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Automotive Industry Customer Segmentation Overview

Growing your business in any industry requires you to know your customer. You can examine many different areas to become more familiar with those who are likely to frequent your business. Most companies implement marketing campaigns to a target market based on a set of criteria or consumer segments.

Automotive Industry Customer Segmentation

Shopify business defines customer segmentation as the process of dividing customers into groups based on common characteristics. Companies can then market to each group effectively.

Your dealership may have 10,000 customers in its database. Segmentation identifies those customers and places them in different categories based on specific criteria. Many industries look at customer demographics like age, gender, marital status, location, and life stage. But a dealership can zoom out on its customer base and look at it from a broader scope.

Segmentation can reflect a customer lifecycle in the dealership. Some main segments to pay attention to with the automotive client are active customers, inactive customers, lost customers, and conquest customers.

Active Customers

Active customers are customers that do business with the dealership regularly. Each manufacturer and each dealership may define an active customer differently. 

Some dealerships define an active customer as one who has been in the store once within six months. Other dealerships say it is once within 12 months. The parameters change, but it is still considered an active customer.

Inactive Customers

An inactive customer has extended their life cycle with the dealership. They no longer come in once a year.  Auto Dealer Today Magazine wrote an article specifically about inactive customers. 

The article claims a customer becomes inactive between six and nine months. They point out that other dealers say this is a 12 month period, and some say it can be even longer.

Lost Customers

“Lost” customers are a segmentation that some manufacturers refer to as endangered or defectors. These are customers that have gone a certain period without visiting the store.

Harvard Business Review claims these are great customers to target. They have demonstrated a need for the service, and they are familiar with the company.

Conquest Customers

Conquest customers are customers available in the dealer’s market but have not yet been to the dealership. While customer retention is imperative to growth, getting these new customers through the door is also a part of the equation.

Automotive Marketing Decisions

Examining these main market segments is a jumping-off point when determining how best to market to these customers. But there are other questions to answer when targeting the automotive customer. What type of vehicle does the customer drive, and did the customer purchase the car from your dealership?

Most studies reveal that marketing to a customer with customized incentives results in a more responsive customer. Segmentation can determine what message and what offers to send to any given customer based on their situation. You can decide what message you put on an offer according to what segmentations you take into consideration.

Is it a ‘welcome back,’ or a ‘thanks for coming to us for the first time?’ Is it a loyal customer discount being offered, or would you like to send a ‘miss you’ type of message? Segmentation inevitably affects the pricing of those incentives. And it also allows us to determine how often and when to contact the customer.

Where to find relevant segmentation data

Dealership segmentation data typically comes from the dealership management system (DMS). A manufacturer will tell a dealer how to segment a customer. Segmentation is almost always based on vehicle type and visit history in the dealership. Some dealerships will override that and set their own segmentation, but all the data comes from their DMS.

Marketing Budget

Marketing must be cost-effective and provide a positive return on investment. Segmentation is a critical area to consider when looking at a dealer’s marketing budget. Determine which segments a dealership already has a good response or ROI and which segments they are struggling to get in the door.

Segmentation also allows a dealer and a marketing company to identify where they’re weak. They can then put resources into those areas and make better use of their budget. When looking at segmentation, we have to understand which campaigns are working and which ones are not. We can then pay attention to the right area.

Customer Experience

A frequently overlooked benefit of customer segmentation is the ability to improve customer experience. By better defining and filtering your customers, you can ensure their experience is more customized to their needs and preferences.  

Some of your customers will take you up on mobile apps and free wifi. Others prefer the traditional paper approach. Some will trust you to pick up and drop off their vehicle, and others prefer to bring it themselves. 

Much of these preferences are unique to some segments of your customer base. So learning what these segments need and like will help you approach your customers accordingly.

The Task is Worth It

The task of extracting and cleaning your customer data is tedious. It takes a skilled data analyst to perform the job, so the information is as concise and accurate as possible. But the results are invaluable in targeting your marketing efforts. It will also ensure the customer has a five-star experience at your dealership.

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