It's a lot easier to keep a customer than to get a new one, at least that's how the sales force maxim goes. So what then does the newly released J.D. Power and Associates 2012 Customer Retention Study say about the automotive brands and their ability to sell the same customer another car.
For starters, something incredibly positive is happening at Hyundai - just two years ago, Hyundai was below the industry average in customer retention - now the Korean brand has flown past Mercedes, BMW, Porsche, Lexus, Infiniti and Acura to become the stickiest brand in the business, with a healthy margin of 4% to Ford and Honda.
The reasons a car owner switches brands make fascinating reading and it seemingly is very hard to retain customers, with even the prestige brands that sell a "way of life" unable to convince much better than one in two to stay with the marque.
Though the primary reason given for switching brands was that the previous brand didn't offer the type of vehicle they wanted (one in three "switchers") the underlying reason for most switches is undoubtedly dissatisfaction with the previous vehicle. Maybe it was too many problems with the car, or that it was too costly to run and maintain, or that the car had poor resale value.
The J.D. Power and Associates 2012 Customer Retention Study is now in its ninth year, and measures the rate at which automotive brands retain their existing customers, the reasons why customers remain loyal, and the rate at which automotive brands capture customers from competitors.
The 2012 study is based on responses from 117,000 new-vehicle buyers and lessees, of which 73,733 replaced a vehicle that was previously acquired new. The industry's average brand customer retention rate improved marginally this year (by one percentage point) to 49 percent.
In 2012, 19 of the 33 ranked brands have improved their customer retention rates from 2010, while 14 have declined. Just to get a clearer picture, we put all the numbers together for 2009 too, to see which brands are winning and which ones are leaking customers over the last three years.
What was most surprising was the performance of both of the big Korean brands. Hyundai improved from 47% in 2009 to an industry-topping 64% this year, but its improvement was beaten by Kia, which scored just 37% in 2009 and this year slotted into equal fourth with 59%, way ahead of all the well known brands which claim to sell a way of life to their customers.
Several other brands improved dramatically over the three year period from the 2009 survey - Land Rover from 25% to 47% (an increase of 22% in raw numbers but effectively almost a doubling of retention), Nissan's prestige brand Infiniti from 25% to 46% and Jeep which improved from 34% in 2009 to 51% this survey.
Looking at the figures over a slightly longer time frame also enables trends to be clearly seen, and the biggest take-out from the survey has got to be the abyssmal perfromance of Dodge which had a similar customer retention rate to Hyundai just three years ago (43% v 47%), and has slipped to just 21% today, doubling the company's customer bleed rate in just a few years.
Equally as intriguing was the poor performance of normal stellar perfromers in Mercedes-Benz, Subaru and Porsche which all lost 9% during the three year period. The study also noted some interesting points. Women and younger vehicle owners (aged 23 to 47) are less likely to choose the same vehicle brand for their next purchase.
"Women and younger vehicle owners are more likely to experience changes in their life circumstances, including growth in household size or changes in income levels, that would lead them to purchase vehicles that better accommodate their new lifestyle," said Raffi Festekjian, director of automotive product research at J.D. Power and Associates.
Brands that perform particularly well in retaining women customers include Honda, Hyundai, Kia and Mercedes-Benz. Among vehicle owners in the Generation Y and Generation X demographics, Ford, Kia, Lexus and Mercedes-Benz perform particularly well in customer retention.
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