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How Auto Makers Keep You Coming Back

25 Janvier 2013 - Wall Street Journal

How Auto Makers Keep You Coming Back

John Kwiecien, 47, is a commercial photographer who reckons he has owned vehicles from about 10 different brands since he started driving.

"I don't want to put myself in a box," says Mr. Kwiecien, who lives in suburban Detroit. He chooses cars that fit his lifestyle at a given time. Right now, he's driving a Volkswagen, but he and companion Camille Milroy spent part of last Sunday touring the Detroit auto show with an eye on a Jeep Wrangler Unlimited to take on outdoor adventures with their two "big, hyper dogs."

If Mr. Kwiecien is the epitome of the automotive brand-hopper, Susan Imbrunnone, 49, also from the metro Detroit area, is a classic loyalist. She says she's on her fifth Honda Civic and isn't looking to switch. "I don't have any trouble," she says. "They're reliable and they're good on gas."

Auto makers are paying close attention to consumer attitudes about sticking with a brand, because loyalty isn't just an admirable personal virtue to them. It's money in the bank. That's something every driver should bear in mind when car shopping or wrangling with a dealer.

The latest R.L. Polk study of brand and vehicle loyalty in the auto industry, released last week, found that 48% of people who bought a car in 2012 bought from the same brand they were already driving. Polk says the three brands with the most loyal customers were Ford, with 61.2% repeat buyers, Mercedes-Benz (57.7%) and Toyota (54.4%).

Reasons for staying loyal can vary. For buyers across the vehicle and price spectrum, the top attributes that inspire a purchase include fuel economy, reliability and pricing, according to consumer research firm J.D. Power and Associates. In the luxury segment, though, the top three criteria include performance, quality of workmanship and exterior styling.

For car makers, it costs far less to sell to a satisfied repeat customer than it does to win one away from a rival brand. Loyal buyers tend to spend more with a brand over time, but analysts say the days when a car dealer could charge loyalists a lot more than a first-time buyer are mostly gone—due to the easy availability of price information.

"There is no more important topic for our industry, in terms of the revenue for different companies, than loyalty," says Jim Farley, executive vice president of global marketing, sales and service for Ford Motor Co.

Because auto makers recognize the revenue potential in loyal customers, they are offering more incentives to stay with the brand. And whether you stick or not, it is often worth taking advantage of the offers.

The most basic weapons in the automotive loyalty wars are the cash "loyalty" discounts that car makers offer at various times, including at year-end and during end-of-summer clearance time. Buyers shopping around can often have those discounts matched by rival makers offering "conquest cash" to pry customers out of their old brand. Sometimes these deals aren't publicly advertised—you'll need to dig in automotive websites and press the dealer.

Customers who need more than point-of-sale cash discounts to inspire loyalty will find that car makers are trying to offer more value in other areas.

About a quarter of General Motors Co.'s Chevrolet dealers, for example, participate in what the auto maker calls the "GM Preferred Owner" program. Customers can sign up and get points, or credits, when they get their cars serviced at the dealership. The reward credits can be converted into discounts on repair work or on a new vehicle, says Don Johnson, vice president for sales and service at GM's Chevrolet division. Mr. Johnson says he's pushing more dealers to offer the program.

Maintenance and repair services—done well—can be a key to earning consumer loyalty, industry executives and analysts say. This is why more dealers are offering such things as fast, low-cost oil changes to persuade drivers that coming back to the dealership for maintenance isn't just the road to an empty wallet.

German luxury car maker BMW AG has for several years offered buyers of new BMWs four years of free maintenance. The deal has an obvious benefit to owners, but it helps BMW and its dealers, too, because, as BMW North America's executive vice president for operations Peter Miles puts it: "They've got to come back."

Before BMW offered the free maintenance program, only about 42% of customers got service at the dealership. Now, close to 100% do during the first four years. That gives dealers more opportunity to nurture a relationship with customers, and potentially pre-empt any wavering toward, say, Mercedes-Benz.

Beyond that, BMW and its dealers reward particularly loyal customers with invitations to golf tournaments, racing events or access to BMW's performance driving track near its U.S. factory in South Carolina.

Ford Motor Co., among others, uses its vehicle-financing arm, Ford Credit, as a loyalty tool, using finance data to target customers with offers to end a loan or a lease early—and to encourage them to pick out a new Ford to drive.

As vehicles have become more reliable, people are gradually widening their shopping lists, according to new research from J.D. Power and Associates. Only 21% of shoppers buy without looking at other cars, compared with 29% in 2010, the market research company found.

Loyalty discounts, service deals and early lease buyout offers have one aim, says Larry Dominique, president of Automotive Lease Guide and a former executive with Nissan Motor Corp.'s U.S. arm: "Their whole goal is to stop you from shopping."

Mr. Dominique says brand loyalty is a factor in the formulas companies use to predict a car's value at the end of a lease—a figure that directly affects the math determining the monthly lease payment.

Auto-industry consultancy ALG maps brands according to loyalty and resale value. Those with high loyalty and high resale values—Honda, Lexus and Mercedes-Benz—often aim to charge higher prices based on their brand power.

Bargain hunters, Mr. Dominique says, should look to brands that have high resale values—an indicator of good quality and attractive design—but haven't yet built a strong loyalty base. Makes in that category include Hyundai, Audi, Kia, Volkswagen and Mazda

 

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