Experian Data Shows Car Customer Loyalty Dropped Nearly 10 Points in 10 Years

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, according to Scott Waldron, president of Experian Automotive, a part of global information services company Experian. Waldron cautioned 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.

COSTA MESA, Calif. — 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, according to Scott Waldron, president of Experian Automotive, a part of global information services company Experian.

"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 said. "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, according to Experian. 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 1 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. If this same manufacturer could improve loyalty performance by the 9.2 percentage points lost since 1998, they would generate an additional $3.73 billion in annual sales.

Waldron cautioned 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 said. "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 that make their own internal data assets actionable by coupling that information with additional vehicle registration, consumer demographic and behavioral data.

For more information, visit: www.experianautomotive.com.