If you’re like me, you probably hear the term “loyalty” all the time. It’s become a bit of a buzzword in many industries, and the automotive sector is no exception. But, especially with the current state of the auto industry, I’d say that customer loyalty is much more than a catchphrase for OEMs and dealers. Loyalty (which we define at Polk as repeat purchase) is necessary for survival. Without repeat customers, a dealership or OEM simply won’t make it.
This may seem obvious to anyone in the automotive industry. What’s less obvious is how to measure customer loyalty. After all, there’s no industry standard, leaving different organizations to come up with different ways of calculating this key metric.
Polk decided to take a look at this issue in a white paper we recently released. It’s called
“What is the Best Way to Calculate Transactional Loyalty?” In it, we look at two approaches to measuring loyalty: the disposal and household methodologies. You’ve probably heard of disposal, which basically assumes a one-to-one trade-off – every time someone buys a new car or truck, they get rid of one in their garage…often, the oldest one. We compare and contrast this approach to the household methodology. The household methodology takes a more comprehensive view all of the vehicles owned by a household and calculates loyalty even when the consumer doesn’t eliminate a car or truck.
What did we find? You’ll have to read the white paper for all the details. But, I’ll give you a clue. One of these two approaches makes it possible to calculate automotive customer loyalty for a far greater percentage of the market. This same approach gives faster results. And, this way of measuring loyalty is more aligned with market share.
I’m not saying that there’s a “one size fits all” approach to measuring automotive loyalty. I know that different organizations have different needs. But, in general, our white paper shows that the household approach to measuring customer loyalty outperforms the disposal methodology. (A caveat: you can measure disposal loyalty a few different ways, including with surveys. For a more “apples-to-apples” comparison, we looked at the disposal methodology as measured with vehicle registration data.)
Intrigued? Want to know more? I’d suggest
downloading our free white paper.
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