The Polk Blog

I did a brief interview for a public radio program last week and they asked me about people and their ownership patterns of cars and trucks. Specifically, they wanted to know if people were hanging onto their wheels longer and why. Short answer: "Yes."

Americans Continue to Hold Onto Vehicles Longer

 

The trend we've seen over the last eight years is pretty stark. As new and used vehicle sales in the U.S. have taken a hit in recent years, the chances that we'll hold onto our vehicle for longer periods of time has definitely risen. In late 2001, the average number of months we Americans held onto a new car or truck was 34.2 months. As of September 2009, it was over 60 months. Same pattern, but at different levels, apply for used vehicles, too. Why? How?

1. The economy helped this, but it's not the only reason. I won't elaborate on the old news of what a recession does to individual spending in the auto market. But that's not the only contributor motivating you and I to hold onto our vehicles longer.
2. Financing. Leasing options were more difficult to come by in 2009, particularly as Chrysler Finance and GMAC withdrew from this type of activity. That hurts the "churn" of someone being able to move from a temporary owned vehicle into another one. Plus, there are more deals out there where you can finance for longer term lengths. You've heard of 72 month car loans? They're growing. That'll add to the average ownership length. I found an article from LendingTree dated 2007 citing the beginning of this pattern.
3. Warranties and extended warranties. Automakers are covering their powertrains for longer periods of time and bumper to bumper warranties are also growing. Go talk to a dealer and they'll be happy to sell you an extended warranty as well. Add another factor to my motivation to hang on to 'ol Betsy.
4. Vehicle durability is rising. While perceived durability and reliability may be an issue for some brands, consumer research shows that more and more brands are on par with one another regarding their overall product quality ratings. That is a systematic factor allowing you and I to deal with the same set of wheels for a longer period of time.

The trend bodes well for the automotive aftermarket. (Repair business is good - have you checked out AutoZone's stock lately?) It does suppress the annual sales rate for new sales, but if you are a franchised dealer, can you think of a better reason to have for building a customer retention game plan for your service business? I can't.

Posted by Lonnie Miller, Vice President, Marketing & Industry Analysis, Polk

In a previous blog I asked the question, "What will be the buzz at NADA 2010?" Now that the show is over, I have some observations to share.

NADA 2010 was a combination of "sizzle and steak." The show included new technologies, and beautiful vehicle models. There were brick and mortar enhancements for dealers to compete on a retail level. Aftermarket Row provided ways to ramp up fixed operations and used vehicle sales for gaining the dealership "orphaned owners." 

The atmosphere was more intimate, featuring a smaller and scaled back exhibit hall. Speaking with attendees and exhibitors, the more personal access and "to-the-point" conversations was a refreshing change from the bloated, party-filled NADAs of the past. The market continues to figure out the digital purchase journey of shoppers to buyers. Dealers and their agencies are working to be more effective at spending automotive marketing and advertising money for better shopper and lead conversion. The magic behind the curtain of behavioral targeting is becoming less of a mystery. And we're all starting to connect the dots of offline and online (digital marketing) activity to help suppliers and dealers figure out ad placement and content when delivering a marketing message that is based on consumer needs.

Overall, the integration of data into dealership portals and dashboards is accelerating and is finally beginning to show that all of this information can be placed into a singular business intelligence tool for making better data-driven decisions.

So, I’ll join the rest of the attendees I’ve spoken with, who enjoyed a new, and different NADA and say that 2010 will be another challenging year. Those that were here will come back with the tools and knowledge to take advantage of a slow, but progressively improving vehicle sales year in 2010.

Posted by Brad Korner, Director - Client Sales & Service, Automotive Retail Solutions, Polk (02.18.2010)

Last week at the Chicago Auto Show, the CEO of the Dodge brand, Ralph Gilles alluded to Apple computers as an inspiration for the design of their future products. Bravo. Seriously.

In the past, Chrysler Corporation was often hailed for their ground-breaking design. The vehicles Chrysler created in past eras (think Prowler...think PT Cruiser...think Viper) would get you pretty jazzed up. I think of my reactions when I received an iPod as a gift or our family bought an Apple computer. I can tell you, we were more excited about those than something that drove 100+mph on 4 wheels. Why? Because Apple's product is elegantly designed. And their stuff integrates with your lifestyle and other personal tools so easily. You want to play with an iPod or an iPhone. Do you want to play with a car? In most cases, no, because it might break and that's not fun.

