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The Power of Repeat Business: Insights on Customer Retention

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Article Highlights:

  • It's far more cost-effective to retain your current customers.
  • Focus on your local market share.

A lot of things can affect whether or not a customer chooses to purchase a car from you. There’s inventory availability, how far away your dealership is, past purchasing experiences, the list could go on and on. And through all of this, your dealership has to find those customers— the ones that are not only likely to buy, but are likely to buy from you.

Developing a custom targeting strategy for your dealership can be tricky. That said, there is data that can show you where some of your best customers, both current and new, may be hiding.

Naked Lime recently published a report that has all sorts of interesting findings about customer retention efforts and conquest opportunities that can help your dealership improve its targeting strategy. But in case you missed it, we’ve compiled some of the insights that you can’t miss here.

Insight 1: What Glitters Isn’t Always Golden

It’s far easier (not to mention more cost-effective) to retain your current customers than it is to obtain new ones. And good thing for dealers—over the last year, vehicle brand retention for US car buyers was at about 42.6% (an increase compared to years past).

Essentially, this means that about 2/5 of car buyers are purchasing a vehicle from the same brand that they were previously driving—your Ford customers stay Ford customers, Honda customers stay in a Honda, and so on.

What Can You Do?

Your OEM probably has a particular demographic that it appeals to, whether that’s people in rural areas, those interested in environmental sustainability, or something else. Your dealership likely tries to align its marketing with these demographics and interests while still pushing your own brand and message. Find where your dealership’s target market and your OEM’s market align— odds are this is a great place to find customers that will return to you for years to come.

Insight 2: A Tough Crowd

We’re all well aware of how competitive this industry is, but it may surprise you to find that there are common patterns in where your customers are going when they defect to other dealers/brands. These patterns may not always be easy to spot, so let’s use an example:

Imagine Charles is in the market for a new car—he’s in his early 30s, just got a hefty promotion at work, and his current car just feels a little too cramped for his liking. He does his research and decides that he’s interested in purchasing one of these two options:

  • A vehicle from the highline equivalent of his current car (think a Cadillac instead of a Chevy or an Infiniti instead of a Nissan).
  • A high trim vehicle from a totally different mainstream brand (think trading that Chevy or Nissan in for a Volkswagen).

This might sound like an outlandish scenario, but it happens all of the time. Customers aren’t loyal to any particular brand unless you can give them a reason to be. Maybe Charles opts for the Cadillac because he’s been taking his Chevrolet to your shop for a while now and he trusts the techs. Conversely, maybe he defects to the Volkswagen dealer because they have a better deal and his friend gave their shop high regards.

What Can You Do?

We’ll say this one again because it’s important—customers aren’t loyal to any particular brand unless you give them reason to be. When it comes to customer retention, making sure that your dealership has accurate, updated customer information in its database is a crucial step. This can go a long way in making your repeat customers feel known and valued. As for your conquest efforts, take a look at what vehicles are being traded in at your dealership. Do you see any trends there? If yes, it might be worth considering whether your dealership can run any campaigns targeted at customers who currently drive those vehicles.

Insight 3: Small Scale, Big Impact

Despite the fact that online car buying is growing in popularity, most of your customers probably live in the same general region that your dealership is found. And when it comes to marketing, what’s going to work for a dealer on the sunny Florida coast isn’t necessarily the best strategy for a dealer in the rural Midwest.

Here’s some regional quick hitters that might be useful to your dealership:

  • For our Midwesterners- Mainstream GM, Stellantis, and Ford brand owners are conquested at a much higher rate here compared to other regions.
  • For the Northeasters- Hold on to those customers! The average retention in this part of the US is the highest in the country at 47.2%
  • For those in the Southeast- All-around retention rates for trucks in this region were the lowest in the US.
  • And the Southwest- The average retention rate in this part of the US is the lowest in the country at 39.7%.
  • And finally… the West- More than half (57.3%) of conquests in this region resulted in the purchase of a foreign brand vehicle.

What Can You Do?

The first step in getting customers to choose you is making sure that they know you’re an option. Brand awareness is essential, especially within your local area. Location-based awareness advertising is a great tactic for dealerships to utilize in cities/towns near them, as well as in any areas where they’re looking to conquest from competitors.

All in all, there’s a lot of factors that influence customer loyalty. While there will always be some elements beyond your control, ensuring that your dealership’s marketing strategy is built around actionable data is key to establishing customer relationships that will stand the test of time.

Note: This article was derived from Naked Lime’s 2023 Brand Retention and Defection Report. For additional insights, you can view the full report here.

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Mollie Swygart is a marketing communications professional at Reynolds and Reynolds. She is an expert on Reynolds’ suite of cutting-edge marketing products, their functionalities, and how they can be utilized to improve dealership success. Mollie received her Bachelor’s Degree in Studio Art and English from Marietta College. She also obtained an Associate’s Degree in Marketing from Rhodes State College.

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