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Customer LoginsIs there such a thing as a spending state of mind?
As you probably know, it is generally easier to sell new products to existing customers than it is to find entirely new customers for your products. It logically follows that when companies are attempting to increase sales, they go to their existing customer base first.
While this sounds easy enough, companies must have a sound approach to efficiently and effectively embark on a cross-sell effort. An overly aggressive "shotgun" approach, using untargeted communications on numerous products to the full customer base, will undoubtedly create angst among customers and drive some away. An overly conservative approach may leave too many quality prospects uninformed, and translate into missed revenue opportunities. The right strategy will incorporate knowledge of customers, products and the marketplace.
We took it upon ourselves to search for insights into one of these cross-sell opportunities for the lending industry, in a recent analysis designed to prove or disprove a correlation between home and vehicle purchases. In this analysis conducted by Kim DeRoche, Senior Analyst, we looked at home buyers for a 12-month period, and then studied their new and used vehicle purchases for 12 months prior to and 12 months following their home purchase. We were looking for a spike in vehicle buy rates following the home purchase, and this is what we saw:
Monthly Purchase Rates Prior and Post Home Purchase
Indeed, Kim found that people do purchase both new and used vehicles at a higher rate following the purchase of a home. During the 24-month study period, a household was 76% more likely than the average US household, and 22% more likely than the average vehicle owning household to purchase a vehicle. And, of those home buyers who also bought a vehicle during the study period, 61% of those vehicle purchases occurred the month of or within the 12 months following the home purchase, while only 39% are prior. Buy rates peak in the first quarter following a home purchase then slowly decline, but maintain higher than average rates for the full 12-month period studied. Sample populations showed consistent buy rates over same time period.
The analysis also found geographic and demographic differentiators that make a home-buyer more likely to purchase a new vehicle. A new home purchase appears to have the most significant impact on subsequent buy rates within the 26-35 age group, while geographically, states in the northeast show the largest spike.
There are also differences in the vehicles purchased after a home. Likely due, at least in part, to the preferences of the age and geographic groups responsible for more of the buy rate spike, Asian brands see the most significant increase at 65%. European brands follow, with a 50% increase from their lowest pre-home-purchase rate to their highest post. Domestics show the smallest increase, with a still impressive 40%.
What does it all mean? While there is much more that can be analyzed, it is clear there are opportunities here. The most obvious is the chance for home mortgage lenders to engage their new borrowers in a cross-sell effort for auto financing. Furthermore, OEMs can consider this audience as a segment ripe for new and certified used vehicle sales. And, as many already do, dealers should acknowledge those who are new to their area, not only offering an introduction for parts and service needs but also for new and used vehicle sales.
All you marketers out there, what are you doing or will you do with this information?