Death of a car dealer = decline in customer loyalty?

14Oct08

The U.K. car market sees fundamental shifts

I’ve always loved cars.

I don’t know whether it was because I was taken to the London Motorshow by my father, to see the launch of the Mk I Golf, or because my grandfather worked at a car factory (visits to which are exciting for any kid). But I simply love cars.

Not that I can fix an engine, or anything else mechanical for that matter. But I do love car design and driving. People no longer say ‘I’m going for a drive.’ with no particular destination in mind. The car has become commonplace and often the products are no longer special, distinctive and idiosyncratic. While the cost of running a car has increased, it hasn’t been more expensive to buy a new car, relatively speaking, for over a decade.

The SMMT reported new car sales slumped to a level not seen since 1966 in August this year. And in recent months many major car manufacturers have seen their share price fall to resemble the line of a particularly treacherous ski slope.

But it’s the car dealerships and their salesmen that were, perhaps, the first to see the impending sales drought and feel it’s effects. For while consumers may perceive it is easy to obtain a new car from any one of a number of competing local dealers. This increasingly isn’t the case, as manufacturers are concentrating their distribution into ever fewer, ever larger, super dealers.

The table below, courtesy of Mintel, demonstrates how rapidly the number of car franchise networks has declined. According to the SMMT, new car registrations peaked in 2004; you can see the pronounced decline in the number of franchised dealerships following 2004. As well as the general drop in dealerships since 1998.

U.K. Car Franchise Decline

U.K. Car Franchise Decline

Such a correction has removed many of the dealerships that offered poor service or weren’t located in profitable areas. The market has moved toward a model where fewer, more powerful and more profitable groups not only control the market, but represent the aspirations of the manufacturers. Let’s hope that the Darwinian model of selection has left us with dealerships we want to go back to?

U.K. Customers are cutting the number of car journeys they make in the current economic downtown. The Times / Populus survey, June 2008, showed that 69% of consumers said they had cut down the number of trips they make by car inthe last year. The key journeys cut being listed as: Trips to the local shops (32%), to shopping malls (29%), trips abroad (24%), business trips (23%), school run (23%) and trips to visit friends (22%).

So what reasons were given as to why we don’t drive as much as we used to? Increasing ‘Cost’ (47%) and ‘Change in lifestyle’ (30%) were the key drivers in the decline in journeys. With only 13% of the 1,067 adult responders mentioning ‘The Environment’.

While we drive less, we are also less brand loyal to car manufacturers (a drop of more than 10% in recent years, to now an average of around 35%). I wonder if the relationship you had with your local car dealer (who isn’t there anymore) played a part in the decline in your car brand loyalty?

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3 Responses to “Death of a car dealer = decline in customer loyalty?”

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