I bought my first new car, a 1983 Ford Bronco, about a year after I graduated from college. I kept it 21 years but in 1999 I bought my second new car, a Windstar, which means I had two Fords in my garage at the same time.
My daughters drove the Windstar during their high school years. (It is not cool for teenage girls to drive the family minivan to school…but I told them it was better than walking!) I traded the Bronco for a new Expedition in 2004, and it is still going strong to this day. To recap, that’s three Fords in 32 years.
My father-in-law was a Cadillac man. He drove Cadillacs for over 60 years.
In the past 50 years I’ve never seen my uncle driving anything but an Oldsmobile or a Chevrolet. Right now he has an Impala.
All that to say I have always thought brand loyalty was directly related to brand ownership longevity…the longer you own a brand, the more likely you are to repurchase that brand.
I was wrong!
According to Experian Automotive, a data analysis firm, after one year brand loyalty is 57%…meaning just over half of vehicle owners would purchase the same brand again. But after 12 years of ownership only 34% remained loyal to the brand.
I spoke with Brad Smith, Director of Automotive Market Statistics at Experian, about the loss of loyalty over time. Smith said several factors contribute to the loyalty decrease, such as:
Changes in a brand’s lineup over time
Changes in a consumer’s budget or credit rating
Expired leases or warranties (which usually keep vehicle owners very loyal while they are in force.)
These factors are largely not under the dealership’s control, but there is a huge contributor to brand loyalty that the dealership can control: time intervals between customer visits to the dealership.
Automotive News reporter Jamie LaReau gave me permission to use a direct quote from Experian’s Smith in a published article LaReau wrote late last year.
Smith said, “The increase in time between dealer interactions, whether they are for sales or services, increases the probability of a customer defecting to the competition.”
Bingo! There it is in a nutshell: there is a direct relationship between customer loyalty and the number of times they visit the dealership each year. Granted, there is a sweet spot, because too many visits a year could have a negative effect on loyalty, too. In my opinion, the customer should come in for service approximately 2.5 times per year.
Some import dealers that are following the manufacturers recommended 10,000 mile oil drain interval are only seeing their customers 1.3 times a year, and personally, I think that’s tragic. It’s hard to build a relationship with a consumer if you only see them four of five times in three years!
Experian says the average length of ownership (new to new replacement) for all brands is 93 months, or almost 8 years. Dodge and Buick have the longest length of ownership with an average of 113 months. Dodge’s loyalty rate is 23% and Buick’s is 38%. Subaru, on the other hand, has an 85-month length of ownership and a whopping 59% loyalty rate.
Ford is the exception to the rule with a high length of ownership rate (110 months) and a respectable loyalty rate (61%).
Smith says OEMs got interested in loyalty because they realized new sales were coming from loyal customers. Therefore, as loyalty wanes, so do vehicle sales.
I must admit that when I speak about customer loyalty, most of the time I’m thinking about loyalty to the service department…and there’s nothing wrong with that, because a loyal parts and service customer is very profitable to the dealership. This Experian study has helped me realize anew the importance service department loyalty plays in keeping consumers loyal to the brand and to the dealership’s sales department.
I’m seeing several dealerships that actively promote their new cars on the service drive. For example, a customer might be able to upgrade from a 2011 to a 2015 and keep his payments the same. One of my Chevrolet clients has followed this practice with positive results… and it provides the used car department with some high-quality, well-maintained vehicles.
Let’s back up a minute. Before you can turn a service customer into a new car buyer, they first have to be a service customer. Let’s be honest with each other; most new car departments do a poor job of introducing customers to the service department. Oh, everyone gives lip service to this process, but most execute sporadically, if at all.
Smith calls this process “sales to service induction” and it is the critical first step in the circle of retention: sales to service, service to sales, sales to service, etc.
We’ve said for years that the sales department sells the first car and the service department sells the second car. Just remember that the sales department better keep the customer connected to the service department, or there won’t be a third car sold!
In closing, here are three quick tips to keep customers loyal to the service department:
When stuff breaks, fix it right the first time.
Keep customers satisfied by becoming masters of the basics: smile, say thank you, follow through, and be a man of your word.
Keep cars trouble-free and fun to drive by educating your customers on the necessity of preventive maintenance.
You’ve heard the phrase “pay it forward.” That’s really what loyalty is all about. It’s planting the “customer service” seeds today that produce the “customer loyalty” harvest tomorrow.