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  • February 17, 2016

IHS Automotive asks: What can automakers do when loyalty isn’t enough?

This week’s guest post is contributed by IHS Automotive.

It’s a classic marketing tenet: retaining a customer costs far less than acquiring a new one. Loyalty marketing and sales strategies have banked on this tenet for decades but now, faced with the challenge of an increasingly competitive market, automotive marketers are realizing it’s not enough. While still a common practice, the returns on loyalty marketing seem to have run their course and competitive forces are driving the need for a new approach: Conquest Marketing.

The battle to retain and conquest automotive consumers is common to every major automotive market, but it is especially intense in the United States. After two decades of investment in customer relationship management (CRM) systems and loyalty programs, leading practitioners struggle to realize 50 percent of their annual unit sales from repeat customers. For the majority of industry players, the repeat customer sales rates struggle to reach 33 percent.

The lagging performance of the majority of brands is not for lack of effort. Armed with a growing store of information on consumers who have purchased their vehicles over the years, automakers have honed the science of retention and lifecycle marketing – engaging consumers over the entire ownership experience. Seizing every opportunity and every channel to communicate, marketers entice their current customers with information on a new model launch, lease buy-back, special financing, rebates, service reminders and more.

In addition to the efforts of automakers, dealers layer on their own set of communications and promotions. Leveraging data out of their own CRM and dealership management systems, they cultivate owner loyalty through proactive reminders of aftersales service schedules, extended service offers and amenities like free shuttle service and on-site, Wi-Fi enabled workspaces.

Unfortunately, the return of these combined efforts are diminishing. With final numbers in, 2015 was a record sales year in the United States , and 2016 projections are pushing to the 18 million unit mark. Despite these high-water marks for sales, the annual growth rate is flattening (see Exhibit 2).

IHS Automotive talks customer loyalty

In the face of these trends, auto marketers who believe that they can continue to achieve share growth (or even parity) using conventional loyalty marketing and legacy CRM systems will need to reconsider. To attain 2016 sales goals and grow market share, the only path is to conquest consumers from the competition.

Conquest marketing starts with an ability to identify and engage with customers who are likely, or potentially likely, to switch brands. Conquest marketing requires a change in perspective and the use of insight-driven, systematic methods that transform traditional methods (such as broadcast media) and channels into a more precise, targeted approach that scales and drives better ROI (see Exhibit 3).

IHS Automotive talks customer loyalty

Conquest marketing leverages technologies that analyze massive data sets encompassing the entire automotive market, identifying customers that are most likely to be receptive to a competing automaker’s marketing messages. Armed with this insight, marketers engage the conquest audience via “best” channel and message, monitoring and refining response via closed-loop measurement.

Read more from the industry report, When Loyalty Isn’t Enough: Industry Leaders Shift to Conquest Marketing.

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Photo: wavebreakmedia/Shutterstock

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