Auto industry risks loss of ethnic customer loyalty

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By: Wise Marketer Staff |

Posted on January 5, 2007

Less than 15% of African-American, Asian-American and Hispanic-American car buyers believe the automotive industry is 'best in class' at developing customer loyalty, according to a study by R. L. Polk & Co.

As Lonnie Miller, Polk's director of industry analysis, pointed out, vehicle manufacturers will need to do a better job of nurturing repeat business from customers in ethnic minorities, or risk losing what may well be the biggest growth opportunity in the industry: "Minority buying power in the US is projected to grow by 14% up to 2010, so winning and keeping minority customers will be a key element to success in the next decade."

A growing market
Minority purchases have been a bright spot for automotive sales in recent years, according to Polk. While personal registrations in the market were down approximately 1% from 2003 to 2005, new vehicle sales to minority customers rose by approximately 18%.

But, despite the overall rise in minority vehicle sales, loyalty to any specific manufacturer is still very low among these groups, the study found. For example, on average, Hispanic-American customers tend to buy from the same manufacturer only 48% of the time, and Asian-American customers buy from the same manufacturer only 42% of the time. Overall manufacturer loyalty in the US currently stands at 52%, which shows that minority loyalty is lagging significantly.

Loyalty influencers
The study, entitled Multicultural Marketing 2006: Listening to a Diverse Marketplace, found that the most important factor for retaining automotive customers is whether or not they feel the manufacturer is "a reliable and trustworthy organisation". This was strongly agreed with by 39% of Hispanic-Americans, 35% of Asian-Americans, and 31% of African-Americans. This was followed (in order of importance) by the consumer's "joy of driving the vehicle" and their overall experience with dealership's service department.

"Apart from the joy of driving the vehicle, the majority of brand loyalty with ethnic groups is built at the dealership level," explained Miller. "There is an opportunity for manufacturers to connect with customers at the dealership level, to encourage them to return for any needed repairs and routine maintenance while also leveraging cultural cues unique to each audience."

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