Common sense suggests that gaining a first time buyer provides the opportunity to create a customer for life. Yet analyzing repurchase behavior among the younger demographic set suggests that manufacturers and dealers alike are not doing enough to retain younger buyers when they return to market. Admittedly, younger buyers represent a small percentage of total repurchase activity, less than 1% for buyers 18-24 and 7.5% for buyers 25-34, but it’s not necessarily about the value these customers represent today, it’s about customer lifetime value.
If we assume the average new vehicle buyer purchases their first vehicle between the ages of 25-35 at today’s replacement rate (71 months for new vehicle buyers), they will purchase 8-10 new vehicles over their lifetime. While that may not seem like much on the surface, consider it from a lifetime value perspective where profit per vehicle, service and referrals play into the equation. With this in mind, the young new vehicle buyer closely resembles an investment in the future.
So what can manufacturers and dealers do to retain young vehicle buyers? The answer is simple: Engage them. Building loyalty isn’t about rewarding consumers for their patronage, it’s about building a lasting relationship. Young vehicle buyers will experience many changes in their lives and these changes will likely impact their vehicle purchase patterns. From a small coupe to a minivan to an SUV and ultimately a luxury vehicle, the dealer and manufacturer that are able to build a relationship and have a vehicle lineup that meets young buyers' changing requirements will be in a better position to this segment's loyalty.
Posted by Brad Smith, Director, Loyalty Management Practice, Polk (03.27.2012)