The automotive industry has been in constant flux. New technologies have exploded onto the scene with electric cars, autonomous vehicles, and assistive technologies. Throw in the all the issues that Covid has created and many dealers have had to adopt a whole new way doing business and that includes new ways to build dealership brand loyalty.
In addition, consumer preferences are constantly changing and are generally tied to economic conditions along with How can you make sure that your local brand keeps up and stands out in this ever-changing market? How do you create or continue to maintain dealership customer loyalty among your brand with so many options on the market? Building dealership loyalty is not a huge task provided you have a clearly defined customer experience process in your store.
Current Market Trends
With over 17 million new passenger vehicles were sold in 2019, this indicated a slight decline from the previous year. However, not all passenger vehicles are created equal, according to a comprehensive study conducted by Edmunds, a decade ago sedans made up 50% of the market while today they only account for 36% of new purchases.
Consumers’ tastes have dramatically shifted in favor or Trucks and SUVs. This can be attributed to lower gas prices, economic growth, and more environmentally friendly SUV options. Edmunds reports that 75% of SUV owners traded in for an SUV and 74% of truck owners stranded for trucks. These shifts in preferences have sent many brands scrambling to abandon their traditional sedan options and bring more SUV and truck options to market.
This has certainly led to a loss in loyalty to those brands that have not been able to make the transition for their consumers’ preferences. It important however to note other mitigating factors in car brand loyalty such as safety, access to maintenance, and warranties. These factors must be accounted for in order to have a successful brand. The product must meet the quality of the brand.
Luxury Auto Segment
In general, the luxury car market tends to experience less loyalty than mainstream market brands. Lexus dominates the luxury market, yet only has a 51% loyalty rate compared to top mainstream brand Toyota with 63% according to Edmunds. Some luxury car owners have made the switch to mainstream brands, which could be due, partially because of the wider selection of SUVs and trucks among those brands.
However, it is important to note that family of brands loyalty remains strong.
Mainstream brands such as Kia and Hyundai have begun to introduce “premium” versions of their automobiles to try to cut into the luxury market. It is important for brands to identify the needs their competitors fill and match them in order to keep loyal customers from defecting to other brands to suit their needs.
“Respondents were loyal to auto manufacturers (or family of brands), with 81% owning multiple vehicles from the same manufacturer. For instance, we spoke to Lexus owners who had previously owned a Toyota, as well as Acura owners who had owned a Honda in the past.” -Jumpstart Automotive Media
Subaru Give Love, Get Love
Subaru has become somewhat of a superstar in the car market boasting one of the highest loyalty growth rates in the past decade moving from 45% in 2007 to 62% in 2018 according to Edmunds. This can be attributed to Subaru’s loyalty campaign strategies. It dates back to 2008 when Subaru launched its Love Campaign. The Love Campaign is an emotion-based campaign that puts a socially responsible spin on loyalty. Subaru pledges to love pets, the earth, to care, to help, and learning and it still being used today.
Through the Love campaign Subaru engaged in various service projects and made donations to help the advancement of each love area. Subaru periodically runs specials that allow purchasers to choose a charitable cause and Subaru will donate funds to that cause. Dear Subaru, is another program they utilize, it is an ode to brand loyalty. Dear Subaru, is a collection of letters from real fans highlighting special moments or reasons why they love Subaru.
These letters have even been used as the basis for some of Subaru’s most beloved commercials. Subaru has created strong emotionally based commercials that demonstrate the longevity of Subaru autos and usually feature man’s best friend. As Forbes’ Jaysen DeMers, notes “Brand loyalists are driven by emotions, at least to some degree, when going back to their favorite companies”.
Honda Drives Repurchase Loyalty
Honda regularly comes in near the top for customer loyalty. They have no official OEM sponsored traditional retail loyalty program but many of their dealerships independently offer a third-party loyalty program.
Honda drives loyalty through frequently offering a customer a loyalty discount for repurchasing another Honda model. A loyal customer is defined as any owners of a 2009 or newer Honda, all models included. As an extra bonus this deal can be shared within the household and does not require a trade-in. This gives Honda the unique opportunity to double its presence in many households.
GM’s Traditional Brand’s Approach
GM has been named the champion of IHS Markit’s Automotive Loyalty Awards the last three years. GM is unique because there are multiple brands under the GM umbrella which allow consumers more choices within the same family of vehicles.
GM’s My Rewards program is great for the GM brands and is helpful to dealerships that have little or no same brand competition in their local markets. The downside is that a customer can go to any GM dealer to redeem their rewards possibly by-passing their local store which may have been their place of purchase. OEM loyalty programs provide little or no loyalty to local brand. The same holds true for the Ford program
According to Experian, Electrical Vehicle (EV) owners tend to demonstrate a very strong sense of brand loyalty. It was found that 62% of EV owners remain EV costumers on their next purchase. A clear champion of the EV movement is Tesla. Tesla boasts an 80.5% loyalty rate and a Conquest/Defection ratio of 13.77 to 1. Tesla has found a unique position as a luxury tech brand with an environmental focus. Tesla’s ability to corner this niche market contributes to its success with brand loyalty.
How to Build Your Local Dealership Loyalty
Consumer brand preferences in the automotive industry are ever changing amidst economic, environmental, and emotional preferences. It is important to build a brand that is flexible and caters to these market changes while still keeping safety and quality product in mind.
It is not difficult to build local brand loyalty for your dealership by following the types of initiatives which OEM’s have found to be successful and doing it on a smaller scale at the local level. There are many third party loyalty program suppliers that would be happy to get you going in the right direction as customer retention has become paramount in maintaining a healthy business model.