Consumer Research

Last week we recognized winners of Polk's annual Automotive Loyalty Awards. One category that gets a lot of attention by our customers is the overall "Make Loyalty" category which basically recognizes superior customer loyalty to an OEM's brand. Since many of the automakers have multiple divisions (i.e., makes or brands), they like to see how consumers react to these separate entities due to the unique position they try to create in the marketplace. This year, Honda won for the U.S. market. But by how much? And how many more repeat sales would have been needed by other brands to beat this year's winner? The point of these questions is an estimation process can be used by automotive marketing managers to figure out what the sales mix needs to be in order to help them predict how they'll help their companies reach their overall sales targets.

How Close Was Each Brand to Beating Honda's Make Loyalty Rate in 2009?

For the 2009 model year, the average make loyalty rate was 44.53%. Honda's make loyalty rate was 54.86%. Toyota missed beating this rate by 0.15 percentage points and Ford missed it by 0.74 percentage points. If I look at the brands, including Honda, that had an above average industry make loyalty rate, there are a total of 10 of them.

But here's what's intriguing to me: is there an "efficiency thing" going on for some brands? Meaning, what dynamic allows a relatively few more sales from past customers to make some brands "win" while other brands need far more sales from past customers to get the same outcome?

Take Subaru, for instance. They missed beating Honda by 6.03 percentage points. But they only needed another 3,914 sales from past customers to exceed Honda's make loyalty of 54.86%. Now if you're Subaru and you only sell just north of 200,000 units in the U.S., yielding another 3,900 units isn't an easy task. But it's worth noting what sales volume deficits exist in order to possibly reach a loyalty target. Now a brand like Chevrolet needed 27,781 additional past customer sales to make them win, yet Chevrolet's overall gap (5.10 percentage points) from beating Honda was smaller than Subaru's (6.03 percentage points). Cross-town rival, Toyota, missed getting the top spot by 849 sales from past customers. In these examples, we have two large volume OEMs and one relatively small volume OEM. So it's not always a size issue that creates the disparities I'm highlighting.

The point is that when companies set targets for sales, much of this will come from past customers. And if there are specific loyalty targets established, managers can conduct a sensitivity analysis to estimate "what's needed" to hit the number. Awards are something to be proud of, but more importantly, hitting sales targets that are built on a bit of science with the use of consumer research and knowing industry trends can make hitting targets a more plausible effort. Here's to 2010... may the best, and most efficient, brand win.

Posted by Lonnie Miller, Director, Industry Analysis, Polk (01.18.2010)

Recently, the importance of customer loyalty in automotive marketing has skyrocketed due to the increased proportion of loyalty sales among total industry sales. Beyond measuring customer loyalty, OEMs and dealers need to understand what drives consumers' decisions to repurchase the same brand. Here at Polk, we attempted to uncover some of the drivers of repurchase intentions through a consumer research study we carried out this past spring.

In this study, we asked consumers who bought a new vehicle during the past three years what the likelihood is that they will repurchase a vehicle of the same brand next time they return to market, based on their ownership experience. We also asked them how satisfied they were with a series of factors pertaining to their purchase and ownership experience that we considered as potential influencers behind their repurchase decision.

These influencing factors were grouped into three major categories:

1. Product (brand affinity, product quality, performance, safety, fuel economy, workmanship, drive quality)
2. Customer relations (sales process, customer communications)
3. Monetary (purchase price, sales incentives, financing, cost of ownership)

Our analytical model revealed that product attributes are the most important drivers. Sales process and customer communications also emerged as highly influential, which reinforces the notion that a positive experience during the sales process has the potential to drive loyalty and also highlights the need for constant communication with customers.

Within the product category, fuel economy is a significant attribute that drives repurchase intention, though it is also directly related to the cost of ownership. Purchase price is perhaps less influential than we expected, although there are other monetary aspects that are important such as incentives, cost of ownership and indirectly, fuel economy. A diagram of the derived importance of repurchase drivers is shown below. More detailed study findings are forthcoming in a paper to be published shortly. Stay tuned.

Posted by Dan Zetu, Analytic Consultant, Polk (10.06.09)

Why don't small diesel cars get bought or sold in the U.S.? The last time you were in Europe up to 40% of the cars driving next to you were diesels. They were getting up to 60 MPG and didn’t have complex recharging systems or heavy batteries. Could you tell? They weren’t smoking, they didn’t sound like an F350, they were probably going to last longer than the petrol version next to them and they are great mid and small sized cars. This industry trend seems almost absent in the U.S. consumer marketplace.

If you could buy the new Taurus as a Turbo Diesel and get 40 MPG, would you? If you could buy the same Saab, Audi or BMW that you buy here in the U.S. today and get double the mileage with none of the hybrid costs or future headaches of replacing batteries – would you? I know I would.

