Luxury Automotive Loyalty - Is it dying or in rebirth?

Europe is undeniably the heartland of luxury automakers with brands such as Mercedes, BMW, Porsche, and Audi, while outside the continent, brands such as Bentley, Land Rover, and Rolls-Royce also reign supreme. 

But a recent study that was conducted in the USA has shown a clear drop in brand loyalty and luxury automakers for those very same brands, whilst others outside of the stereotypical ‘luxury car segment’ have gained more and more popularity. 

The question is then, is this foreshadowing the same change for the European market?  


 

What are the reasons for such a decline?
 

A multitude of factors have come into play, especially most recently the Covid-19 pandemic had a paradigm shift in the way we view our lives, specifically when it comes to business operations, remote work, supply chain, and a reluctance to ‘travel’, either by air or car. 

Albeit many automakers have claimed that supply chain issues are slowly diminishing, new economic challenges have arisen. 

Surging inflation has pushed the price of a new car to record highs which have driven consumers to look at second-hand options, rather than new ones. This coupled with the constant rise in global interest rates has negatively impacted the demand for new car purchases.
 

The challenges within ‘Luxury Automotive Loyalty’
 

• A lack of reliable customer data

Most automotive brands are using quite outdated or unsophisticated CRM systems (or no system at all) which makes it incredibly difficult to track data, let alone collect it. This is true of both B2C and B2B clientele as a constantly changing and dynamic auto industry requires insightful customer data that can uncover customer needs, wants, values and preferences. 

Some brands also heavily base their projections on third-party sources which don’t provide accurate, first-hand information from customers, where they rather are relying on a low level of detail which in turn doesn’t translate well to understand customers' needs. 
 

• A difficult purchasing cycle

Let’s face it, buying a car isn’t as simple as purchasing a new shirt, or even a new toaster. It is a hefty investment that requires substantial preparation and thought, not to mention capital. This is true for both B2B and B2C customers, as the purpose of the vehicle defines its purchase. 

Do you require an SUV or a sedan or perhaps even a hatchback? Are you environmentally conscious? What about price range, fuel efficiency, safety features, luxurious amenities, and the list goes on?
 

• Frequency of purchase

This attribute could be related to the point mentioned above, but automotive customers' purchase lifecycle is longer than what we regularly see in other industries, such as retail. Cars are long-term investments in most cases, where the average ownership of the car is 8.4 years in the US and 11.8 years in Europe. 




 

This provides automakers a large disconnect between their customers as once they are out of the door, they have minimal contact with them, making it difficult to directly influence or even create stable lines of communication with their customer base (especially once the warranty runs out). This in turn makes it difficult to continually build up emotional brand loyalty. 
 

How to ‘supercharge’ loyalty
 

• Customer experience and a personal touch

When it comes to purchasing something as elaborate as a vehicle, there is no doubt it is quite an experience. This is why brands need to focus on personalizing the journey and tailor specific offers for specific clients. 

This can be achieved by having a focused loyalty program that engages customers by creating customized experiences that allows the customer to have options to choose a vehicle based on their criteria. This can be achieved by interactive applications that allow customers to build cars based on their preferences or even by utilizing augmented reality so they can better visualize the finished product.

A loyalty program can also serve the company as a data touch point as customer data that is collected can be used to further develop the aforementioned experience. Not to mention that a loyalty program with a large database (integrating existing customer data platforms - such as a CRM or ERP) can also serve brands to further have projections and forecasts about trends, sales, and preferences, that have a massive impact on brand image and product. 
 

• The building offers that bring customers back 

Rewarding customer behavior is paramount to maintaining a steady relationship with your customer base. This can be achieved by creating offers that bring customers back to automaker salons, rather than 3rd party establishments. 

By rewarding your loyal customers with lower servicing fees, free add-ons such as car washes or interior cleaning, or even providing rebates on winter/summer tires throughout the seasons, this will in turn drive customers to not outsource their car maintenance. Practices such as this further drive customer loyalty, especially when the customers themselves see value for money.
 

• Utilizing technology and innovation to push loyalty

Utilizing the latest AI technology is a must for any powerful loyalty program to succeed. Through the use of machine learning in loyalty software, customer lifetime value, churn rates, and other variables can be examined and acted upon.

The facilitation of this technology and the combination of customer and transactional data can constantly build an understanding of your customer base. This further can drive retention and marketing strategies that are targeted toward the needs of your customers.
 
All of this combined can anticipate a customer's needs further driving an independent foothold in the market. 
 

Conclusion

Automotive loyalty, particularly in the luxury segment is an evolving and at times, fickle market. But by utilizing technology and customer experience strategies, brands can learn to understand their customer base and further develop products and services that drive at the heart of their desires.