In any case, the auto industry can take some cues from other industries. This is a theme I've spoken and written about in the past. Whether it's the gaming industry or other technology sectors, actively listening to the market, watching for the right demand signals and being relevant to consumers, on their terms, makes it easier to succeed.

Here's to inspiration. And here's to learning from other market leaders that can help auto companies reach their goals more quickly.

Posted by Lonnie Miller, Vice President, Marketing & Industry Analysis, Polk (02.16.2009)

Retail throughput (new vehicle sales per franchise outlet) is arguably the most important issue in the controversy about the recent dealer count reduction by Chrysler and the planned reduction by GM. The huge disparities in throughput between the domestics and Asians have not been highlighted in discussions of the dealer count reductions, but maybe they should since they are the crux of the problem. In 2008, the typical Toyota dealer sold 1,589 new cars and light trucks, the highest average throughput in the industry*. Honda was second at 1,253, and Nissan was third (among non-luxury brands) at 785 units. In contrast, the typical Ford Division dealer in 2008 delivered 477 units, with Chevrolet at 459 and Dodge at just 202.

In the luxury market the gap is even larger. The typical Lexus dealer sold 1,158 new vehicles in 2008, more than ten times that of the typical Cadillac (112) or Lincoln (83) dealer. Lexus's average throughput was higher than that of any other brand in the industry except Toyota and Honda.

While the Toyota, Chevrolet and Ford brands nationally sell approximately the same number of new vehicles, the typical Toyota dealer sells many more than its domestic counterparts because there are far fewer Toyota stores. As of January 1, 2009, there were 1,225 Toyota and 1,029 Honda franchises nationwide, compared to 3,812 and 3,430 Chevrolet and Ford outlets, respectively. These widely divergent numbers have received virtually no media coverage. 

The obvious way to increase throughput at the domestic stores is to reduce the number of stores, something the domestics have been trying to do for years. But closing one store in normal times can take years because of state franchise laws. GM and Chrysler’s bankruptcies presented them with an inviting one-time opportunity to dramatically shrink their networks with "one stroke of the pen."

Throughput is highly correlated with dealership profits. The more profitable Toyota and Honda dealers currently have more money to spend on employee salaries, employee training, and facility improvements (among other things), raising the entire water level of their operations relative to the competition. The domestic OEMs are well aware of this situation, and it is the central reason for their recent actual/planned dealer count reductions.

All comments and/or rebuttals are welcome.

*All throughput data are from the 2009 Automotive News Market Data Book

Posted by Tom Libby, PolkInsight Advisor, Polk (02.15.2010)

After the EuroCar Seminar on 20 January 2010, we posted the top ten questions asked by OEM and OES delegates in attendance. Today I will be answering the last few questions. I hope you have found all of our answers helpful. If you missed the answers to the previous questions, don’t forget to read the answers posted by Norm Marks regarding marketing and Thomas Mawick regarding hybrids.

Can you share with us where or from whom dealer network planning can be most improved?

All manufacturers in all countries have room for improvement... I believe that in Europe, German networks need restructuring most urgently. Surprisingly, importers suffer most; even if they had better possibilities to align locations strategically, they need to improve dealer performance and network efficiency. The focus of network planning should be on the key metro markets.

Besides the saturated markets, there will be a lot of network planning potential in the eastern European countries, especially Russia.

Do you have a view about the demise of block exemption and the impact this will have? 

Motor Vehicle Block Exemption Regulation ("BER") is the legislative framework for motor vehicle distribution and servicing agreements in the EU. In place since 2002, current regulation No. 1400/2002 was meant to pave the way for efficient competition within the European markets and caused some significant changes in dealer networks such as discontinuation of location clause or multi-franchising trends.

With the current regulation expiring in a couple of months, the question is valid whether we have to expect further significant changes. The European Commission has not yet approved any new regulation so it's hard to say what the impact will be in detail. But from the recent drafts seen, here are a couple of issues:

• New BER is anticipated in June for service but for sales there will be a transition time until 2013. In my opinion, we must not separate regulations for new vehicle sales and aftersales business. I have outlined how important integrated sales and service functions are for both dealers and manufacturers – Vertical BER does not help this way.
• Vertical BER allows brand exclusivity contracts for up to a 5 year contract period, while automotive BER does not. Multi-brand dealerships are on average underperforming, therefore I have no doubt that manufacturers will make use of this exclusivity option. For many multi-franchise businesses this could mean that recent investments will not pay for themselves.
• And finally a legal issue: the principle of legal certainty is not given for those manufacturers and/or dealers which exceed 30% market share.

