DAYTONA BEACH, Fla. – DMEautomotive (DMEa), a provider of "science-inspired, results-based" automotive marketing programs, has released a new white paper, "The Changing Service Loyalty Landscape," which studies the $215 billion U.S. auto service market, analyzing consumer service loyalty rates at dealerships, independent stores and aftermarket chains.
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, DMEa says. Data in the report indicates that the dealership service center is becoming a "senior center," as younger consumer segments are significantly gravitating toward aftermarket chains. The report also finds that the record age of the U.S. vehicle fleet is significantly benefiting independent stores and aftermarket chains, while taking its toll on dealerships.
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, older than any other loyalist group. Roughly half (47 percent) of aftermarket loyalists are under 34, while nearly half (46 percent) of dealer loyalists are a "graying" 50-plus. Meanwhile, more than a third of those most likely to be disloyal to a dealership service center are in the 25-to-34-year-old age range. 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 and heartening signs for aftermarket chains, according to DMEa.
"If dealerships don’t replace their aging loyalists, and aftermarket stores are successful in retaining their loyalists as they charge toward 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 and analytics, DMEautomotive.
Dealership service is a $78 billion market, and DMEa’s new data shows loyalists drive 62 percent 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 unreplaced, 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
Notably, less than half (45 percent) 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 percent of that initial business, with only 31 percent reporting they would use dealerships for these services. By 7-plus years, only 13 percent 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-3, 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 percent 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," said 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."
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. It includes data from AAIA and NADA as well as DMEa’s own research. The complete report is available by clicking here.
