Automakers who leverage emotional design, offer a wide array of SUVs and have a solid history of reliability hold the keys to keeping customers brand-loyal, according to the new 2018 Edmunds Trade-In Loyalty Report.
The report leverages insights gleaned from more than 13.9 million vehicle transactions between 2007 to 2017 to explore what drives customer loyalty at both the segment and the brand level. Edmunds defined loyalty as the percentage of vehicles traded in to purchase a new vehicle that was the same segment, manufacturer, brand or model.
“There’s been a dramatic shift in the last 10 years in the tastes of car buyers, and with auto sales on the decline, maintaining customer loyalty has arguably never been more important,” said Jessica Caldwell, executive director of industry analysis at Edmunds. “Trade-in customers are a critical group for automakers to keep in the brand family, as in theory, they should be among the easiest to retain.”
This in-depth report uncovers the reasons why consumers have made such a dramatic pivot away from passenger cars in favor of SUVs and the significant impact that’s had on loyalty. It also identifies which companies are doing the best at keeping trade-in customers in the brand family, and what they’re doing right.
Key findings include:
Toyota, Subaru, and Honda have the highest levels of customer loyalty in the mainstream segment. According to the report, the storied reputation Toyota and Honda have for quality and reliability have helped ensure that buyers who value vehicle longevity keep coming back to the brand. Even though this reputation was built on the backs of passenger cars, it has successfully bled over and boosted loyalty for their SUV offerings as well. Subaru owes its success primarily to offering the right products at the right time: thanks to making a quick pivot to a lineup bolstered by desirable SUVs, the brand has seen its loyalty leap from 45 percent in 2007 to 61 percent in 2017.
Lexus, Audi and Land Rover lead in luxury loyalty at a time when high-end buyers are more fickle than ever. While luxury loyalty has historically always been lower than for mainstream brands, Edmunds reports that it’s been dropping steadily for the last three years — and in 2017 hit 37 percent, the lowest since 2009. Similar to its twin brand on the mainstream side, Lexus earned the luxury loyalty crown by appealing to practical buyers who embrace the brand’s reputation for comfort and reliability. Audi came in second place by leveraging the opposite strategy and focusing on appealing to buyer emotions with distinct designs and a focus on performance. Similar to Subaru on the mainstream side, Land Rover’s SUV-heavy lineup is perfectly in line with current consumer tastes, and the brand doesn’t have the baggage of displaced former passenger car owners weighing them down.
The Great Recession was the driving force behind shoppers shifting so dramatically away from passenger cars to SUVs and completely changed the loyalty landscape. In the years during and following the Great Recession, CAFE mandates, dramatic swings in fuel prices and the economic climate converged, forcing automakers to change how they approached the SUV segment. In 10 years SUVs went from a segment of boxy gas guzzlers to efficient car-like family haulers, forever transforming the automotive market. In 2017, SUVs dethroned trucks in buyer loyalty for the first time, and passenger vehicle loyalty hit a low not seen since 2009. Edmunds analysts predict that by the end of 2018, passenger car loyalty could drop so low that it would match the loyalty level for SUVs during the Cash for Clunkers period, a drop of 15 percent in just 10 years.
“We’re heading into one of the most transformative periods in the automotive industry, and instability in the short term could severely jeopardize automaker success further down the line,” said Caldwell. “Sales are cooling off from record highs, and the abundance of offerings on the market has created a new reality where nameplate loyalty no longer holds the same weight. It’s going to be a delicate balance for automakers as they face the immediate challenge of keeping customers in the fold while also anticipating the demands of the future.”
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