Trends in US Dealer Loyalty

While brand and manufacturer loyalty are closely followed by the
auto industry, partially because leaders can use strong retention
results in marketing campaigns, dealer loyalty, on the hand, is not
as widely tracked. But, for the retailer itself, dealer loyalty is
a high-priority metric. Dealer-loyal households provide the
foundation for a dealer’s very existence, not only with repeat
sales but with maintenance and repair business.

IHS Markit loyalty data indicate that dealer loyalty generally
over the past ten years has followed the same pattern as
manufacturer and brand loyalties: all three metrics rose from 2012
to the 2017-19 time period and then either plateaued or retreated
slightly. Recently, though, the similarities have diminished, as
dealer loyalty dropped 1.6 PP from February 2018 R12 to February
2021 R12 while manufacturer and brand loyalties each slipped just
.2 PP.

A surprising trend in the IHS Markit dealer loyalty data relates
to relative size of markets. The data indicate that dealer loyalty
does not vary much based on whether the dealer is located in an
urban or rural area. As shown below, dealer loyalty within the top
ten DMAs in the U.S. (the DMAs were selected on 2020 CY RTM volume)
is just .4 PP lower than in the ten smallest DMAs. This runs
against the widely-held belief that customers in urban areas, with
same-brand dealers in closer proximity to one another, are more apt
to switch dealers for a better deal or for other reasons.

Other dealer loyalty findings are more intuitive. Lessees are
substantially more loyal to their dealers when compared to
purchasers (as they are based on most other loyalty metrics as
well). Lessees generally maintain a closer relationship with the
purchasing dealer than do owners, which would lead to a greater
likelihood to acquire the next vehicle from the same store.

There is also a significant range of dealer loyalty rates across
the five regions of the U.S. As illustrated in the table below,
more than four of every ten RTM households in the Midwest will
acquire their next vehicle from the same dealer, this metric drops
to just three of every ten in the West Region.

As mentioned, dealer loyalty is more “under the radar” than
brand or manufacturer loyalty, but for the retailer it is
paramount. By tracking dealer loyalty as well as dealer conquest
and defection metrics, including finance type splits, a dealer can
identify encouraging as well as alarming trends; with this
information, he can take action to improve his loyalty, operations
and profitability.

Posted 17 May 2021 by Tom Libby, Associate Director Loyalty Solutions and Industry Analysis, Automotive

Source: http://ihsmarkit.com/research-analysis/trends-in-us-dealer-loyalty.html