DETROIT — 2009 and 2010 will be pivotal for auto manufacturers and dealers as they look to retain customers in the coming years, according to upcoming new research from R. L. Polk & Co.
Polk anticipates manufacturers, together with their dealers, will have difficulty surviving in the future without a true commitment to a customer retention strategy. Taking care of customers and dealers has never been more important for manufacturers. With fewer U.S. sales expected, along with owner loyalty rates of approximately 45 percent, these conditions pose an extreme financial threat to any automaker, according to Polk.
"We’re confident Detroit will pull through this," said Stephen Polk, chairman, president and CEO of Polk. "Nearly every manufacturer will become smaller and leaner as they look to drop poor selling vehicles and unprofitable business units, most certainly changing the complexion of the automotive industry," he continued. "The research currently underway at Polk will enable us to better help our customers – both manufacturers and dealers – through this transition."
Polk is currently conducting research to determine the impact on customer loyalty when vehicle models, or even entire brands, are phased out. One of the initial findings is that consumers of discontinued models leave a manufacturer 55 percent of the time when they make their next vehicle purchase. This is approximately eight percent higher than the natural defection rate for an automotive brand and has the potential to represent thousands of consumers. In a shrinking auto market, losing even one customer is painful, especially when many consumers may not buy a new vehicle at the same rate they previously have, the company said.
As a result, Polk is recommending its OEM and dealer customers employ strategies to minimize the negative impact the potential rapid product downsizing will have on their business. Consumer and dealer loyalty programs must be taken more seriously than ever before by OEMs and they must make smart investments, in order to keep and maintain their customer base. Customers at the risk of being "orphaned" are the most susceptible to defection and should be a primary focus. OEMs must consider these programs as important as a crucial product launch, and invest in them, if they are to survive and thrive long-term.
Over the next two months, Polk will release a series of reports assessing the impact of challenges facing the auto industry. Topics focusing on owner defection, vehicle demand scenarios, implications for business in the vehicle parts and service arena and dealer network planning will be further examined.