Customer retention is at an all-time low.

Dealers seek new ways to protect their customers from defection and increase customer loyalty through marketing and customer loyalty programs, but the results are minimal.

Blog posts, marketing campaigns, and statistical studies all point to the benefit of retaining previous customers, but dealerships are facing declines in customer retention each year.

The truth is, there is no marketing scheme or budget allocation that can guarantee 100 percent customer retention. Even with a miracle solution, investing in retention efforts is not enough to refill the void.

Customer Loyalty Is History

The truth is, the days of customer loyalty are behind us.

Shoppers no longer rely on the dealers for the information they need to buy a vehicle and they’re no longer attached to any particular make or model.

They find the information they need online and compare multiple vehicles across multiple brands.

Dealers today market to informed customers who don’t need dealer marketing to make a decision.

Recently, we did a study of over 400 dealerships nationwide. This study took the customer data base of all 400 dealerships and ran them through a Customer Repurchase and Lost Opportunity Report Analysis.

The average store had 26,828 customers in their dealership management software (DMS). Our study shows that one out of every three car buyers in a dealer’s DMS were no longer customers and 35 percent of their customers no longer owned the vehicle listed in the DMS. Which meant that the average dealer had a customer retention rate of about around 66 percent.

While this might not be an overwhelming number to you, we delved a little deeper and discovered that this information was not necessarily the whole story.

Even if all of a dealer’s business came from previous customers, the average retention rate would still be below the believed percentage.

The actual retention rate of the average dealership is less than 25 percent.

“The actual retention rate of the average dealership is less than 25 percent.”

As our data delved deeper, we discovered what effect make loyalty really had on a dealership.

Our study shows that, at most, the average brand had a loyalty rating of 42.58 percent. This means that less than half of each make’s customers bought the same make again. It does not mean that they bought the same make from their original dealer.

In fact, 12.5 percent of make loyal customers bought their next new car at a different dealership selling the same make. There is no way a dealership can have a 60 to 70 percent customer retention rate, when almost 60 percent are make defectors!

In a recent Webinar, Google came to the same conclusion.

Google’s data shows that the BEST customer retention rate a dealer can have is 25 percent.

Let me break this down.

Each month, the average dealership in our study sold an average of 75 new cars and 57 used cars to a mix of previous and new customers.

But, if 1.1 percent of the customers in a dealer’s DMS buys a new car each month, then that adds up to 295 new cars.

At the same time, 1.49 percent of the customers in a dealer’s DMS bought a used car each month. That’s 400 used cars per month!

This means dealers miss out on over 695 car sales per month to consumers who are currently in their DMS.

Customer Retention Marketing is Not the Answer

With this many customers defecting to another make or dealership every month, dealers lose over a third of their customer base each year.

The answer to this, however, is not to increase your customer retention marketing budget. Our data shows that this will not solve the problem at hand.

This is because there are two main reasons people defect from your dealership.

They’re either defecting from your store or they’re defecting from the brand you represent.

New car customer loss is mainly caused by make defection.

This is a market force that is completely outside of a dealer’s control.

How the Buyer’s Journey Has Changed Customer Retention

The average vehicle shopper spends about ten hours researching cars online before making a purchase. These same shoppers spend only three and a half hours at a dealership, including the time it takes to buy the car.

This means they’ve made up their minds on the make, model, and even price they’re willing to pay.

Once they reach this point, you can’t spend enough money to change their mind and there’s no offer you can make that will regain their business.

Once a shopper has already spent a significant amount of time and effort researching and deciding on their future vehicle, no campaign will make a difference. Anything you send trying to convince them to buy your make at your dealership, if they haven’t already chosen your make or dealership, is a waste of time and money.

What this Means for You

The days of a “Chevy Family” or a “Ford Family” are long gone…and millennials place even less value on make loyalty. Which means these trends will only get worse.

The good news here is that there’s a way to benefit from these statistics.

You simply need your new customer sales to out-pace your customer defection rate.

You still need to improve retention where you can control it, but by bringing in new customers you’ll replace your defecting customers with new conquests. By allocating more of your advertising dollars towards conquest customers, you can refill your dwindling customer base.

With customer retention at such a low percentage, conquest marketing has never been more important.

And, our data shows that conquest marketing has never been more possible.

With over two-thirds of the average dealer’s DMS defecting to other dealership, there are more conquest opportunities available than ever. You simply need the right marketing strategy.