(March 8, 2012) DAYTONA BEACH, Fla. — A new study by DMEautomotive has found that two "forces of graying" are significantly favoring aftermarket chains' service profits while threatening those of new car dealerships. Data in the report indicates that the dealership service center is becoming a "senior center," as younger consumer segments are significantly gravitating towards aftermarket chains.

And the report provides fresh evidence that the record age of the U.S. vehicle fleet is significantly benefiting independent stores and aftermarket chains, while taking its toll on dealerships.

Produced by DMEa's Strategy & Analytics division, "The Changing Service Loyalty Landscape" is based on a recent survey of 4,000 U.S. vehicle owners.

DMEa's white paper identifies three levels of loyalty for dealership service center customers: "loyalists" (who both visit and spend most at a dealer store); "swing loyalists" (who either visit, or spend most at a dealer store, but not both); and "disloyalists" (who neither visit nor spend most at that dealer store). 

Newly released data from the paper also analyzed loyalty, spending and service selection motivators by age, and revealed that dealership "loyalists" represent the oldest service customer, while aftermarket chains — which are poaching the largest share of business from both dealerships and independent shops — are best capturing the younger wave of shoppers.

The report also shows that dealership loyalists are more likely to be over 60 than any other loyalist group. Roughly half (47%) of aftermarket loyalists are under 34, while nearly half (46%) of dealer loyalists are a "graying" 50+.  Meanwhile, over a third of those most likely to be disloyal to a dealership service center are only 25-34. 

With a significant percentage of a dealership's loyalists poised to exit the market, and as young aftermarket loyalists enter, the report's findings have troubling implications for dealerships service centers, if more heartening signs for aftermarket chains.

"If dealerships don't replace their aging loyalists, and aftermarket stores are successful in retaining their loyalists as they charge towards their prime spending years, a share-of-wallet sea-change is looming that would greatly favor aftermarket stores, while eroding dealerships' lifeline service profits," said Doug Van Sach, Vice President, Strategy & Analytics, DMEautomotive.

Dealership service is a $78 billion market, and DMEa's new data shows loyalists drive 62% of those revenues. Hence, if dealerships lost (and did not replace) loyalists over age 75, it would represent a loss of $310 million, and if over-70 loyalists exited the market un-replaced, it would represent a hit of $3.4 billion.

Despite economic recovery, Americans are still breaking records for how long they hold on to their vehicles. And DMEa's new data provides fresh confirmation that an aging, out-of-warranty vehicle fleet favors the aftermarket, while it takes a toll on dealerships. Consumers reported on their service center preferences for five "bread-and-butter" services across their vehicles' lifespan — and DMEa identified major dealership defection points around brakes, battery and tires:

Dealerships Lose Bread-and-Butter Service Business as Vehicles Age

Notably, less than half (45%) reported they're likely to visit the dealership for these core services even within the first two years of ownership, when the in-warranty dealership relationship is still strong. And as vehicles hit 3-6 years, dealerships lose (on average) 47% of that initial business, with only 31% reporting they would use dealerships for these services.

By 7+ years, only 13% of customers will select dealerships for these services. DMEa's survey reveals independents and aftermarket stores grab significantly more "core" service business at vehicle-age-three, much earlier than many dealerships may imagine.

"This white paper explores many serious, often surprising, shifts underway in the U.S. service market where more than three in four customers, and 42% of dollars, are currently in play. And the 'graying' dealer loyalist base and vehicle population are two distinct forces poised to further color the market-share picture," noted Van Sach. "Our next white paper will help every service category develop smarter communications and marketing programs to retain their loyalists, convert more of the  "swing" and "disloyalist" customers, and reach entirely new shoppers."