Every day, dealers are faced with multiple decisions about various facets of their business. Among them: constantly trying to decide if they should invest in buying leads to conquest more consumers or if they should spend more to retain existing customers. At the same time, they often lack the information required to choose the best course of action. In fact, due to an absence of a complete view of the lifetime value of their customers, many dealers are hard-pressed to answer even the most basic questions about them.

It may be surprising, then, to learn that dealers who over-invest in leads can actually harm their business, as has been demonstrated by AutoLoop’s analysis of buyer behavior over a 5-year period. Performed to determine how much business is generated from first-time vs. repeat customers, our 2018 analysis covered a national sample of over 400 auto dealers. Consisting of approximately 800K first-time customers—including those with no previous transactions at a dealer—and approximately 600K repeat customers, we specifically analyzed those who’d purchased a vehicle or had a service visit in the past.

Our findings? First-time customers accounted for 56% of a typical dealer’s sales units and 64% of their gross margin dollars, as shown below. However, while dealers may be tempted to invest even more money in acquiring leads to attract new customers based on these results, this is only part of the picture. To understand the true impact of these buyers on business growth and profitability, auto dealers should consider all aspects of the customer’s behavior over the entire 5-year period, as well as the role leads play in the overall scope of their business.

Two primary issues are key here: first, with less than 10% making a purchase at a typical dealership, leads have proven increasingly more difficult to convert to buyers. The second—and perhaps most important—issue is that leads who are successfully converted to first-time buyers are less loyal and less profitable over their lifetime. In fact, first-time buyers are 60% less likely to repurchase at a dealer than customers with at least one prior vehicle purchase or service visit. They also spend 10% less than repeat customers when they do eventually repurchase.

So for every 100 deals from repeat customers, the average dealer will also gain 10 more vehicle purchases and $2,660 more gross than they’ll earn from the equivalent number of first-time buyers over their lifetime.

If the ultimate goal is long-term growth and continuous profitability, then it stands to reason that pouring more resources into acquisition would be extremely risky at best. This is demonstrated repeatedly by dealers who buy leads that are less loyal. When those leads don’t turn into repeat business, they tend to buy even more leads to make up for declining loyalty over time. As you can see based on the data, this over-investing in leads actually results in lower profit in the future, thereby reducing the total value of a dealer’s business.

To break the cycle, drive real growth, and improve profit in the long run, smart dealers will shift some of their investment from costly acquisition to retaining customers for a second and third purchase. For instance, revamping sales processes and investing in digital tools will better accommodate and retain digitally minded customers who demand transparency and flexibility at every stage of the purchase process. As well, auto dealers can implement strategies and utilize tools that drive higher customer engagement in their stores and throughout the ownership period, since engagement has proven to be the most important predictor of customer loyalty. So ultimately, dealers who invest more in their repeat customers will yield a better return on their investment over a 5-year period—and they’ll reduce their costly dependency on buying expensive leads.

When your customers decide to trade in their current vehicle, you know exactly what to do first: make sure they get an appraisal as quickly as possible, since that’s the number one priority for most buyers. Right?

Not so fast.

AutoLoop recently surveyed 1,000 recent car buyers and analyzed over 100,000 leads from various trade-in valuation companies—and we discovered a significant gap in what consumers expect and what dealers think consumers expect. Accordingly, even though many dealers are making significant investments in digital retailing, the trade-in tools on their websites are actually turning away some of their best prospects. In fact, the typical online trade-in tool on dealer websites falls dismally short of consumers’ expectations, resulting in a poor customer experience and lost sales.

It’s all about the guarantee

Case in point: over half of customers surveyed said the most important factor for them in an online trade appraisal is receiving a guarantee of value for the trade. But countless dealers are still focusing primarily on the benefits of a fast appraisal—which, in reality, very few customers care about. In fact, only 1 in 5 customers said they wanted a quick appraisal.

However, many trade-in tools don’t offer guarantees because the process requires more time and intelligence. More specifically, it requires intelligence from a live person, rather than just a machine. Consumers are already distrustful of trade-in valuations from dealers—and our research indicates that without some type of guarantee, many consumers simply move on to another dealer.

Raise rates with the right tools

The good news? Dealers can still get a dramatic jump on the competition by migrating to consumer-friendly trade-in tools that deliver what buyers want most. We analyzed the conversion rates achieved by trade-in tools from various companies and discovered that those offering a guarantee of value have 3x to 4x higher conversion rates. That means dealers who are using a less intelligent trade-in tool are losing 10-15 deals per month! And that’s just the start—according to our survey, consumers who utilize the smarter trade-in tools with guaranteed values also convert to buyers in 10% less time than customers using outdated resources. Since faster conversions mean less time chasing down consumers with phone calls and emails, staff can spend more time selling.

With trade-in tools, the “work smarter, not harder” adage is key. By simply improving the intelligence of your trade-in process, you’ll avoid wasting money on leads and hours lost from your employees. In return, you’ll ensure your dealership is in sync with the real preferences of your customers—and the one they’re more likely to choose when it’s time to purchase.

