While loyalty customers have long been critical to dealership success, the segment has grown in importance in 2021.
According to a recent IHS Markit report, “During the past several years loyalty has emerged as one of the most watched metrics in the US new vehicle industry, along with market share and profitability.”
Now amid inventory shortages and historically high vehicle prices, nurturing and protecting dealership loyalty customers against competitor’s conquest attempts has become key – critical to both immediate and long-term success.
In this blog post, we’ll explore three key reasons why dealers need to focus on their loyalty audience in 2021 including:
Supporting Short-Term Success
While ongoing inventory challenges spurred by global chip shortages may make stocking your dealership with the right vehicles seem like an impossible task, mapping the vehicles already available in your inventory to the buyers predicted to be interested in them has never been easier.
According to a recent report from IHS Markit covering automotive customer retention statistics a third of all US new vehicle registrations in 2020 were for loyalty households. Focusing your immediate efforts on tapping into your most loyal customers is a fantastic way to start leveraging loyalty to increase your sales numbers in the short term – and this dealership loyalty strategy isn’t just limited to brand.
While brand loyalty, the percentage of return-to-market households that acquire the same brand again, is typically the most cited loyalty metric, IHS Markit registration data details loyalty at various other levels ranging from manufacturer loyalty to loyalty for import vs. domestic brands. For example, mainstream compact CUV buyers led in segment loyalty in 2020 at 52%, while SUVs led in body style loyalty at 71%.
By leveraging behavior prediction technology to analyze customer insights from their CRM and DMS, as well as inventory data, dealers can account for the wide variety of factors beyond brand loyalty influencing a buyer’s purchasing decisions to map their available inventory to the best prospective buyers.
This loyalty sales process empowers dealers to meet their short-term sales goals by maximizing their available inventory – all while protecting against competitor’s conquest efforts by reaching buyers before they start shopping around.
Loyalty Builds Loyalty
Not only will tapping into your loyal customer base support your immediate sales goals, focusing on this already critical segment only increases its value. To put it simply, loyalty builds loyalty.
According to IHS Markit, a loyal household becomes more loyal with its next acquisition, and the growth continues after that. For example, in 2020, older super loyalists, or those who acquired their three most recent acquisitions from the same make, generated an incredibly high loyalty rate of 90%, while young nomad buyers generated a 73% loyalty rate.
Understanding these subsets is critical to dealers identifying which of their loyalty customers present the greatest sales opportunities and which are most at risk to be conquested by a competitor. This becomes increasingly important as lack of available inventory pushes some customers to begin shopping elsewhere.
With tools powered by behavior prediction technology, dealers can reach loyalty customers at key relationship building touchpoints, like with conveniently timed and personalized service notifications.
By further leveraging their unique access to information on their customers’ existing vehicles and buying behaviors, proactive dealers can take this one step further and identify when customers are preparing to re-enter the market to engage buyers before they’ve had the chance to defect with messaging designed to retain their business, such as extended lease offers.
By taking a similar approach using Market EyeQ’s intelligent behavior prediction modeling, our dealer partners increase retention sales up to 15%.
Loyalty Customers Supply Future Sales
Finally, dealership loyalty customers represent a critical source of future sales regardless of what lies ahead.
Long before the pandemic, total new vehicle registrations declined year-over-year in both 2019 and 2020. At the same time, rapid digitalization has only increased competition between dealers. To succeed despite growing and evolving challenges, its critical dealers take a proactive approach to dealership customer retention
Remember: Loyalty customers increase in value and commitment over time. Just as it’s critical to think ahead and protect this segment against the competition through consistent communication, dealers need to ensure they’re not jeopardizing a long-term customer relationship with a short-sighted approach.
Loyalty customers are an invaluable supply of high ROI sales, less likely to negotiate and more likely to generate service and other fixed-ops revenues, as well as contribute to referral business. Among inventory shortages and other uncertainties, focusing on dealership customer loyalty equates to a steady supply of highly profitable sales now – and in the future.
Interested in learning how Market EyeQ can help your dealership drive customer loyalty and retention, even in the most challenging environments? Contact us for a free demo.