Published in Automotive

2016 Automotive Dealership Loyalty Study

Automotive Dealership Loyalty Study Background

Purpose of the Study: To determine the relationship between dealership satisfaction, dealership customer loyalty and dealership revenues.

This was a follow-up study of 2009 and 2010 model year vehicle purchasers who returned MaritzCX’s New Vehicle Customer Study. Customers were asked about their vehicle service behaviors and vehicle repurchase behaviors since purchasing their 2009 or 2010 vehicles.

2016 automotive study background

Two Data Sets

  • All Respondents (n=12,875)
    • Weighted to 2009 and 2010 vehicle sales by model
    • Used for Sales to Service Loyalty analyses and service usage analyses
  • Vehicle Replacers (n=5228)
    • 5431 had replaced their 2009 or 2010 vehicle
    • 203 respondents removed because their original brand was no longer available
    • Weighted to 2009 and 2010 vehicle sales by model
    • Used for Sales to Sales Loyalty and Service to Sales Loyalty analyses

Key Dealership Measures

Key Dealership Measures

Dealership Sales Satisfaction – Satisfaction with the dealership purchase experience as reported by customers in 2009 or 2010.

Overall Dealership Satisfaction – Satisfaction with the selling dealer over the lifetime of the vehicle as reported by customers in 2016.

Dealership Sales-to-Sales Loyalty – The percentage of vehicle replacers who purchased their replacement vehicle from the same dealership that sold them their 2009 or 2010 vehicle.

Dealership Sales-to-Service Loyalty – The percentage of customers who reported that they usually used their selling dealership for various types of service work.

Service-to-Sales Loyalty – The percentage of vehicle replacers who purchased their replacement vehicle from the dealership that sold them their 2009 or 2010 vehicle by where they usually had their 2009 or 2010 vehicle serviced.

Sales-to-Sales Loyalty

Dealership Satisfaction and Dealership Loyalty

Both dealership sales satisfaction and overall dealership satisfaction are strongly related to dealership sales loyalty

  • Customers completely satisfied with the dealership are over four times more likely to buy from that dealership again compared to very dissatisfied customers

Dealership Satisfaction and Dealership Loyalty

Dealership Loyalty and Brand Loyalty

While dealership satisfaction is more associated with dealership loyalty than vehicle brand loyalty, both show strong relationships

  • Those completely satisfied with their dealerships are about twice as likely to re-purchase the brand as those that are very dissatisfied with the dealership

Dealership Loyalty and Brand Loyalty

Sales-to-Service Loyalty

Dealership Sales Satisfaction and Service Loyalty

Customers with higher levels of dealership sales satisfaction are about 50% more likely to have their vehicles serviced at the dealership:

Dealership Sales Satisfaction and Service Loyalty

Overall Dealership Satisfaction and Service Loyalty

That relationship gets stronger when looking at overall dealership satisfaction

  • Customers are two to three times more likely to service at the dealership if they rate their overall dealership experience completely satisfied vs. very dissatisfied

Overall Dealership Satisfaction and Dealer Service Loyalty by Service Type

Dealership Satisfaction and Service Spend

As customers are less satisfied with their dealerships, service spend doubles at independent facilities and halves at the selling dealerships

Overall Dealership Satisfaction and Service Spend Percentages

Service-to-Sales Loyalty

Service Usage by Service Type

About half of customers report usually using their selling dealership for all types of service work, but this tapers off for out of warranty service

  • Independent facilities are picking up this work

Service Provider and Dealership Sales to Sales Loyalty

  • Dealership sales to sales loyalty is over 50% if their customers usually have their vehicle serviced at the dealership
  • Dealerships really want to avoid customers servicing at other dealerships. Only about 10% of customers who service their vehicles at other dealerships return to the selling dealership when replacing their vehicle.

Show Me the Money – A Financial Model

Financial Impact of Dealership Satisfaction on Dealership Revenue

For the average US dealer

  • Increasing satisfaction of all customers by one “box” on a 5-point scale generates approximately $2.5 million in loyalty related revenue
  • Allowing satisfaction to fall one box for all customers equates to a loss of $4.2 million in loyalty related revenue

On a typical 100 point scale, each point of customer satisfaction relates to approximately $151,800 in additional loyalty related sales revenue for each dealership

Model Showing the Financial Effect of Increasing Satisfaction One Level

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Model Showing the Financial Effect of Decreasing Satisfaction One Level

Decreasing Satisfaction One Level

Scaling to 100-Point Scale

To model loyalty changes on a typical 100-point satisfaction scale, we converted the 5-point scale by assigning the values of 100, 75, 50, 25, and 0 to the boxes from Completely Satisfied to Very Dissatisfied. We then extrapolated the models shown previously to the points where all customers where completely satisfied and all customers were completely dissatisfied.

For all the models in this process we calculated the 100-point satisfaction score and the associated loyalty rate. These points were plotted on the graph below. Because the resulting curve is mostly linear, a trend line was fit to it, and its regression equation was determined. This equation and its associated line shows that every point on the 100-point scale relates to a .45 percentage point change in dealership sales-to-sales loyalty

  • For the average dealership with 1003 vehicle sales, that equates to a change of sales revenue of $151,830 per point1

Scaling to 100 Point Scale

1Assumes an average selling price of $33639 per vehicle as reported by the National Automobile Dealers Association for 2014 (the most recent data available).