It’s a common scenario: drivers eating, texting, talking on the phone, taking care of personal grooming, or even reading while on the road. Loosely termed “distracted driving,” it includes any activity drivers engage in when they’re behind the wheel, according to the National Highway Traffic Safety Administration (NHTSA).

A recent AutoLoop study identified the most common of those activities among morning commuters while driving. With a remarkable 48% of survey participants qualifying as distracted drivers, we discovered that 25% ate breakfast, 17% checked Facebook and 13% of commuters used the drive time to read the news on their phone. Others made purchases, brushed their teeth, shaved, put on makeup, even changed their clothes–and a full 5% actually put in their contact lenses while en route.

Scary statistics–but surprising opportunities

Although our current findings might motivate some to start seriously considering public transportation, they also provide unique opportunities for dealers. Ironically, even as drivers try to make the maximum use of their drive time through constant multitasking, they are also simultaneously seeking vehicles with more features to help them stay safer on the road. This, in turn, gives dealers an ideal place to start trade-up conversations during in-person visits.

Safety features: better technologies for worsening trends

While interest in safety features overall has increased, blind spot warning alerts, lane departure warnings, and voice control are among the most popular in-vehicle technologies sought by recent buyers. Dealerships can take full advantage of this rising interest not only to showcase those particular features but also to highlight the many other safety capabilities in new models—and compare those to the customer’s current vehicle. Dealers should also help prospective buyers understand how these latest enhancements, although never a substitute for good driving practices, can certainly help drivers be safer on the road, especially those who are less experienced. Ideally, these conversations will raise awareness of distracted driving and its potential impacts while increasing your bottom line.

The good news? To date, automotive sales have remained stronger than many analysts originally predicted, with customers of all ages continuing to buy both new and pre-owned vehicles. Considering some of the earlier ominous forecasts, it’s no wonder numerous retailers are breathing a collective sigh of relief.

The not-quite-so-good news, at least for those retailers, though, is that new AutoLoop analytics show that customers are holding on to their vehicles significantly longer before deciding to repurchase. Since a key indicator of upcoming sales is the length of present vehicle ownership, analyzing current trade-in activity among today’s customers is crucial, as it offers invaluable insight into future vehicle sales.

To determine exactly how long customers are keeping their rides now, AutoLoop analyzed trade-in activity over 100,000 vehicle purchases. As a result, we found that in the first half of 2018, the average age of a trade-in was 5.1 years.

In 2017, however, the average age was 4.7 years—and in 2016, just 4.5. While this trend was fairly consistent across vehicle brands, luxury and domestic dealers showed the biggest increase.

So how does this translate to actual numbers for a retailer?

According to the data, the age of a trade-in vehicle is increasing by 6% each year. Another interesting discovery is that longer loan periods did not factor into this trend. In fact, our research showed the exact opposite. Customers whose loan terms exceeded five years actually traded in their vehicles sooner than buyers with shorter finance periods.

Those findings are just as significant for dealers as the ones showing a higher age on trade-in vehicles. They indicate that revenue from loyal sales customers will likely decline as customers choose to stay in their current vehicles longer and delay subsequent repurchases. Accordingly, retailers should start placing a higher emphasis on service and sales loyalty now, combining those efforts with the most intelligent sales marketing. Dealers would also be wise to invest significantly more in retention programs that continuously engage customers throughout the life of a vehicle.

In addition, retailers should develop more sophisticated approaches to interacting with owners who are considering replacing their vehicle, particularly as this segment slowly declines. Digital retailing is one such technology that provides a wealth of resources aimed at capturing the customer’s attention. Using those technologies to create more engagement opportunities helps dealerships maintain a competitive advantage, especially with customers who are more hesitant than ever to contact a dealer during the vehicle purchase process. Plus, digital retailing technology allows dealers to expand and enhance customer profiles, thus helping them deliver the smart, uniquely personalized experience customers are seeking most.

What do customers expect during the vehicle purchase process? What do they value most? In a survey included in the AutoLoop 2017 Digital Experience Study, we discovered valuable insights to these questions and more – insights that can give your dealership the competitive edge when customers start shopping. Read on to grasp a better understanding of what customers want, and how to meet their needs to capture more sales.

Promote Price Over Payment

In our studies, nearly 40% of consumers preferred the right price overall, as compared to 23% who were looking for the right monthly payment and 38% who wanted the right combination of both. Catch the customer’s eye by keeping the price point prominent in your email and direct mail marketing communications. Providing the right price also builds trust through transparency, making customers more likely to visit your showroom to seal their desired deal.

Stay Top-of-Mind – and Top of Their List

Just over 70% of consumers preferred to negotiate in person rather than online and planned to visit two dealerships. Make sure your dealership is one of them by sending consistent, targeted communications through a variety of channels for maximum reach. And make it personal by emphasizing the extra comforts your dealership offers to better the customer experience, such as no-pressure sales, a simplified shopping process, and, of course, the vehicle they want at a desirable price point.

