Will households choose a new powertrain from a familiar brand?

Every 3.5 years in the United States, an active vehicle-buying household re-enters the market, and approximately half of these buyers opt for a different brand than their previous purchase. Each time they return, they face a growing selection of vehicle options and an expanding variety of powertrains, all vying for their attention.

At the same time, automakers are pressured to innovate with new powertrains and vehicle models to capture market share while striving to retain customers. This prompts a crucial question: are households ready to buy a new powertrain offered by their current brand?

The answer is that households tend to exhibit greater loyalty to powertrains than to brands themselves. In fact, three out of four US households returning to market for a new vehicle choose to stick with the powertrain they currently have in their garage. Among these, more than half opt to purchase from the same brand. 

Brands enjoy a favorable retention rate of 56% for households who are loyal to a specific powertrain. However, what about that one household who is seeking a different powertrain?

The implications for automakers are clear. While brands can lose households through powertrain changes, introducing these innovations can also attract new households from competitors, who can then be nurtured into brand loyalists. 

This strategy has been pivotal in Tesla's rise, establishing it not only as a champion of brand loyalty but also as a leader in the EV market during the first half of this decade.

Although targeting all households with a new powertrain can be costly, focusing on specific groups that are more open to a different powertrain can lead to more efficient and effective marketing efforts. Moreover, this approach helps identify those households who remain committed to their current powertrain and brand. 

The more granular your targeting, the more effective your strategy will be.