Advantages and Disadvantages of Dealership Loyalty

A loyalty sales process can boost a dealer’s short-term sales goals. This strategy protects against conquest attempts from competitor brands. By tapping into a loyal customer base, dealers can meet sales targets and increase their value. IHS Markit shows that loyal households continue to grow.

Customer acquisition

One of the most significant advantages of establishing customer loyalty is that dealerships can avoid the cost of acquiring new customers. While the specific percentage varies from study to study, it is generally accepted that a dealership can save between five and 25 percent by focusing on retaining existing customers. While this reduction in acquisition costs is significant, the benefits of dealership loyalty go beyond the cost of acquisition. Building customer loyalty can lead to a substantial increase in short-term sales.

For dealerships, loyalty can help boost service revenue, build effective referral programs, and future fuel sales. First, however, dealerships should understand the actual costs of loyalty programs and how much they cost. For example, if a dealership sells 450 cars per year at a gross of $4,000 per vehicle, a ten percent decrease in customer loyalty will cost the dealership $400,000 annually.

Customer retention

Building loyalty with your customers is one of the critical components of dealership retention. However, this is a complicated process. Every customer is different, with varying needs and values. Attempting to improve all areas at once can result in too much effort, which does not yield desired results. However, customer retention has many benefits, including increased profit, reduced stress of competing with competitors, and free advertising from satisfied customers.

Customer retention is the key to sustained growth. The more you retain your customers, the more likely they will refer you to their friends. Customer retention is a critical component of successful auto dealership marketing. It is essential to remember that a customer’s lifetime value is about five times that of a new client. It is necessary to build a relationship with existing customers and to do so, you need to offer them the best possible experience.

Customer repurchase

Customer repurchase is a critical component of dealership loyalty. It allows dealers to generate referral business, drive service revenue, and future fuel sales. While dealerships need to meet immediate sales goals, focusing on customer retention is an investment in the long term. In a study by S&P Global Mobility, customers loyal to a dealership are more likely to repurchase their vehicle.

A recent Harvard Business Review study shows that dealership loyalty increases profits by 25 to 85%. But this reflects that dealers’ customers are less sensitive to price and less likely to renege on their purchase. In addition, loyal customers are a source of referral business with a high ROI. Therefore, it is essential to invest in customer retention and satisfaction.

Customer service

There are advantages and disadvantages if you’re considering signing up for a dealership loyalty program.

For one thing, the program requires you to spend more money than usual. But in return, it can also increase the likelihood of a customer buying a new vehicle from the dealership.


A dealership’s customer retention program is a significant investment. Increasing customer retention can boost revenue by up to 30%. While acquiring a new customer can be costly, keeping existing ones can help a dealership maintain a good customer base for years to come. After all, a survey found that repeat business from existing clients is more likely than switching to a rival dealership. A dealership’s customer retention rate is directly proportional to its sales results.

Dealerships like to know that loyal customers will come back for service, and by offering incentives, dealerships can maintain a solid customer base. Often, this means finding additional ways to improve customer satisfaction. Similarly, a dealership can offer more services for a loyal customer, such as free maintenance. In addition, car companies are increasingly pushing leases to encourage consumers to stick with a specific brand.

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