How to Increase Customer Repurchase Rates

Insights | January 24, 2020

Author: Doug Van Sach

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Repeat buyers account for an increasing share of new vehicle sales and now represent 31% of all new vehicles purchased at a dealership, compared to 29% a few years ago. This trend is good news for dealers due to the lower cost of retaining vs. acquiring customers.

Unfortunately, this trend is expected to decline due to a lack of improvement in customer repurchase rates. Despite the greater share of repeat buyers, customer repurchase rates have stayed within a relatively stagnant 23.5% to 24% range over the past few years.

The flat repurchase rate trend is masked by the strong SAAR over the past 10 years, which has created a larger pool of buyers available to repurchase, thus creating more repeat buyers. As SAAR slows down, we expect the share of repeat buyers to drop unless dealers adopt a new approach to retaining sales customers.

Affinitiv recently performed an in-depth analysis of the underlying trends in repurchase rates and identified a unique opportunity for dealers based on financing trends for repeat buyers. First, we separated buyers into three distinct groups based on their initial purchase: cash, lease, or loan. Next, we followed those customers over a 5-year period and compared their finance choice on the original purchase to the next vehicle they purchased. As expected, most buyers chose the same financing option for their repeat vehicle purchase.

In fact, 77% of lessees, 87% of loan buyers, and 91% of cash buyers repurchased a vehicle using the same financing choice as their original purchase. The trend to use the same financing on the repurchase creates a significant opportunity for automakers and dealers to better tailor their marketing to each individual buyer.

Based on an Affinitiv survey with 1,000 consumers who recently purchased a vehicle at an auto dealership, a customer’s financing choice also helped us to identify their unique preferences relating to buying habits. Since cash buyers pay in one lump sum, their only concern is the total price of the vehicle. Lessees primarily care about the payment amount since they are locking themselves into a monthly payment.

Loan buyers are mixed. However, we found a strong correlation between their preference and their down payment amount. Customers with a down payment amount below $10K had preferences in line with lessees presumably because a lower upfront payment leads to a higher monthly payment throughout the loan. However, customers with a large upfront payment of $10K or higher had preferences similar to a cash buyer.

In addition to price vs. payment preferences, we also found differences in the primary reason for the last vehicle purchase. Cash and loan buyers were more interested in buying a vehicle with the latest technology during their last purchase. Lessees were more likely to be motivated by a strong incentive compared to other buyers.

Dealers have an opportunity to dramatically improve their customer repurchase rates by aligning their marketing strategy with the unique characteristics of different types of buyers. Here are some key strategies to apply to each group of buyers:

Cash buyer or loan buyer with high down payment (>$10K): promote the total price of vehicles in inventory. Highlight the technology features of vehicles.

Loan buyer with low down payment (<$10K): promote monthly payments of loan. Highlight technology features of vehicles.

Lessee: promote monthly payments of lease. Promote dealer and factory incentives.

Ensure your marketing programs properly segment customers and deliver the right financing option and vehicle selling points. By adopting a more personalized approach to marketing, dealers have the opportunity to improve repurchase rates and lessen the impact of the projected declines in SAAR.

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