What’s the Lifetime Value of an Auto Buyer’s Customer Relationship?

Of all the things you do in a dealership on a daily basis, creating a value proposition for customers may not be high on the list. Many dealerships still look at customers as a “one and done” job: when the sale ends, the relationship ends. But there is evidence that customers’ lifetime value is far higher than a single vehicle.

According to a recent white paper by Black Book entitled, “The Value of Loyalty: Customer Lifetime Value in the Automotive Industry,” the lifetime value of customer loyalty in the automotive industry is more than $50,000 per customer. The figure was determined after factoring in the potential revenue from referral business.

“Many automotive sales professionals mistakenly view car buying transactions as one-offs, assuming that the customer is unlikely to transact with their brand, or dealership, ever again,” wrote the white paper’s authors. “At the same time, customer satisfaction in the automotive industry lags behind other industries. This white paper discusses how dealers can maximize automotive customer lifetime value (ACLV) by improving the trade-in process.”

Customers today determine their behavior on a single customer experience. Good ones are worth their weight in gold, and bad customer experiences often don’t just lose one customer, but influence the buying behavior of the original customer’s family, friends and social media network.

“Customer experience is a dealer’s most important success differentiator today,” said Jeff Risner, CEO of the Appraisal Lane, which assisted in the creation of the white paper. “Lower margins, increased competition, and dwindling loyalty are eroding business. A better customer experience starts with a better trade-in process. By focusing on this, dealers can expand their share of a customer’s lifetime value, improve CSI, and create future opportunities for sales, service, and referrals.”

Black Book and The Appraisal Lane noted in the white paper that the automotive industry trails other industries when it comes to customer satisfaction.