I work at a Harley-Davidson dealer in a smaller town, and we give our customers 15% off on parts and motor clothes. We are looking into retracting this because of our low gross margins. In your expert opinion, what are the pros and cons of a loyalty program vs. discounting? Will this have an effect on future customers or current ones?
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In part, the Harley-Davidson clothing, and the logo displayed on it, can and should be viewed as free local advertising and promotion for the dealership; so, it might be useful to reframe the discount as that kind of investment. This could perhaps be further leveraged through local H.O.G. events. In regards to loyalty programs and discounting, it's rarely an either-or situation. However, as a general rule, I'm far more positive about loyalty programs than discounting -- providing the customer data which the loyalty program generates is used to create stronger insights, improve processes, and find other elements of added value for customers. The only thing discounting does, like any price rollback, is help commoditize the value proposition. If the dealer "brand" connotes enough value in everything that's offered to a customer, it should not be necessary to reduce prices to make a sale.
This was first published in October 2006