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By Kent Chiu
Get the latest insights on customer loyalty in the automotive industry and strategies for automakers to build and maintain a loyal customer base.
Customer loyalty in the automotive industry is a vital component for sustained success; competition is fierce and consumer preferences are ever-changing. Vehicle manufacturers recognize that fostering loyalty among their customer base not only enhances their brand reputation but also drives profitability.
Here are some of the latest insights on automotive customer loyalty in the US and strategies for automakers to build and maintain a loyal customer base.
To grasp the importance of customer loyalty, it’s essential to first understand loyalty rates within the automotive sector. According to S&P Global Mobility data, the overall US loyalty rate stands at 51.8% for the time period of December 2023 - November 2024.
This means that more than half of all households that return to the market to acquire a new vehicle stay with the same brand they currently have.
When we break this percentage down further, we can see a distinct difference between loyalty rates for mainstream versus luxury brands. Mainstream brands have a loyalty rate of 52.3%, while luxury brands sit lower at 49.6%.
Luxury consumers typically enjoy increased financial flexibility and a broader array of choices when considering different brands and products, which may result in lower loyalty rates. Additionally, luxury consumers have higher expectations for quality, performance, and customer experience. If a brand fails to meet these expectations, the customer may quickly switch to competitors.
The top performing mainstream brands for December 2023 - November 2024 include:
The top performing luxury brands (note: exotic brands not included) for the December 2023 - November 2024 period include:
Why do vehicle manufacturers place such a high value on loyalty? The answer lies in the numerous benefits that loyal customers bring.
First and foremost, loyal customers tend to make repeat purchases, which directly contributes to a stable revenue stream. Additionally, they are more likely to recommend the brand to friends and family, serving as brand ambassadors and helping to attract new customers.
Moreover, loyal customers often exhibit a lower cost of acquisition. According to a Harvard Business Review study, acquiring new customers can be five to twenty-five times more expensive than retaining existing ones. By investing in customer loyalty initiatives, manufacturers can save significant marketing costs while simultaneously enhancing their customer base.
An interesting aspect of automotive loyalty is the difference in loyalty rates between lease and purchase households. Recent data from S&P Global Mobility’s AutoCreditInsight™, in partnership with TransUnion, indicate that households that lease vehicles have a loyalty rate of 63.7%, whereas those that purchase vehicles with a loan show a loyalty rate of 47.2%.Cash purchasers have a loyalty rate of 48.3%.
This distinction is critical for manufacturers as it provides insights into consumer behavior and preferences.
The predictability of the buying cycle for lessees allows brands to time marketing messages and offers to customers just as their lease is coming to maturity. Communicating to a customer with the right message and at the right time helps drive loyalty.
The long-term benefits of customer retention are also substantial. By nurturing relationships with existing customers, manufacturers can effectively graduate them through the brand’s portfolio. For example, a young professional may start with an entry-level vehicle, but as their career progresses, they may seek to upgrade to a luxury model.
Additionally, brands can grow with buyers and family units as they move through various life stages from singles to couples to families and empty nesters. Each of these life stages often require different types of vehicles. By offering a diverse range of vehicles, manufacturers can create pathways for customers to remain within their brand, resulting in increased lifetime value and loyalty.
Leveraging these automotive insights can help manufacturers anticipate customer preferences, ensuring that product offerings align with automotive consumer demand and bolstering long-term brand commitment.
This strategy not only boosts sales across different segments of the portfolio but also fosters a sense of brand community. Customers who feel a connection with a brand are more likely to stay loyal, making it essential for manufacturers to cultivate these relationships.
One strategy to create customers for life is to guide them through a diverse portfolio. Brands can offer a wide range of models in their showroom. An S&P Global Mobility analysis revealed a compelling correlation between the number of models a brand provides and its loyalty rates.
The chart below illustrates the relationship between brand loyalty rates and the variety of models available. Brands with a greater selection tend to enjoy higher loyalty rates, as this extensive range offers buyers more choices that align with their evolving life stages and vehicle requirements.
In addition to adding new models, manufacturers can increase product breadth by introducing vehicles using different fuel types. Hybrid electric vehicles as well as full battery electric vehicles are conquesting market share from competitors at a faster pace than traditional internal combustion engine (ICE) vehicles.
S&P Global Mobility data shows households have been choosing alternatives to gasoline vehicles with gasoline loyalty down over 11 percentage points since 2019.
To effectively leverage customer loyalty in the automotive industry, manufacturers must utilize actionable insights derived from loyalty data. By analyzing this data, companies can implement targeted marketing strategies that resonate with their loyal customer base. For instance, personalized communication can be used to engage customers and keep them informed about new models or special offers.
Additionally, product training for employees is essential to ensure they are equipped to meet the needs of loyal customers effectively. Well-trained staff can provide tailored recommendations and create memorable experiences that further enhance customer loyalty.
Incentive planning is another crucial aspect. By offering loyalty rewards or incentives for repeat purchases, manufacturers can encourage customers to remain loyal and choose their brand for future vehicle acquisitions.
In conclusion, customer loyalty in the automotive industry is not merely a metric to track; it is a vital driver of success. By understanding loyalty rates across different segments, recognizing the cost savings associated with retention, and implementing actionable strategies, manufacturers can cultivate a loyal customer base that drives long-term growth and profitability.
To take your understanding of automotive loyalty to the next level, utilize the suite of tools available through S&P Global Mobility such as Loyalty Analytics and AutoCreditInsight™. Our robust analytics platforms provide deep insights into consumer behavior, enabling you to make informed decisions that enhance customer retention and loyalty.
Don’t just keep pace with the competition — leverage data to drive your brand’s success and build lasting relationships with your customers.
Request a live demo of our loyalty analytics tool.
This article was published by S&P Global Mobility and not by S&P Global Ratings, which is a separately managed division of S&P Global.