Is the decrease in the Japanese dealer network an indication of the direction European dealer networks are going?

Indeed we could see some dealer terminations recently and domestic manufacturers already cut their networks in Japan or plan to do so. But it is not quite the same downsizing trend as in Europe or North America; dealer networks in Japan are relatively stable. The reason why we might see a decline in dealer contracts is different from Europe and the US. There are two market characteristics which make Japanese networks unique: first, Japan has a broader range of models in the market and second, dealerships and showrooms are commonly very small. As a result, many manufacturers sell different models through different sales channels. A large domestic OEM used to have two channels. But when they got into financial trouble in the early 2000s they reduced the number of models and scaled back the workforce. Hence both dealers, channel 1 and 2, were in fact close to each other selling the same models. Polk supported a network reduction (consolidation) project in 2005 to identify optimally located channel 1 or channel 2 dealers that could be expanded to handle the sales capacity of two former showrooms.

We hope that our answers have helped you. Feel free to comment if there’s anything you feel we've overlooked or if you have any comments.

If you could not attend the UK seminar, click here to find out about the upcoming Global Network Planning Trends Webinar.

Posted by Tanja Linken, Team Lead Network Management, Europe, Polk (02.10.10)

Global hybrid sales trends have continued to increase despite the declining global light vehicle market. Some of the fastest growing light vehicle markets in the world are BRIC nations with China, India and Brazil experiencing light vehicle growth in 2009.

Despite the overall automotive growth in these emerging markets, hybrids have declined. And not just declined, but not sold. In China from January - October of 2009, only 303 vehicles out of nearly 9.7 million sold, were hybrids. For this same time period, India had 61 hybrid sales out of nearly 1.7 million vehicles. And Brazil didn't have a single hybrid vehicle sold during this time period.

So why don't hybrids sell in these otherwise fast growing markets? My best answer for this is a combination of activities including relatively low retail gas prices, no financial incentives from the government to buy "greener" cars that would compensate for the higher sticker price and also the possibility of limited availability due to OEM distribution strategies.

I'm currently working on a global hybrid Polk View analysis that will be published soon and would like to hear your thoughts on why hybrids aren't selling in emerging markets.

Posted by Margaret Zewatsky, Global Market Analyst, Polk (02.09.10)

After the EuroCar Seminar on 20 January 2010, we posted the top ten questions asked by OEM and OES delegates in attendance. Today I will be answering questions pertaining to hybrids. If you missed Norm Marks answers to the Marketing questions, you can find them here. Tanja Linken will be answering questions aboout Network Planning in the next blog entry.

With regard to CO2 emissions, hybrids and zero emission vehicles, do you have any insight into vehicle whole life costs?

This question targets the cost of vehicle construction, battery cost including disposal and the vehicle running costs. The variety of calculations regarding life costs is still quite large. While it is not yet clear whether the retail prices for hybrid vehicles allow for a financial break-even to occur, in some premium models the hybrid drive is extremely expensive which can prevent a break-even from happening. The highest costs in car driving appear to be the loss in value on the one hand and the running costs (mainly fuel). So very much depends on the residual values for alternative cars and their general acceptance and the price relationship between the different fuel types in the future. The term "zero emission vehicles" is also a bit misleading as EVs (electric vehicles) do not emit while driving, but they still need energy for battery recharging. Dependent on the energy mix used in the production process, EVs might emit more CO2 than small diesel or petrol engines.

Is the development of fuel efficient vehicles dependent on the oil price going to $600 a barrel?

There are different scenarios regarding the future oil price development. Polk expects a price of ~$130 towards 2020, others expect $300 or even $600 per barrel. During 2008, oil became quite expensive with almost $150/barrel by the middle of that year. The pressure to develop alternative drives for cars increased. New regulations (e.g., those related to fleet consumption and CO2 emissions) force the public to reduce the fuel consumption of their vehicles. We expect to see both an improvement in conventional combustion technology by engine downsizing, optimized engines, start-stop systems, etc., as well as an expanded model offer in advanced technologies like hybrid or EV. With higher oil prices, there will be higher pressure to develop new technologies as well as pressure to reach financial break-even points for alternative energies.

