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Trends in US Dealer Loyalty

17 May 2021 Tom Libby

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, S&P Global Mobility


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