COSTA MESA, CA – Customer loyalty isn’t what it used to be, says Scott Waldron, president of Experian Automotive, a division of Experian plc., an information-services company.
For one thing, there’s less of it, as tallied by how many vehicle customers repeatedly buy the same brands. Such loyalty levels have dropped from 49.1% in 1998 to 39.9% in 2008, according to data from an Experian study.
Meanwhile, brand faithfulness has taken some ironic twists and turns, according to the study.
For instance, while thebrand scores highest (59.8%) in consumer loyalty to an automotive nameplate, its kid-brother brand Scion scores lowest (19.8%). The paradox is that Toyota Motor Sales U.S.A. Inc. launched Scion in 2003 as a division intended, in part, to garner youthful loyalists.
Another irony: Customer satisfaction does not necessarily equal loyalty. The Lincoln and Jaguar brands scored highest in customer satisfaction, yet ranked 11th and 14th respectively among 20 brands, Waldron notes.
The satisfaction-loyalty disconnect may stem from customer satisfaction scoring often being swayed by dealerships that “coach” buyers to rate them highly on surveys sent to auto makers.
“How many car buyers get called by the dealer saying, ‘Please give me a (high score)?’” Waldron says at the 2008 ENG Customer Relationship Management conference here. “It happens all the time. It happens to me.”
Another ironic study finding is that despite their economic disparity, the most-affluent car buyers ($200,000 and over household income) and the least-affluent ($25,000 and under) showed similar corporate loyalty levels – which on both ends were lower than allegiance demonstrated by consumers in middle income brackets.
Rich people’s fickleness is because their wherewithal makes so many auto brand choices open to them, Waldron says. Conversely, the least affluent are not particularly loyal because so few vehicle choices are available to them.
“You get the same results, but for entirely different reasons,” Waldron says.
In what could be a cautionary tale forFinancial, which stopped leasing vehicles in August, “the No.1 highest loyalty driver was leasing,” Waldron says, referring to an Experian case study.
“What was it about leasing that caused that loyalty?” he says. “Was it that the customer could be out of the car in two years? Was it the affordability of the payments?
“And how do you replicate that loyalty on the purchasing side.” He doubts if it can be done simply by transferring incentive money.
Auto makers’ captive financing companies help boost consumer loyalty to the manufacturer and dealer alike, says the study. Captive financing gave a 20% loyalty boost to auto companies and a 27% boost to dealers compared with financing from outside sources.
The overall decline of product loyalty has much to do with the automotive market becoming so crowded with more than 45 brands, 30 vehicle segments and 300 models, Waldron says. “There are increased choices and competition.”
The sheer size of the U.S. car market means even small bump-ups in loyalty can produce big numbers for incremental sales. Waldron cites this example:
An auto maker with 10 million consumers currently owning its vehicles will see about 15% or 1.5 million of them return to the market each year. A corporate loyalty rate of 40% of that group equals 600,000 retained customers.
If the loyalty rate went up just one percentage point, to 41%, it would mean additional vehicle sales of 15,000 units, Waldron says. “With the average revenue per (new) vehicle being $27,000, that means an increase of $405 million in incremental revenue.”