What is the difference between plug-in hybrids, pure full hybrids and mild hybrids?

A plug-in hybrid vehicle is similar to a conventional full hybrid vehicle—both use a combustion engine as well as an electric motor. However, a plug-in hybrid uses larger battery packs that can be recharged by connecting to common household electricity. In full hybrid vehicles, the electric motor and the internal combustion engine are installed so that they can both individually or jointly power the vehicle. For shorter distances the vehicle can be propelled in its EV mode solely, which eliminates emissions. Mild hybrids use a generally compact electric motor to give extra output during the acceleration, and to generate on the deceleration phase. With mild hybrids, the vehicle cannot be powered by the electric motor exclusively.

Do you have any evidence that customers are driving shorter distances as a result of economic conditions?

At the moment we don't have any evidence for this development. The tightening of economic conditions has affected all kinds of industries dealing with transportation. Nevertheless private mobility is of common interest. With the overall trend of rising costs of ownership, the private driving behaviour might change and result in decreasing mileage, but this depends on the development of the costs of alternative means of transportation.

Thank you for taking the time to read my blog entry. If I left anything out that you would like answered, please submit a comment and I will be happy to address it!

Posted by Thomas Mawick, Manager, Automotive Studies, Europe, Polk (02.08.10)

It's Friday and I didn't want to blog people down with a serious entry about the depressing automotive industry challenges or sales trends. Today I decided to blog about something lighter, but something that we can all think about—how can we make the car even better? The OEMs are doing such cool stuff already, as seen by features like the Ford SYNC® and the recently announced KIA UVO voice controlled system (to name just two), but what would make the car perfect for me?
 
Now, I’m not a techie. And frankly, I have no idea how my car works. I'm a marketing guy. But, I pay attention. I see all the neat new technology that my sons ask for, that I refuse to get them. And what I have learned most recently is, no matter what you want to do, there seems to be an "app" for that. 

Take the automatic car starter. Today, they require you to push a button on a key fob aimed at the car. That's too much work. My colleague, Cenk Hepaktan, discussed new features that could easily be available with your smart phone in his blog last fall. I'd like an app that would allow me to set a timer to start the car and warm the seats, too. Then I could walk out my door and have my car running with absolutely no effort on my part. It seems simple like a marriage made in heaven.

Today, many cars come equipped with a GPS. A great advancement, but I know where I'm going when I drive. I want a system that tells the guy in the nearby car how to drive instead. Remember the old Mr. Microphone that let you project through your car radio? Same idea—if someone is tailgating you, your car could automatically broadcast into that car’s radio and scream whatever epithet is pre-programmed for that offense.

How about a car with a built-in memory? Computers have memories. Computers are in cars. Therefore, cars should have memories. I want to get in my car and simply say, "Work," and my car should take me to my destination. Actually, I'm pretty sure my car can already do this, since there are days that I drive to work where I would swear the car drove itself. I’ve also seen some pretty interesting ways that programmers are using their smart phones to actually DRIVE their cars, using telematics and smart phones, as can be seen in this humorous video.



(http://www.youtube.com/)

However, I would prefer to not sit on or in the car. I would rather stay home and have the car drive and pick up my kids from their friends' houses. So I guess, those really far-fetched futuristic George Jetson ideas may be showing up at the next North American International Auto Show.

So have you thought about your perfect car? Are you already driving it? What features would you love to see at the next auto show? How can the OEMs create your perfect car?

Posted by Jeffrey Stone, Sr. Marketing Specialist, Polk (02.05.10)

After the EuroCar Seminar on 20 January 2010, we posted the top ten questions asked by OEM and OES delegates in attendance. Today I will answer the three marketing questions. The remaining questions will be answered by Tanja Linken and Thomas Mawick.

1. If you could only do one thing with respect to marketing in this environment, what would it be or in what area would you focus?

We must optimize automotive marketing both for new vehicle sales and aftersales. That said, aftersales marketing has been an area that in my opinion has not received an appropriate level of attention. There are numerous opportunities to better communicate effectively with customers during their ownership period. These efforts have strong impacts on the customer experience at both a OE and dealer brand level.

2. You have covered a great deal of ground, what type of automotive marketing has been most effective/impactful?

Programmes that focus on customer loyalty and retention with demonstrable ROI are perhaps the most effective marketing initiatives given the efficient use of precious marketing resources. In a difficult sales environment, long term loyalty really matters.

