SOUTHFIELD, Mich. — The federal Cash for Clunkers (C4C) program has created an unforeseen side effect in vehicle sales relating to owner loyalty, according to recent analysis by R. L. Polk & Co. Between July and August 2009, when dealer showrooms saw increasing traffic and vehicle sales, overall loyalty rates to a manufacturer dropped nearly 6 percentage points. Over the same two month period in 2008, owner loyalty rates stayed relatively flat.
Chrysler and General Motors experienced the largest declines, with Chrysler suffering a drop of 13 percentage points in corporate loyalty from July to August, and General Motors experiencing a drop of nearly seven percentage points during the same timeframe. Ford was the least affected of the domestic manufacturers, with a drop of six percentage points. Honda and Toyota experienced two and five percentage point declines in owner loyalty, respectively, based on Polk’s monthly analysis.
"While the Cash for Clunkers program drove sales, it also caused a lot of competitive cross-buying that hurt repeat sales to the same automaker. Our analysis supports that OEMs and dealers may not have realized the potential defections the C4C program might bring. Whether this matters in the short-term, we think long-term loyalty needs to be a constant focus," said Lonnie Miller, director of industry analysis for Polk.
Industry-wide, contributing factors to the monthly spike in defections include low or depleted inventory levels of qualifying vehicles during a period of time in which attractive incentives existed for consumers, according to Polk. GM’s planned phase-out of Saturn may also have accounted for hurting some of the corporate loyalty GM received from these owners. For the first time in eight years, less than one in two Saturn owners are expected to stay with GM.
"The playing field was virtually leveled when all OEMs had the same incentives, and loyalty rates were adversely affected," according to Miller.
"Given what happened between July and August of this year, this should make for an interesting final quarter for our model year period that ends in September," Miller said. "With the loyalty rate drops we’ve seen based on Cash for Clunkers, we might expect some surprises in overall loyalty rates once results for the entire model year are analyzed."
Polk tracks industry loyalty on a monthly basis. It will present its 14th annual Automotive Loyalty Awards, which recognize automotive manufacturers for excellence in customer loyalty, on January 12, 2010, during the Automotive News World Congress in Detroit. New categories to the program this year include specific loyalty awards within the African American, Hispanic and Asian categories, and a new award that will recognize ‘Most Improved Loyalty’.
The Polk Automotive Loyalty Awards utilizes the only fact-based methodology in the industry to recognize manufacturers for superior owner loyalty performance. Loyalty is determined when a household that owns a new vehicle returns to market and purchases or leases another new vehicle of the same model or make.
