The Difference Between a Repeat Buyer and a Loyal One

Tiger Okeley, Executive Board Member of Oak Motors, explains why repeat purchases do not necessarily mean customer loyalty, and how consistent service and fair treatment help dealerships earn it.

Every dealership wants to see a familiar face walk back through the door. When a customer purchases a second or third vehicle, most dealers consider that a sign they're doing something right. But I'd argue that repeat business and customer loyalty aren't always the same thing.

A repeat purchase tells you that a customer came back. It doesn't tell you why. And if dealers don't understand what's driving those decisions, they may be giving themselves more credit for customer loyalty than they've actually earned.

What Dealers Mistake for Loyalty

There are plenty of reasons a customer might return to a dealership that have little to do with loyalty.

Convenience is one of them. Maybe the dealership is right down the street, the down payment is affordable or the underwriting process is relatively simple. If a customer needs a vehicle right away, they may not have the time to research their options, shop around for the best deal or take a bunch of test drives.

Inventory availability is another major factor. If a dealership happens to have the right vehicle with the right equipment at the right price, it'll likely win the sale. Larger dealerships often have a leg up on their smaller competitors in this area simply because they have more inventory to choose from.

In my particular niche, buy-here, pay-here (BHPH), perceived access to credit also influences customer behavior. If a buyer believes they're more likely to be approved at one dealership over another, that can be enough to influence their decision.

There's nothing wrong with winning business for any of these reasons. Making it easier for customers to buy a vehicle is good business. But dealers shouldn't confuse those circumstances with a customer making a conscious decision to return because of their relationship with the dealership.

The next time that customer needs a vehicle, another dealership may have a better selection or more appealing financing options. If that's all the customer is looking for, there's very little keeping them from going somewhere else.

Loyalty Is a Two-Way Street

Building customer loyalty takes a lot more than luck. It's a mutual exchange where each side understands what's expected of them and follows through on those expectations.

There isn't a set of directions for earning loyalty. What matters is what you do consistently, and ultimately, the customer decides whether that's enough. Much of that work happens between sales, through everyday interactions with customers and how well the dealership delivers on its promises after the paperwork is signed.

For dealerships, creating that environment requires everyone in the business to understand what's expected of them. The customer doesn't stop forming an opinion about your dealership once the sale is complete. Their experiences with your service department, finance team and customer support staff all influence whether they'll want to do business with you again.

This also raises questions about how much authority employees have to make decisions. Does the person speaking with a customer have the ability to resolve an issue, or does every problem have to be escalated to someone else?

Good businesses run on policy, but not every situation fits into a nice, neat box. Someone has to be able to make decisions outside of it.

That doesn't mean employees should be free to make exceptions whenever they want. It means they need to understand the business well enough to recognize when some flexibility is appropriate.

Where These Principles Get Tested

Loyalty may be earned between sales, but it gets tested when something goes wrong. For BHPH dealers, that moment often comes when a customer falls behind on their loan payments.

It’s not uncommon in our industry for customers with a good track record to run into problems that affect their ability to meet their loan obligations. In those cases, we do our best to work with the customer to find a solution together. Sometimes that means taking a shared loss, then giving the relationship another try when the customer gets back on their feet.

Of course, there are limits to what any dealership can do. We still have a business to run, and not every situation is going to end the way the customer wants. But having clear expectations from the beginning makes those difficult conversations easier to navigate.

We've found that a good relationship can outlast a bad outcome when both sides feel like they have held up their end of the bargain. Loyalty doesn't mean a dealership has to say yes to every request. It means customers have reason to believe they'll be treated fairly, even when the answer isn't the one they were hoping for.

Building Consistency in an Organization

Our organization has learned the lesson of consistency over the years and has made operational changes to help implement it company-wide.

For example, we’ve always offered a certain level of protection with every sale, but for years, those offerings weren't necessarily something we put in writing or actively promoted. About three or four years ago, we decided to identify what we wanted to do really well and then make sure we were doing those things repeatedly.

We codified our warranty and service offerings into a plan that we could explain the same way to every customer. Then we set out to train everyone in our organization, execute the plan and clean up inconsistencies along the way. Our goal was to make it so that every customer received the same answer no matter who they talked to.

That sounds simple, but when you have multiple departments and employees interacting with customers, it's easy for things to get lost in the process. An unwritten benefit is only available to customers who ask the right employee. By putting those commitments in writing and making sure everyone understands them, we've been able to establish a more consistent approach to customer service.

The lesson for other dealerships isn't necessarily to offer the same programs we do. It's to take a hard look at what you've promised your customers and whether your organization is actually delivering on those promises.

Cultivate Loyalty, Not Retention

Customer retention is a fine goal to pursue. But creating repeat buyers isn’t the same as cultivating loyal customers. Convenience isn’t loyalty. Inventory isn’t loyalty. Luck isn’t loyalty. Those are circumstances that could shift with the next strong breeze.

Building loyalty requires dealerships to stand for something, communicate clear expectations for themselves and their customers and then work their tails off to deliver on their promises every single day. Dealerships that decide to invest their resources on delivering for their customers, rather than drawing in new ones, will ultimately win the day.