3. Are there any other marketing challenges that ‘keep you awake at night’?

One marketing challenge that keeps me awake at night is the reliance on incentives in order to sell new vehicles. This poses a dilemma when incentives aren't always available yet sales targets need to be met. By and large, OEMs recognize this challenge, yet many struggle with breaking the cycle of providing generous incentives.

I hope this answers your questions. Feel free to comment on this blog if you have anymore questions or insights. Watch the blog for the upcoming responses to the network planning and hybrid related questions in the next few days.

Posted by Norm Marks, Vice President, Sales & Client Services; Managing Director Northern Europe, Polk (02.04.10)

Generally, the first question that people ask themselves after deciding that they would like a new car or truck is, "How am I going to pay for this?" In years past, many consumers have turned to leasing as a convenient option that allows for "a little more car." In recent years however, that option has been harder and harder to come by. 

In 2008, the average lease rate was 18.1%. BMW, Daimler and Volkswagen all led the pack, leasing well over 40% of their vehicles. The credit crunch in 2009 forced lending institutions to impose strict rules governing the approval of lease applications. The average US rate fell to 13% through November. This was an especially big hit to the market share of the already weakened domestic OEMs. Chrysler's leasing came to a halt--dropping from an average of 15.3% in '08 to only 1.6% in '09. 

Geographically, leasing is most popular in the Mideast states where lease rates reached as high as 28.6% in 2008. The Great Lakes region experienced over a 50% drop in leasing driven by its heavy domestic presence. The smallest drop and lowest lease rates occurred in the Southwest where only 6.3% of sales are leases. 

What does 2010 have in store for leasing? Polk's automotive forecast is 11.5 million light vehicle sales for 2010. This, coupled with a forecasted 2.9% increase in GDP spells good news for leasing, especially if lending rules surrounding consumer credit can be relaxed. Stabilization of the unemployment rate will assist in minimizing foreclosures which should allow the housing market to gain some much needed lost ground. If all of the moving pieces can line up, we should slowly see a return to historical leasing levels. But one thing is certain, they will not rise as fast as they fell.



Posted by Michael Yakima, PolkInsight Advisor to General Motors, Polk (02.03.10)

Last week, I was proud to introduce William C. Diggory as the recipient of this year’s Heavy Duty Industry Aftermarket Hall of Fame Award.

Bill is the retired Vice President and General Manager of SKF Vehicle Service Market in North America. In addition to his wealth of industry experience, Bill also served as chairman of the Heavy Duty Manufacturers Association (HDMA) from 2005 to 2006. His leadership in planning and promoting Heavy Duty Aftermarket Week (HDAW) led to the tremendous success and growth of this event. And what an event it has become! This is the third straight year Polk has sponsored the "Hall of Fame Award" and it is truly an honor every year to pay homage to those special individuals who have made significant, selfless contributions to the commercial vehicle market.

Thanks to everyone who attended last week. I look forward to seeing you again at HDAW 2011.



Posted by Gary Meteer, Director of Sales & Client Services, Aftermarket & Commercial Vehicle, Polk (02.02.10)

The National Automobile Dealers Association (NADA) Convention in Orlando, FL, is next week and customers, colleagues and industry suppliers seem less cautious and more optimistic about the industry trends for 2010.

And why shouldn’t we? New vehicle sales forecasts have continued to inch up to the mid and high 11 million ranges. New vehicle models have been launched with enthusiastic responses and early indications are a good start for January.

The word from dealers and dealer groups in 2010 is to capture consumers and households that have been orphaned from the dealership closures.

For new and used vehicle sales, or parts and service transactions, dealers know the importance of extending outside of their customer base and staking claim for new market share. Finding these prospects and transitioning them into customers is a key goal Polk is hearing from the dealers attending NADA. 

So what are the suppliers to dealers saying? The allied industry suppliers, like marketing services and automotive CRM companies, new & used inventory stocking tools and consumer portals, are all looking to integrate objective market data into their applications for helping dealers make good data-driven decisions. The days of disparate data bases and silo reporting are over. This method simply does not allow the industry to act quickly and economically to target audiences and individuals who are in the market to purchase.  Dealers are telling the suppliers to consolidate this data into an easy-to-use application so they can go to one spot and evaluate where to invest their automotive marketing budget, in what channels and with measured ROI.

