.
Shorman opposes discounting prices, either
in the showroom to sell a car or in the service
department to mollify an angry customer
stunned by a $1,500 repair bill.
His solution: Replace cash discounts with
"currency" to be spent at the dealership.
Instead of knocking $800 Canadian (about
$630 U.S.) off the sticker price of a Highlander,
for instance, Granville Toyota gives the customer the same amount in currency to spend
at the dealership. Customers can use the currency for accessories or toward a new vehicle,
but Shorman says most spend it all on service.
see LOYALTY, Page 39

Table of Contents for the Digital Edition of Fixed Ops Journal - August 2017