Experian survey shows automotive customer loyalty dropping by 10 percent

It's nothing but dismal news for automakers these days — especially now that a new survey by Experian Automotive has revealed that automotive customer loyalty at the manufacturer level has dropped by 9.2 percentage points, from 49.1 percent in 1998 to 39.9 percent in 2008. This is costing some automakers more than $3 billion in annual sales, says Scott Waldron, president of Experian Automotive, a part of global information services company Experian.

Waldron released these findings during a presentation to a collection of leading manufacturers and marketing agencies at the recent ENG Automotive Customer Relationship Management Summit.

"The current struggles in the auto industry make it more important than ever for automakers to keep the customers they have coming back to purchase another vehicle," Waldron says. "However, the increased number of available manufacturers and models make engendering customer loyalty a bigger challenge than ever before. Automakers who have a firm understanding of what drives their customers to remain loyal will have a significant competitive advantage in this challenging market."

Even a small rise in customer loyalty can lead to significant increases in revenue. As an example, a manufacturer with 10 million current customers will have approximately 1.5 million of those customers return to market in a given year. A one-percentage-point rise in customer loyalty would produce 15,000 additional annual sales, or approximately $405 million in additional revenue, based on an average vehicle sale price of $27,000.00. If this same manufacturer could improve loyalty performance by the 9.2 percentage points lost since 1998, they would generate an additional $3.726 billion in annual sales.

Waldron cautions that traditional customer satisfaction scores are not always a reliable indicator of overall loyalty performance. He said automakers need to understand how customer loyalty is influenced by several other factors, such as financing, warranty work and customer satisfaction with all dealership interactions.

"Generating customer loyalty is a far more complex process than simply scoring high on initial customer satisfaction surveys or just tracking whether a customer bought another vehicle of the same make," Waldron adds. "Automakers need to factor in all of their customer touch points across the ownership lifecycle to understand the definition of loyalty that is specifically meaningful to their brands and their customers."

Waldron added that truly effective loyalty programs begin with manufacturers who make their own internal data assets actionable by coupling that information with additional vehicle registration, consumer demographic and behavioral data, and analytic expertise from sources such as Experian Automotive.

"Automakers have incredible amounts of customer data from virtually every customer touch point," Waldron says. "Bringing that data together with Experian Automotive's assets provides manufacturers with new capabilities in understanding and defining loyalty that drives from the corporate level down to the dealer and service level to reach and retain loyal customers and drive increased revenue."

More information about Experian's customer loyalty survey is now avaiable online.