Brand and dealership loyalty decreasing as consumers pay more, GfK research says

New research from Growth from Knowledge AutoMobility shows that loyalty toward brands and dealerships is continuing to decline as consumers pay at or above the manufacturer’s suggested retail price.

“It’s been widely publicized in the industry that a lot of people are paying over MSRP. We know that prices have been escalating and continue to reach near record highs virtually every month,” said Julie Kenar, senior vice president at GfK AutoMobility. “This notion of paying sticker and even above sticker is absolutely something that’s come really over the past 18 months.”

In May and June, 80 percent of car buyers paid at or above the sticker price, the research showed. In addition, 31 percent of buyers who paid above sticker said they would tell others not to go to the dealership they used, and 27 percent said they would not return to the dealership for service.

Kenar said dealerships worried about building a link with consumers must consider the future cost of charging more.

“I think what dealerships need to do is realize that they’re forgoing a long-term relationship with customers when they charge over the MSRP. Consumers can tell which dealers are in it for the long term versus the short term,” Kenar said. “I really think that it’s incumbent upon the dealers to take that long-term view as opposed to just taking their money and likely never seeing them again.”

Twenty-seven percent of respondents said they would not buy from the same brand if they were charged more than the sticker price, and 23 percent said it negatively impacted their opinion of the brand. As a result, automakers have had to manage the negative criticism they face because of dealerships’ prices, Kenar said.

“It’s not that brands aren’t doing anything; a lot of brands have communicated with their dealers that ‘You’re potentially damaging the equity that you’ve built up in your dealership and we’ve built up in our brand,'” Kenar said. “But from a legal perspective, there’s not a whole lot that brands can do. We’re hoping that with releasing this research, this will provide brands and dealers with some data points to say that this is not anecdotal.”

Though customers may come back when they have to purchase a new vehicle, Kenar said charging more is not worth the risk for dealerships and brands.

“We’ve also actually seen industry loyalty, overall, is declining. And it’s actually taken an even sharper decline more recently this year,” Kenar said. Consumers “seem very intent on holding a grudge and not returning.”

“Three or four years down the road, things could be different. But if they’ve already made a sacrifice, they’ve already potentially jumped to a competitor. Brands could have a hard time trying to get that person back into the seat of one of their vehicles.”