How Does Customer Repurchase Loyalty Impact the Auto Sector?

The automotive industry is among the most competitive and dynamic in the world, with a wide variety of brands and models vying for consumer attention and loyalty. This is why car manufacturers are constantly innovating and improving their products to stay at the top of the market and in the minds of consumers. In this regard, and precisely because of the fierce competition, there is a crucial factor for success in this sector: customer repurchase loyalty.

As a reader, you might wonder, "How much impact can repeat customers have on a brand? Isn't it more important to attract new customers?" Well, repeat customers are those who return to the same automotive manufacturer to purchase their next vehicle, and they are particularly valuable for brands. Loyalty is essential for the long-term success of an automotive manufacturer as loyal customers increase the lifetime value of the company and can also become organic brand ambassadors.

While there is no precise data, and each case is different, it is often said that it is more expensive to attract a new customer than to retain one who has chosen us before. However, this statement takes on an additional nuance when it comes to winning back a lost customer, someone who preferred us but for some reason, we lost their business. This can be even more challenging than the previous two scenarios.

In the highly competitive automotive industry, with rapidly advancing technologies, vehicles offering similar features in many cases, new competitors entering the market, and a post-COVID-19 pandemic "normalization" scenario, customer loyalty is a key point to analyze.

To begin, we need to define what loyalty means in a purely commercial context. It is the allegiance shown by a customer toward a product or brand they have already tried, above others that may seem more attractive in certain specific aspects. It involves building a strong customer-brand relationship that ideally grows, transforms, and solidifies over time.

This customer loyalty is achieved through three basic aspects:

1. Being consistent in the products and services we offer: It is proven that consumers seek consistency from a brand from the first contact. To have a satisfied and loyal customer, fulfilling the brand promises is a necessary and fundamental step throughout the brand-customer relationship.

2. Not diminishing the product or service through promotions or discounts aimed at attracting new customers: Many times, in an attempt to attract new customers, brands offer bonuses or promotions that reduce the resale value of existing vehicles, affecting the assets of our current customers. When a customer purchases a vehicle and their asset value is significantly reduced in the market, the brand loses the opportunity for a strong loyalty relationship with the buyer, who may consider other options for their next purchase.

3. Creating an environment where the customer feels supported by the brand in any situation: The customer may understand that their vehicle can have issues, but they will never accept that the brand is not present to resolve any situation or problem that arises, whether it's the brand's responsibility or the customer's. This point is particularly noticeable in luxury brands, where service excellence is a factor that should never be overlooked.

If these three aspects are not addressed, automotive brands will have to spend resources to "buy" this loyalty. This may involve offering loyalty bonuses at a discounted price, providing preferential interest rates, accepting trade-ins at a price lower than market value, or other common practices in the automotive sector.

If the inadequate work in achieving customer loyalty is combined with the aggressive offers from competitors, such as "conquest bonuses," where a cash amount is offered upon proving ownership of a competitor's vehicle, a bonus that can even be extended to family and friends, we can conclude that customer loyalty comes at a considerably high cost. This cost must be paid by developing and mastering the three aforementioned basic aspects or by addressing the deficiencies in those aspects at a higher price.

Today, there are platforms and systems that help gather customer information, personalize processes or offers, and understand specific factors that customers desire. However, in reality, all these solutions are just countermeasures to poorly executed work in the three basic aspects mentioned above, whose ultimate goal is customer satisfaction.

Brands, more than ever, must understand that customer satisfaction creates a virtuous circle where loyalty is generated. Loyalty reduces costs and, consequently, generates greater profits. It also drives higher sales through word-of-mouth recommendations. This, in turn, motivates the salesforce as they can convert prospects more easily, and the satisfaction of the salesforce reduces staff turnover. As companies understand this virtuous circle, they will be more willing to invest many more resources in the three basic aspects.

Unfortunately, the desire for immediate results, misunderstandings about cost-saving in customer service processes, and a lack of consideration for the future of the brand lead us to work on "recovering loyalty" instead of truly creating it organically with our current customers.

This is a great opportunity for all brands, which is easy to say but difficult to implement.