If you wouldn't buy one, why not? Most of these vehicles have been engineered to meet U.S. vehicle safety and crash standards. The diesel that you can buy here in the U.S. is now clean enough to put in their highly tuned engines without destroying them. What is stopping the OEMs from bringing them over by the boatload? VW is making a start – their TDIs appear to be selling well but this is a small manufacturer with few models. Is it really public opinion of diesels that is driving manufacturer behavior? Has there been no consumer research to gauge loyalty for this forgotten automotive engine segment? Or are the manufacturers overstating consumer concern and missing a huge opportunity to improve U.S. fuel consumption on new vehicles... and limiting consumer choices? I know that when I buy my next vehicle, it will be a diesel since I commute 86 miles to work each day.

Posted by Chris Royle, Director, Global Product Strategy, Polk (09.15.09)

In a recent Polk View on automotive industry challenges, we looked at the impact of Chrysler's and GM's bankruptcies, brand eliminations and dealership closings on consumer attitudes and likely buying behavior. Our ongoing consumer research program painted a picture that wasn’t particularly rosy just a few months back: over two-fifths (43%) of surveyed consumers were likely to defect if their local GM or Chrysler dealer closed; one-third (35%) would be less likely to purchase a brand being discontinued and a similar proportion (34%) said an auto company bankruptcy would make them less likely to buy.

Consumer Attitudes - Impact on Purchase Consideration
Level of Agreement: I am less likely to buy because of...

Fortunately, things are starting to look a little brighter for the U.S. auto industry, with positive signs emerging in a relatively short time. GM's and Chrysler's rapid emergence from bankruptcy and the government's highly successful Cash for Clunkers program have been big factors contributing to the improvement.

While we're clearly not out of the woods yet, there are some signs of an upturn. Chrysler recently announced it's re-signing 140 dealers of the almost 800 closed under bankruptcy protection. As reported in Automotive News, dramatic cost cutting and production cuts, along with Cash for Clunkers sales, have left auto inventories at their lowest levels since 1992 and now automakers are scrambling to build more of their popular models. GM just announced that it's increasing production and calling back laid-off workers at several plants to fill the void. Retailers also report a late model used car sales boom from shoppers who didn't qualify for Cash for Clunkers and the increased traffic is driving service and maintenance business, which are both quite profitable.

Things seem to be boding well for Ford, which gained market share due to the other Detroit manufacturers' duress. Also, Toyota has trimmed its huge losses from last quarter. Economic indicators add to the optimism: the stock market's up, GDP is shrinking less than previously, unemployment is slowing, the housing market may have hit bottom and consumer confidence is showing signs of renewed life.

Let's keep our fingers crossed that the economy, a leaner and meaner GM, and Fiat’s merger with Chrysler all mean that brighter days are ahead for a smaller but "better" auto industry. What do you think? Are things improving for the U.S. auto industry?

Posted by Bruce Giffin, Corporate Market Research Manager, Polk (08.24.2009)

Is it wrong for me to be excited about the new Ford Taurus? Maybe I’m just getting old, but the Taurus always represented what my father and his friends drove . . . a boring car for the practical, budget-minded adult.

A combination of pent-up demand, GM and Chrysler bankruptcies, and a ‘buy American’ sentiment could make the Taurus’s July 2009 release date perfect. Automotive consumer research indicates that the public’s perception of Ford is improving due to Ford’s strong quality scores, its avoidance of government bailout funds, and the release of more exciting vehicles. If we look at the midsize sedan segment, Taurus’s major competitors include the Toyota Avalon and Chevrolet Impala . . . the buzz seems to indicate that the 2010 Taurus competes exceptionally well from a price, content and quality perspective with these makes. At the high end, the SHO could steal share from entry-level luxury buyers that traditionally consider brands such as Cadillac, Mercedes and BMW. My guess is that the Taurus is going to be a major hit.

Now the tough question . . . can I really see myself driving the same boring car dad used to drive?  I'll have to ask my kids.

Posted by John McBride, Director of Sales and Client Services, Polk (07.10.2009)

I'm intrigued by what really goes through an owner's mind when they find out they have a car or truck that's discontinued.  I'm sure a lot people don't care or don't really realize a particular model is retired after a while.  It's expected, right?  But for some, a vehicle defines who they are.  And it just might irk these customers to know they bought a vehicle the brand chose to pull from the product line-up...or worse yet, they bought a vehicle from a brand that's simply going away. So when, for example, Pontiac announced they're "going adios," what do those poor Solstice convertible owners think?

There's a lot written about customer loyalty, lost customers, conquesting, etc.  But right now, when sales are down and customers are nervous about the economy, this is important stuff.  It's really important to keep good customers interested in your brand.