Automotive loyalty still dropping after 10 years

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By: Wise Marketer Staff |

Posted on August 21, 2008

Automotive loyalty still dropping after 10 years

Automotive customer loyalty at the manufacturer level has dropped by 9.2 percentage points, from 49.1% in 1998 to 39.9% in 2008, and costing some automakers more than US$3 billion in annual sales, according to Experian Automotive.

According to Scott Waldron, president for Experian Automotive, current battles in the automotive industry are making it more important than ever for automakers to keep their customers loyal.

Loyalty challenge "However, the increased number of available manufacturers and models make engendering customer loyalty a bigger challenge than ever before," Waldron warned. "Automakers that have a firm understanding of what drives their customers to remain loyal will have a significant competitive advantage in such a challenging market."

The company suggests that even a small rise in customer loyalty can lead to significant increases in revenue. For example, a manufacturer with 10 million current customers will have approximately 1.5 million of those customers return to market in a given year. A 1 percentage point rise in customer loyalty would produce 15,000 additional annual sales, or approximately US$405 million in additional revenue (based on an average vehicle sale price of US$27,000).

But if that same manufacturer could improve loyalty performance by the 9.2 percentage points lost since 1998, it would generate an additional US$3.726 billion in annual sales.

Satisfaction scores aren't king Waldron warned, however, that traditional customer satisfaction scores are not always a reliable indicator of overall loyalty, and that automakers need to understand how customer loyalty is influenced by several other factors, such as financing, warranty work, and customer satisfaction with dealership interactions.

"Generating customer loyalty is a far more complex process than simply scoring high on initial customer satisfaction surveys or just tracking whether a customer bought another vehicle of the same make," said Waldron. "Automakers need to factor in all of their customer touch points across the ownership lifecycle to understand the definition of loyalty that is specifically meaningful to their brands and their customers."

Waldron concluded that truly effective loyalty programmes begin with manufacturers that can make their own internal data actionable by coupling that information with additional vehicle registration, consumer demographic, and behavioural data, as well as analytic expertise.

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