The Why and How of Automotive Customer Loyalty

by Natasha Ambavle |

What do Lexus, Mercedes, BMW, Porsche and Audi have in common? The answer is a strong base of loyal customers. Lexus ranks highest among luxury brands with a 48% loyalty rate. Mercedes-Benz ranks second with 47.8%, followed by BMW in third place with 45.1%, Porsche with 44.9% and Audi with a 43.4% loyalty rate.

Loyalty plays an important factor especially in premium purchases such as automobiles. However, automotive customer loyalty is facing a decline, year after year. Research by Bochmann Consulting estimated that commitment to repurchase is dropping from 90% after purchase to 70% when the time comes to replace a vehicle.

A great way to tackle this and boost loyalty among customers is through customer loyalty programs in the automotive industry. In this article, we will explore common challenges of automotive loyalty marketing and how loyalty programs can help with retention.

Automotive Loyalty Marketing Challenges

  • Longer Purchase Cycle – Unlike FMCG goods or other products and services, the period between purchases is quite long in the automotive sector. Customers do not buy automotive as frequently or regularly as they do other products, which makes every purchase even more important for the seller.
  • Declining Loyalty – According to Beehive Research, 48% of new car owners are undecided if they will choose the same car or brand again in the future. Quality and service do play an important factor here, but besides that, the customer has no other incentive to repurchase from the same brand.
  • Competition – The growing competition makes it even more difficult to retain customers. Today, customers have more brands and models to choose from than there were a decade ago. Customers are also looking for novelty and might switch brands ‘just for a change’.
  • Pandemic Effect – Covid-19 has not only impacted the financial capabilities of customers but also caused a paradigm shift in their purchase behavior. For example, after the first lockdown in China and the US lifted, retailers observed a new shopping pattern called ‘revenge shopping’ which they massively benefitted from, however, the looming uncertainty of the pandemic, gave birth to conscious consumerism and customers today are more careful about their purchases than they were before the pandemic.

How Can You Benefit from Automotive Customer Loyalty?

  • Improved Retention – Empirical evidence proves that retaining customers is less expensive and more profitable to business than acquisition. The most efficient and practical way to significantly improve retention rate is through the means of an automotive customer loyalty program. Dealerships see 33% more customers than non-customer; on average, for every 2 member visits, non-customers only visit 1.5 times. Customers enrolled in a loyalty program are less likely to falter away from the brand and repeat purchases in order to earn rewards and benefits.
  • Loyal Customers – Through the means of retention, automotive loyalty programs promote loyalty. Customers that repeatedly purchase from a brand, develop an affinity towards it. With good customer service and experience, you could significantly improve customer satisfaction and retain these customers for a prolonged period of time, turning them in brand loyalists.
  • Impact on Brand Image – Loyal customers help in enhancing and building a strong brand image. Loyal customers are brand advocates and act as brand representatives, positively influencing others and projecting the brand as reliable and credible.
  • Improved Customer Lifetime Value – Customer lifetime value is the total profit attributed to a customer throughout their journey with a brand. A loyalty program encourages more purchases and continuous engagement from both parties – the brand and the customers, thereby, significantly improving customer lifetime value for each customer, enrolled in the loyalty offering.
  • Improved Customer Experience – Customer experience is the behavioral response or reaction of a customer towards a brand. It is the sum total of their overall experience which includes pre-sale to post-sale experience. Marketers have found that, customer experience has a direct impact on sales and revenue.

How Can You Upscale Your Customer Loyalty Programs in the Automotive Industry

  • Up-selling – Customer loyalty programs in the automotive industry that encourage customers to up-sell by offering better rewards, act as a win-win for both- the brand and the customers. Customers are motivated and suitably rewarded or incentivized for upselling and the brand, in turn, earns more money.
  • Meaningful Rewards – Your rewards and incentives play a crucial role in the success of your customer loyalty programs in the automotive industry. Rewards that add value to the customer’s life can boost loyalty and improve the retention rate. Experiential rewards like staycations, travel vouchers, dinner dates etc. help in building brand affinity and creates a strong brand recall value.
  • Strong Online Presence – According to Autotrader, customers spend 59% of their time researching online before buying an automobile. Although most customers buy automobiles in-store, a strong digital presence does influence their purchase decisions. Incentivizing customers to write online reviews or indulge in social sharing can do wonders for the brand. The customers will show more enthusiasm when rewards are involved and actively influence their network at the same time, while increasing automotive customer loyalty.
  • Upgrading Customer Service – Today, the real competition focuses more on customer service than any other aspect. 54% of customers say they would buy a car from a dealer who offers them the best experience, even if they don’t have the lowest prices. After the purchase is made, customer support is probably the only point of contact and plays an important role in determining whether to continue association with a particular brand or not. Customers frequently reach out to the brand to enquire about their loyalty points or automotive service loyalty program and this is where you could up your game and impress your clients.
  • Reducing Chaos – Speed and convenience are keys to improved sales. Reduce the processes and clear the chaos at POS. Making redeeming points a smooth, easy, and quick process. Almost 56% of dealers, in turn, would buy more vehicles from the carmaker if the process were quicker and easier. Make it worth their money without wasting their time. In general, an improved, easier, and smarter retail experience could increase sales by approximately 25%.

Why Annex Cloud is the First Choice of Automobile Dealers?

With the highest possible scores in 15 criteria in the few Forrester Wave, Annex Cloud is the irrefutable market leader in premium loyalty solutions. The highly experienced team at Annex Cloud will design the best-suited automotive loyalty program that resonates with your brand image and is designed to excite and engage your target audience. For a free consultation and demo, click here.

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