GM, Ford turning to reward programs to boost customer loyalty
Bowsher: Most dealers on board
Harvard Business Review says acquiring a new customer is estimated to cost anywhere from five to 25 times more than retaining an existing one.
That math is starting to click with U.S. automakers.
As U.S. auto sales slow, they’re setting aside their fixation with conquesting new customers to focus more on how to make their existing ones feel more valued — and become more valuable.
One way they’re doing that is through loyalty programs that award points that customers can redeem for discounts on accessories or services. Such programs aren’t new to the industry but have historically been part of an automaker-branded credit card.
Ford Motor Co. said this month that it will launch such a program as part of its FordPass app in 2019, and as part of a broader shift in its marketing approach toward retaining loyal customers.
“When we did all the data analytics, it became really clear: A loyal owner is so much easier for us to do business with than trying to get a customer from someone else,” Jim Farley, Ford’s president of global markets, told dealers during a meeting in Las Vegas. “It was a big ‘aha’ moment for us.”
Ford hasn’t provided more details.
Its announcement came six months after General Motors quietly launched the My GM Rewards points- based loyalty program.
“We are in the post-record time for vehicle sales,” said Michelle Krebs, Autotrader executive analyst. “The pie is not growing, it’s shrinking. So it is critically important for brands to hold onto their loyal buyers rather than going after new ones.”
Krebs believes other automakers could follow. “Everyone needs to hold onto their current customers for sales and service,” she said. “It’s becoming incredibly important and it’s supportive of dealers.”
IHS Markit reports Ford has led in overall customer loyalty for brands for eight consecutive years, while GM has achieved top honors as a company for the past three years.
GM spokesman Jim Cain said the new program was developed to help continue that streak. He declined to discuss specifics of the program.
Dealers are at the front lines of GM’s program. They are currently signing up customers, and GM has been sending out informational and enrollment emails to customers since at least May.
Customers who join GM’s program are awarded points for actions such as enrolling in the program, buying or leasing GM vehicles, taking vehicles into the dealership for service and buying services from OnStar.
Points can be redeemed at eligible dealerships for discounts on accessories, maintenance services and OnStar telematics subscriptions.
Redemption values range from 2,000 points for $10 toward service to 100,000 points for a $500 allowance toward a new vehicle.
Mike Bowsher, chairman of the Chevrolet National Dealer Council, said the program has been a runaway hit so far. “It’s a great tool to drive traffic back to the stores,” he said.
Bowsher, owner of Georgia-based Carl Black Automotive Group, said GM has been working on the program for more than a year with its dealer councils. To participate, he said, dealers are charged a “small” percentage of the customer revenue.
“For the most part, the dealers like it — especially in the service, parts and accessories area,” Bowsher said. “We’re going to continue to grow this.”
GM’s optional reward initiative launched as part of its Essential Brand Elements program for dealers in the second quarter. At the consumer level, the programs are marketed by their individual brands as My Chevrolet Rewards, My Cadillac Rewards and so on.
The program comes two years after Chevrolet announced its Truck Legends loyalty program, which the company has touted as highly successful.
But Truck Legends differs in that it’s exclusively for Chevy truck owners and is more of a community for owners, rather than a point-based incentive program.
Customers begin earning points under GM’s new program as soon as they sign up. Some ways points can be earned:
• 1,000 points each for enrolling in the program, completing membership profile
• 5,000 points for buying a certified pre-owned GM vehicle
• 20,000 points for buying or leasing a new GM vehicle
• 6 points per $1 spent on service, certain repairs and accessories at participating dealerships, and using a plan from OnStar