Doug Van Sach explains the growing gap between retailers and automotive consumer experience in this video blog.

Doug Sach, VP Analytics & Data Services for AutoLoop discusses how driverless cars could affect the auto industry in this short video blog.

AutoLoop VP, Analytics and Data Services shares findings about the best predictor of customer loyalty from AutoLoop's recently published white paper, "Life After Loyalty."

AutoLoop VP Analytics & Data Services Doug Van Sach shares some gaps between Millennial expectations and reality in this video blog.

AutoLoop VP, Analytics & Data Services discusses the importance of follow-up in generating revenue in this video blog.

Today, the Big 3 automakers account for only 44% of the market – a 26% decline from 2 and a half decades ago. In this short amount of time, consumer loyalty is no longer within reach, as the average customer retention rate across the industry has sunk below 50%. This amounts to dealers losing more than half of their customers each year.

Why the sharp decline in loyalty?

Carl Sewell wrote his ground-breaking book “Customers for Life” in 1990, changing how many dealers viewed their customer relationships and paving the way for the industry to drive higher levels of service and loyalty. While increased competition and online pricing is partially to blame for the decline in loyal consumers, a critical factor is the changing mindset of the U.S. consumer. The hard truth for dealers is most consumers have redefined what it means to be loyal in the digital age.

How the meaning has changed.

AutoLoop surveyed 1,000 vehicle owners from across the U.S. to better understand their mindset towards loyalty. We were surprised to learn 62% of consumers actually consider themselves loyal to an automotive service center despite the low retention rate for the average dealer. To better understand the gap between consumers’ attitudes and their actions, we dug deeper. When we asked customers to tell us what loyalty means to them, we found a split among generations.

• Baby Boomers were most likely to say loyalty equates to always visiting the same store when they have a need for service.
• The younger generations are more likely to cite loyalty as a “sometimes” rather than an “always” behavior.
• Slightly more than half of Millennials actually believe they are loyal even though they frequently visit competitors.

In other words, loyalty is more of a convenient activity rather than a commitment. Given this discovery, dealers are faced with a new challenge – prevent their best customers from going elsewhere even if they show no signs of disloyalty.

Our research shows that dealers lose close to $1M per year of service spending from their current customers. To address the lost revenue opportunity, dealers need to dramatically rethink their marketing strategies. Many dealers are using outdated, disconnected marketing programs with little to no coordination across media and touch points.

Engagement is key.

Given the constant threat of losing business to competitors, progressive dealers need to use a variety of integrated programs to stay top-of-mind and continuously engage with their customers. At AutoLoop, we are leading the charge by integrating more programs and touch points to ensure dealers stay relevant at all times. From appointments to inspections, newsletters to maintenance reminders, and loyalty programs to mobile apps, AutoLoop has the fully-integrated platform dealers need to stay ahead of the competition and keep their customers coming back time and time again.

On-demand driver services such as Uber are on the rise. The approaching disruption of driverless vehicles shouldn’t come as a surprise, but dealers need to find a way to keep up with customers who want alternatives to owning a vehicle. It comes down to this: complacency can cause suppliers to lose touch with their customers. To remain successful and compensate for declining vehicle owners, it’s time to face the facts.

What’s driving demand?

In a recent study of 1,000 consumers, we found that 1 in 4 U.S. drivers said they always or typically prefer someone else to drive them. This is not a new demand. Transportation options have remained the same for nearly a century, so it’s likely that this preference has existed for quite some time. Rather, the disappearing driver phenomenon stems from a lack of innovation around supply.

Sudden increases in supply

Vehicle manufacturers, dealers, and leasing companies had little reason to change until the Great Recession of 2008. When our economic bubble burst, consumers suddenly stopped buying cars and started looking for less expensive transportation. As major automotive manufacturers teetered on the brink of extinction, a couple of guys decided it was time to fulfill an unmet need and forever change the industry.

Cue: Garrett Camp and Travis Kalanick. These two started Uber in 2009 after the last straw with an age old problem—trying to hail a cab.  In just seven years, they created a business worth more than Ford and General Motors. Multi-billion dollar disruptions like this don’t go unnoticed. Uber quickly got the attention of large technology companies like Google and Apple, who are determined to reshape transportation as we know it with self-driving vehicles.

Measuring the impact

Given the growing popularity of Uber—which currently racks up over a million rides per day—and the emergence of driverless vehicles, we felt compelled to answer an important question for dealers: how much will mobility alternatives impact vehicle sales?

To find the answer, we went to the most reliable source: vehicle owners. In our survey, we asked them how they expect driverless vehicles will impact the number of vehicles they own in the next five years.

• 16% of drivers said they would own more vehicles in 5 years
• 21% of drivers said they would own less vehicles
• 10% said they won’t own any vehicles[1]

As a result, as much as 15 percent of vehicle owners will disappear—virtually guaranteeing an unrecoverable decline in sales.

What does this mean for dealers?

The 15 percent of drivers without vehicles still need ways to get around; yet they won’t need the same number of vehicles to support them. Consider this: a typical driver spends an average of 46 minutes per day in their car[2].  So if 50 percent of vehicles are used for ownership alternatives (e.g. driverless cars), we estimate that one vehicle will soon support up to 15 former drivers—which means the majority of the 15 percent decline in drivers will translate directly to a drop in SAAR.

And that’s only the beginning. It’s uncertain how the majority of vehicle owners will respond once they see their friends and family members enjoying the perks of going vehicle-less.

Dealers can’t afford to sit idle and watch their vehicle sales erode in the wake of on-demand driver services and self-driving vehicles. Instead, they need to work on new revenue sources to make up for the decline in vehicle owners. They should also consider ways to enhance the experience of customers with new, more innovative options for owning a vehicle. Now is the time for dealers to embrace the inevitable—disappearing drivers—and find their place in the new mobility economy.