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New Study Reveals Dealership Service Profits Threatened by Aging Customer Base

DMEautomotive releases service market loyalty white paper and new demographic findings:

- Auto service loyalty now pivots around age: roughly half of aftermarket chains loyalists are under 34, while around half of dealer loyalists are 50+.

- Dealership loyalists from the over-70 segment exiting market would represent $3.4 billion loss.

- Aging vehicle fleet favors aftermarket: dealerships lose 47% of bread-and-butter service business when vehicles reach age 3-6.


News provided by

DMEautomotive

Mar 05, 2012, 08:30 ET

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DAYTONA BEACH, Fla., March 5, 2012 /PRNewswire/ -- DMEautomotive (DMEa), the science-inspired, results-based automotive marketing leader, has released its new white paper, "The Changing Service Loyalty Landscape," the most comprehensive study of the $215 billion U.S. auto service market[1] to date - and the first-ever analysis of consumer service loyalty rates at dealerships, independent stores and aftermarket chains[2].  

(Photo: http://photos.prnewswire.com/prnh/20120305/FL63700 )

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The paper includes new findings revealing that two "forces of graying" are significantly favoring aftermarket chains' service profits - while threatening those of new car dealerships. Data in the report indicates that the dealership service center is becoming a "senior center," as younger consumer segments are significantly gravitating towards aftermarket chains. And the report provides fresh evidence that the record age of the U.S. vehicle fleet is significantly benefiting independent stores and aftermarket chains, while taking its toll on dealerships.

Produced by DMEa's Strategy & Analytics division, "The Changing Service Loyalty Landscape" is based on a recent survey of 4,000 U.S. vehicle owners.[3] The complete report is available at: http://www.dmeautomotive.com/solutions/the-changing-service-loyalty-landscape-whitepaper-request.aspx

Young Aftermarket Chain & Aging Dealership Loyalists
DMEa's white paper identifies three levels of loyalty for service center customers: "loyalists" (who both visit and spend most at a store type); "swing loyalists" (who either visit, or spend most at, a store type, but not both); and "disloyalists" (who neither visit nor spend most at that store type).  

Newly released data from the paper also analyzed loyalty, spend and service selection motivators by age, and revealed that dealership "loyalists" represent the oldest service customer, while aftermarket chains - which are poaching the largest share of business from both dealerships and independent shops - are best capturing the younger wave of shoppers.

The report also shows that dealership loyalists are more likely to be over 60 than any other loyalist group. Roughly half (47%) of aftermarket loyalists are under-34, while nearly half (46%) of dealer loyalists are a "graying" 50+.  Meanwhile, over a third of those most likely to be disloyal to a dealership service center are only 25-34.  With a significant percentage of a dealership's loyalists poised to exit the market, and as young aftermarket loyalists enter, the report's findings have troubling implications for dealerships service centers, if more heartening signs for aftermarket chains.

"If dealerships don't replace their aging loyalists, and aftermarket stores are successful in retaining their loyalists as they charge towards their prime spending years, a share-of-wallet sea-change is looming that would greatly favor aftermarket stores, while eroding dealerships' lifeline service profits," said Doug Van Sach, Vice President, Strategy & Analytics, DMEautomotive.

Dealership service is a $78 billion market,[4] and DMEa's new data shows loyalists drive 62% of those revenues. Hence, if dealerships lost (and did not replace) loyalists over age 75, it would represent a loss of $310 million, and if over-70 loyalists exited the market un-replaced, it would represent a hit of $3.4 billion.

Aging Vehicle Population Also Means Dealership Losses:
Despite economic recovery, Americans are still breaking records for how long they hold on to their vehicles. And DMEa's new data provides fresh confirmation that an aging, out-of-warranty vehicle fleet favors the aftermarket, while it takes a toll on dealerships. Consumers reported on their service center preferences for five "bread-and-butter" services across their vehicles' lifespan - and DMEa identified major dealership defection points around brakes, battery and tires:

Dealerships Lose Bread-and-Butter Service Business as Vehicles Age

 

Where do you prefer to obtain these services or products?

YEARS

 

AUTO DEALER

 

0-2

3-6

7+

Brake Service

54.5%

39.2%

17.8%

Oil Change

50.1%

35.2%

15.3%

Tire Rotation & Balance

44.8%

28.6%

11.8%

Battery

42.8%

27.8%

11.4%

Tire Replacement

33.4%

22.1%

8.5%

 

Notably, less than half (45%) reported they're likely to visit the dealership for these core services even within the first two years of ownership, when the in-warranty dealership relationship is still strong. And as vehicles hit 3-6 years, dealerships lose (on average) 47% of that initial business, with only 31% reporting they would use dealerships for these services. By 7+ years, only 13% of customers will select dealerships for these services. DMEa's survey reveals independents and aftermarket stores grab significantly more "core" service business at vehicle-age-three, much earlier than many dealerships may imagine.

"This white paper explores many serious, often surprising, shifts underway in the U.S. service market - where more than three in four customers, and 42% of dollars, are currently in play. And the 'graying' dealer loyalist base and vehicle population are two distinct forces poised to further color the market-share picture," noted Van Sach. "Our next white paper will help every service category develop smarter communications and marketing programs to retain their loyalists, convert more of the  "swing" and "disloyalist" customers, and reach entirely new shoppers."

DMEa's "Marketing Success in a Changing Service Loyalty Landscape" (available March 2012) analyzes: a) drivers of service center selection - what specific store attributes matter most to the spectrum of service shoppers, b) communication strategies that leverage communication preferences and media usage, and c) role of a loyalty program in retaining your most precious asset – your loyalists. This data will inform best practices on sending the right message, to the right customer, via the right platform.

To request this report, click here: http://www.dmeautomotive.com/solutions/marketing-success-in-a-changing-service-loyalty-landscape-whitepaper-request.aspx

About DMEautomotive:

DMEautomotive (DMEa) is the industry leader in science-based, results-driven automotive marketing, and provides turnkey marketing to the largest and most innovative automotive organizations, from automobile dealerships - including AutoNation, Lithia Automotive, MileOne, Larry H. Miller and the Van Tuyl Automotive Group - to many of the largest aftermarket companies in the U.S. DMEa's uniquely panoramic view of the complete automotive sales and service market, combined with its cutting-edge, science-based marketing programs, increases customer yield, conversion and retention.

DMEa does not take marketing performance on faith, and each product and service is measured by a simple, precise scientific approach: Is it true? Prove it. Will it work? Test it. Does it generate results? Show it! Supported by DMEa's proprietary, cloud-based Red Rocket Technology Platform, the DMEa product suite includes science-based, data driven, multi-channel customer acquisition and retention marketing programs; best-in-class campaign reporting; data management and analytics; auto-focused Customer Interaction Center solutions, and complete on-site mail and email fulfillment services. Headquartered in Daytona Beach, Florida, DMEa also has major operations in Jacksonville, Fla.

[1] AAIA data, 2011
[2] The aftermarket chain category includes oil change/lube establishments, tire retailers and department/wholesale stores.
[3] Conducted 2011. All respondents were responsible for service-related decisions on their primary vehicles(s) and purchased auto service within the last year.
[4] NADA data, 2011

SOURCE DMEautomotive

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