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Surviving the Customer Loyalty Tailspin

By Doug Van Sach

Today, the Big 3 automakers account for only 44% of the market – a 26% decline from 2 and a half decades ago. In this short amount of time, consumer loyalty is no longer within reach, as the average customer retention rate across the industry has sunk below 50%. This amounts to dealers losing more than half of their customers each year.

Why the sharp decline in loyalty?

Carl Sewell wrote his ground-breaking book "Customers for Life" in 1990, changing how many dealers viewed their customer relationships and paving the way for the industry to drive higher levels of service and loyalty. While increased competition and online pricing is partially to blame for the decline in loyal consumers, a critical factor is the changing mindset of the U.S. consumer. The hard truth for dealers is most consumers have redefined what it means to be loyal in the digital age.

How the meaning has changed.

AutoLoop surveyed 1,000 vehicle owners from across the U.S. to better understand their mindset towards loyalty. We were surprised to learn 62% of consumers actually consider themselves loyal to an automotive service center despite the low retention rate for the average dealer. To better understand the gap between consumers’ attitudes and their actions, we dug deeper. When we asked customers to tell us what loyalty means to them, we found a split among generations.

Customers' Definition of Loyalty to a Store

Customer Loyalty

  • Baby Boomers were most likely to say loyalty equates to always visiting the same store when they have a need for service.
  • The younger generations are more likely to cite loyalty as a “sometimes” rather than an “always” behavior.
  • Slightly more than half of Millennials actually believe they are loyal even though they frequently visit competitors.

In other words, loyalty is more of a convenient activity rather than a commitment. Given this discovery, dealers are faced with a new challenge–prevent their best customers from going elsewhere even if they show no signs of disloyalty.

Our research shows that dealers lose close to $1M per year of service spending from their current customers. To address the lost revenue opportunity, dealers need to dramatically rethink their marketing strategies. Many dealers are using outdated, disconnected marketing programs with little to no coordination across media and touch points.

Engagement is key.

Given the constant threat of losing business to competitors, progressive dealers need to use a variety of integrated programs to stay top-of-mind and continuously engage with their customers. At AutoLoop, we are leading the charge by integrating more programs and touch points to ensure dealers stay relevant at all times. From appointments to inspections, newsletters to maintenance reminders, and loyalty programs to mobile apps, AutoLoop has the fully-integrated platform dealers need to stay ahead of the competition and keep their customers coming back time and time again.