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Automakers and customer loyalty: it’s hardly rocket science

Marketing must focus on new touchpoints to expand the active loyalists' base. A re-commitment to creating customer satisfaction via the digital domain is necessary, and they must put their money where their marketing mouth is.
automakers-and-customer-loyalty-it-is-hardly-rocket-science

Thanks to the pandemic, in addition to supply challenges, consumer demand has never been harder to predict. New forces, such as lockdowns, health concerns, and the transition to remote work, have reshaped consumers’ transportation needs. Add historically high vehicle, gas prices, and consumer preference for electric vehicles (EVs), and you have a volatile mix.

In such a scenario, automakers must speed up their efforts to gain and retain customers’ loyalty. Loyal customers boost sales and benefit businesses in more than subtle ways.

Why loyalty matters

First, brand loyalty drives sales and strengthens customer retention.

Studies show that loyal customers make up 20 percent of an average business’s customer base, but they drive 80 percent of its revenue. Thanks to macroeconomic factors, businesses are under pressure, which makes boosting customer loyalty urgent. Of course, a company can always attempt to gain new customers, but it is an expensive pursuit, and conversion of new customers costs five times more than cultivating existing customers.

Second, an increase of 5% in customer retention increases business profitability by 25%-95% on average. Thus, a business with fewer loyal customers will have to spend more on acquiring new customers.

Finally, loyal customers recommend friends and family, and referrals are crucial to the bottom line. A new referral customer’s lifetime value is 16% higher than a non-referral customer. Generally, friends are more likely to recommend a brand or its services if they already have a favorable opinion of the business.

In a consumer survey, 83% said they would recommend a company they trusted. Creating trust helps a brand gain repeat business and attract new customers.

Building company loyalty isn’t just about preventing customers from leaving; it’s about maximizing growth potential. Customer disloyalty can reduce growth by 25% to 50% when all these effects are combined.

Important touchpoints

A consumer’s journey doesn’t end when they purchase a product: the post-purchase experience shapes their opinion about future purchases, so the journey continues.

The idea of providing an after-sales experience that inspires loyalty is not new. However, not all commitment is equal in today’s increasingly competitive environment. Loyalists are of two types: active and passive. Active loyalists not only remain loyal to a brand, but they also recommend it to others. Passive loyalists simply hang on to a brand without being committed to it because they are lazy or confused by the array of choices. Passive loyalists are also not resistant to competitors’ messages coaxing them to switch.

According to McKinsey’s research, notable brands experience a sixfold difference in the ratio of active to passive loyalists, so rivals have an opportunity to interrupt the loyalty cycle.

When brands make comparison shopping and switching easy, they attract passive loyalists from across the fence. It is an opportunity to give consumers reasons to leave competitors rather than put up with their excuses for staying.

Marketing must focus on new touchpoints to expand the active loyalists’ base. A re-commitment to creating customer satisfaction via the digital domain is necessary, and they must put their money where their marketing mouth is.

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