Understanding Consumer Segments in the Automotive Industry

A red car parked in a used car dealership

There's more than one type of car buyer, from the head of household in a rural community to singles in large cities. Automotive industry segments group buyers based on shared characteristics and preferences. There are numerous distinct segments, with today's focus on demographic, psychographic, geographical, and behavioral segmentation. Knowing these buyers' motivations will enable your sales team to find vehicles that fit their lifestyle and budget.

If you haven't already, it's time to dig deeper into customer segmentation.

What are the Different Automotive Market Segmentations?

Consumer segments are customers with shared traits, behaviors, or needs.

Demographic Segmentation

One common type of information used to create consumer segments is demographic details like age, gender, race, income, and education level (i.e., high school, college)

For example, younger buyers —those born roughly between 1981 and the early 2010s, aka Millennials and Gen Z — shop for cars differently and prioritize different car features than older generations. These car buyers grew up in the digital age, motivating them to purchase vehicles with tech-focused safety features like advanced driver assistance systems, lane-keeping assist, and rear-cross traffic alerts. Connectivity is also key, as younger consumers gravitate to state-of-the-art infotainment features like touchscreen displays, Apple CarPlay, and Android Auto.

Younger buyers are also research-oriented, starting their research online first versus visiting a dealership in person. Gen Zers, for instance, spend, on average, 147 days researching and shopping for vehicles and 89% conduct the research online using third-party websites (i.e., Car and Driver, Consumer Reports) or social media (i.e., The Car Mom, Reviews on Reddit). Millennials aren't too far behind, devoting approximately 112 days to these tasks¹.

Enhance your social media presence and place digital ads on third-party automotive websites to drive conversions and appeal to young consumers in the research phase of their car-buying journey.

Conversely, Gen Xers (born between 1965 and 1980) prioritize practicality, gravitating to SUVs, wagons, and trucks². Baby Boomers (born between 1946 and 1964) are brand loyalists and are more likely to choose gas, diesel, or hybrid cars over EVs³.

Car dealers should adopt an omnichannel strategy and stress loyalty programs to appeal to older vehicle shoppers.

Psychographic Segmentation

This segmentation refers to car buyers' lifestyles, behaviors, and interests. Psychographic segmentation centers on identifying key motivations and goals for a customer. In the automotive space customers can typically be broken out into one of these segments: Luxury, Adventure, Environmental Conscious, Family/Practical-Oriented, and Performance.

For example, those who prefer luxury goods might view a luxury vehicle as a status symbol⁴. They want the state-of-the-art features (like autonomous driving functionality and voice-activated controls⁵), plus indulgent interior trim options one would expect from Mercedes-Benz, Lexus, and other luxury automotive brands.

Another example of a segment is Families, which are extremely pragmatic in what they value. They prioritize more practical features like cars with ample cargo space and cutting-edge safety features — anti-lock brakes, blindspot monitoring — and infotainment systems to keep kids occupied and the entire family safe.

Individuals prioritizing Performance lean toward sports cars and other high-performance vehicles with powerful engines, responsive steering, and stiff suspension. These customers are interested in High-performance vehicles, which are a good investment for your lot, as sales have increased by 5% annually over the past few years⁵.

Geographical Segmentation

Where car buyers live also dictates how they might use their purchasing power. Consider your dealership's location and how your inventory can appeal to geographical conditions that might impact customer decisions like climate (i.e., Does it snow a lot?) or whether your dealership is in a major metropolitan area or smaller rural market.

Compact cars are popular in larger cities due to their maneuverability in high-traffic areas and narrow city streets. Individuals in rural communities might prefer trucks for work and vehicles that easily handle rugged conditions (i.e., 4x4 or All-Wheel Drive). Crossover vehicles and SUVs appeal to suburbanites for their large cabins and numerous seats.

Behavioral Segmentation

This car market segmentation divides shoppers by past behavior patterns, preferences, and level of engagement with specific brands. For example, think about your customers' lifecycle. Are they a first-time car buyer, a brand loyalist who always purchases the same make, or perhaps they aren't loyal at all and are "switchers" buying cars based on other factors like incentives, pricing, car features, reliability, functionality, etc.?

For First-Time Buyers, your approach would be about showcasing inventory that is affordable and dependable, while for Brand Loyalist, it would be about culling the data you have available in your CRM to find prospects that might be ready to move into one of the newest models.

Car shoppers often opt for the brand they previously owned, with a brand loyalty rate of 52.2% in the first half of 2024⁶. For "switcher" customers (individuals who are switching from one make to another), really listen to what they didn't like about their last car and see if you have inventory that meets their needs — whether that be technology features or specific needs they have like a larger backseat or cargo space.

Take Advantage of Industry-Leading Inventory and Merchandising Tools

Your BDC team and sales staff interact with diverse vehicle shoppers through each phase of the car-buying journey. Having a grasp of customer segmentation will turn window shoppers into return customers. Trust ACV MAX to provide intuitive vehicle merchandising tools to help your dealership remain competitive in the modern automotive sales industry.

Learn more about how ACV MAX can help your dealership.

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