SOUTHFIELD, Mich. — Customer loyalty to automotive brands reached a 10-year high during the first quarter of 2015, according to analysis from market research firm IHS Automotive.
Brand loyalty during the first quarter was 52.8%, the firm reported. Several brands also experienced 10-year highs in loyalty rates, including Chevrolet, GMC, Infiniti, Jeep, Land Rover, Lexus, Lincoln, Mazda, Mitsubishi, Nissan, Porsche, Subaru and Volvo. Key drivers of these record results include a number of factors, said Tom Libby, manager of automotive loyalty and industry analysis at IHS Automotive.
“The increased number of different models within brands makes it easier for households that may need a different type of vehicle to maintain their loyalty,” Libby said. “In addition, the increased popularity of leasing since the downturn has helped significantly as lessees are consistently more brand loyal compared to retail owners.”
The number of models available in the U.S. market increased by 33, or 12%, from 2005 to 2015 — with much of that gain being driven by several luxury brands. The expanding model lines are providing customers returning to market with a greater number of choices, increasing the probability they will remain brand loyal.
Leasing, which is higher than at any point this decade, is another driver. It has rebounded from its decade low of 13.9% of the market in 2005 to 22.5% of the market so far in 2015 — a near 62% increase. Based on new-vehicle registrations analyzed by IHS Automotive, 24 of 32 segments reviewed had an increase in lease penetration over the decade.
“In several vehicle segments, there have been increases in leasing penetration of more than 20 percentage points,” IHS said in its report. “This leasing trend is due, in part, to greater cooperation between OEM captive finance arms and their operating divisions.”
Other contributors to higher loyalty rates include improved vehicle quality, which is keeping consumers happy with their vehicle choice over time. The improved quality is also driving up loyalty while pushing defection rates lower. Marketers also are aware that it is more cost effective to retain a customer than to conquest one, which is why OEMs are placing a greater focus on loyalty and customer satisfaction over time.
Consumers who returned to market for a new vehicle after driving brands that have been discontinued, such as Pontiac, Hummer, Mercury and Saturn, also account for some of the uptick in loyalty. Based on the IHS analysis, the number of households returning to market who had a discontinued brand in the garage has declined by 49% from 2010 to 123,388 in 2014.
OEMs are seeing the benefits from their efforts in vehicle content, expanded product lines and financing offerings to retain their customers. “While OEMs are experiencing increased retention, it's critical that they also continue their conquesting activities in order to compensate for the normal churn in their customer base,” IHS noted. “In 2014, most brands lost more customers than they kept.
“In addition, conquesting owners of competitive products will only get more difficult as the share of defectors declines,” the research firm added. “Product, marketing and financing actions will take on additional importance as brands attempt to conquest competitive owners. More specifically, among other things, understanding ownership life cycles, including the ability to predict which customers will return to market - and when - will be key competitive advantages moving forward.”