Highlight the Features They Love

What are customers looking for in a vehicle? Newer technology was most sought after by 40% of consumers, and 39% simply wanted a newer vehicle in general. Other features to spotlight in your marketing communications include:

• Higher quality
• Better fuel economy
• More seating and/or cargo room

You know how service visits affect service retention, but do you know how service visits relate to the customer buying process? According to a recent study conducted by AutoLoop, we discovered that the peak repurchase rate occurs between the fourth and eighth service visit. This valuable insight gives you an edge in your marketing strategy: increase engagement and revenue by sending your service customers sales communications at precisely the right time. Learn how below.

The Facts: How Service Visits Relate to Repurchase

We analyzed thousands of deals across a large sample of dealerships and found that repurchase rates are highest between the fourth and eighth service visit; rates begin to drop after more visits (likely meaning that customers are keeping their vehicles long-term). Luxury brands are even more likely to purchase during peak intervals, and sooner too – the repurchase rates begin closer to the third service visit.
                       

Maximize Your Marketing: Here’s How

With this insight, you can make the most of your sales marketing efforts to engage customers at the ideal time in the buying process. Target your service customers based on the number of service visits. And stay top-of-mind by sending sales promotions with your current incentives, personalized offers based on your customer data, and more. Ensure your customers are informed of your best deals while they’re considering repurchasing – and encourage more of them to visit your showroom at their next service appointment.

Does the day of the week an email campaign is launched affect whether that email is opened? It does! And boosting your open rates ultimately increases response rates – meaning more ROI for your store.

In a recent study, we identified how dealers could drive ROI by analyzing on-demand email campaign launch dates. In our research, we were able to pinpoint the best days of the week as related to email open rates. Read on to learn how to improve your campaign engagement by optimizing your launch days.

What We Discovered

We analyzed all on-demand email campaigns launched through our system between January 2015 and September 2017. And in our analysis, we found that the beginning and middle of the week showed higher volume and open rates. While the weekend showed lower volume, the open rates were significantly higher than during the week – a strong indicator of customer engagement.

How to Maximize Your Results

For non-premium brands, target the first half of the week, Monday through Wednesday, as your prime days to drive engagement. For premium brands, the ideal campaign launch days are Tuesday and Thursday. Although the weekend shows lower volume, all brands should consider trying a Saturday or Sunday campaign launch to find out how it performs for your store.

Summer is here – and for luxury retailers, that means a significant increase in tire sales. Based on an analysis of over 9 million repair orders, we’ve discovered a large increase in tire demand for high-end models beginning this month. Peaking at nearly 25% of all ROs in July, this spike in tire sales goes through August before returning to normal levels in September.

Timing is Everything: Create Campaigns Now

Although all dealers see escalated tire sales in the last two months of the year, only luxury stores experience a dramatic surge during the summer – and it’s the ideal opportunity to drive profit even further with strategic new tire campaigns.

Start the season by showing customers why summer tires make a difference on their luxury vehicle, or remind them of all the safety advantages before they get on the road. Help them start their vacations with more peace of mind by offering complimentary oil changes, multi-point inspections, or car washes to maximize likelihood of purchase.

You can also feature personalized, limited-time specials, or create incentives based on an individual’s prior activity. And by consistently reminding customers of your technicians’ extensive training and expertise – and their exclusive use of genuine OEM parts – on each communication, you’ll reinforce the expectation of premium care for their luxury vehicle in your service lane.

Identify, Target, Increase

To maximize your response rates, use a marketing program with built-in machine learning to identify the customers most likely to buy tires in the near future. Then, target that segment with the most relevant and strategic messaging to further drive the sale. With the combination of a seasonal sales spike and predictive analytics, you have multiple possibilities for peak profit on tires for luxury brands during the summer months ahead.

Almost half of a dealership’s sales customers never return for their first service appointment – that’s a hefty chunk of a dealer’s lifetime service potential! What causes this pattern in car buyers, and how can you channel more of them from your showroom to your service lane? AutoLoop surveyed our subscribed dealers and their customers, and we discovered vital insights that will enable you to establish a long-term relationship with your customers – and generate more consistent revenue.

Why Customers Go Elsewhere for Service

Studying a large sample of dealers and finding that nearly half of sales customers don’t return for their first service visit prompted the need to dig deeper. So we surveyed customers who purchased a vehicle in the last 12 months at a dealership and discovered that the biggest reasons they bolted for the aftermarket service providers was due to comfort and cost-related factors. The primary reason customers did not return to the dealer for service was due to an inconvenient location to their home or workplace. Other reasons include:

• Competitive prices
• Speed of service
• No appointments required
• Price options

Address Pain Points to Win Them Back – and Keep Them

In addition to marketing to your dealership and informing customers of Service Department amenities and specials, target the pain points listed above to overcome customer perceptions. If a new car buyer misses their first scheduled maintenance appointment, offer deeper discounts or savings on bundled maintenance packages to overcome the inconvenience of your location and compel them to choose your dealership over the competition. Emphasize the acceptance of walk-ins and the availability of loaner vehicles or shuttle service, if available, to solve the comfort factor. And promote your factory-trained technicians and genuine OEM parts selection. That way, your customers will know that in your service lane, their vehicle will receive the utmost care – something the other guys can’t guarantee.

Doug Van Sach shares how tire sales impact customer loyalty in this video blog.