So, what will be the buzz at NADA 2010? With a record number of workshops and companies exhibiting many of the tools mentioned above, I think we are going to see dealers that are looking for their suppliers to provide better methods for integrating the different market data while providing them and their employees more effective, economical and efficient ways to capture and convert consumers from their current data bases, as well as orphaned prospects that need a "new home" for their transportation needs. I'll report back after the show and let you know the outcome—stay tuned.

Posted by Brad Korner, Director - Client Sales & Service, Automotive Retail Solutions, Polk (02.02.2010)

Last week I attended the AAIA Car Care Council—Women’s Board 2010 Winter Meeting at the Rio Hotel & Casino in Las Vegas. I was also honored to participate in a Hybrid Technology Panel to discuss the future of hybrid vehicles and how they will affect the automotive aftermarket industry.

Through the discussion, it became very clear that while hybrids are talked about a lot, they are still very, very young. As of July 1, 2009, hybrids represented less than 1% of the vehicles in operation. However, while currently not that significant, it is clearly viewed as the technology of the future. And, new technologies bring new challenges and that means new opportunities for the aftermarket.

The training available for technicians at this time is still very limited to only maintenance work and since these vehicles are still so new, it is too soon to determine what types of service issues they may be prone to.

All in all, the aftermarket needs to keep an eye on this small, but growing segment. Hybrids don’t appear to be going away, so we need to embrace and prepare for a very promising future.

Posted by Heidy Herrera, Account Representative, Aftermarket, Polk (01.26.10)

What were the top 10 questions from the OEM and OES delegates attending the Polk EuroCar Seminar in the UK on 20 January 2010?

1. If you could only do one thing with respect to marketing in this environment, what would it be or in what area would you focus?
2. You have covered a great deal of ground, what type of marketing has been most effective / impactful?
3. Are there any other challenges that 'keep you awake at night'?
4. Can you share with us where or from whom dealer network planning can be most improved?
5. Do you have a view about the demise of block exemption and the impact this will have?
6. Is the decrease in the Japan dealer network an indication of the direction European dealer networks are going?
7. With regard to CO2 emissions, hybrids and zero emission vehicles, do you have any insight into vehicle whole life costs?
8. Is the development of fuel efficient vehicles dependant on the oil price going to $600 a barrel?
9. What is the difference between plug-in hybrids, pure full hybrids and mild hybrids?
10. Do you have any evidence that customers are driving shorter distances as a result of economic conditions?

These questions are an indication of the themes foremost in delegate's minds. Watch the blog for answers to these questions.

Posted by Marcus Richardson, PolkConnect Programme Manager, Polk's Europe Operations (01.21.2010)

2009 will forever be remembered as an extremely turbulent year—filled with global automotive industry challenges. Global Light Vehicle sales for 2009 were approximately 61.9 million, down 5.1% from 2008. However, from a purely statistical point of view, the Global Automotive market demand seemed to be far more robust than expected at the beginning of 2009. November '09 sales were up 25% from the year before, and December '09 sales were up by about 22%! All together, fourth quarter sales were up about 17% over the final quarter of 2008, when sales bore the full brunt of the financial crisis.

Looking back we have to realize that demand was inflated by numerous government programs enacted to stimulate the automotive markets and as a result impact sales trends. On the other hand, it is astonishing how different the results were in most of the developed saturated automotive markets (e.g. the U.S.) compared to the upcoming "emerging markets" (e.g. China) which are still characterized by a very low density of vehicles on the road.

Stimulated by energetic government intervention, the global economy has stabilized in recent months so the basic economic outlook for 2010 is clearly better compared to the economic framework in 2009. Will the Global Automotive market follow this positive industry trend?

The latest Polk global light vehicle forecast report is available free for your download. This automotive forecast analyzes 2009 sales, Polk's economic outlook and light vehicle forecast for the year ahead. Take a look and let us know your expectations for 2010.

Global Light Vehicle Sales Forecast

Posted by Uwe Biastoch, Director Global Forecasting, Polk's Europe Operations (01.20.2010)

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)

It was my honor to present the 14th Annual Polk Automotive Loyalty Awards at the Automotive News World Congress this week. We’ve discovered over the years that the more you know about customer loyalty, and the more you focus on it, the better. And I can tell you first-hand that we’re seeing more and more of our customers taking their loyalty objectives very seriously. Our 2009 Model Year winners are no exception!

Every year Polk recognizes automotive manufacturers for their superior performance in customer retention. Our Loyalty Awards are based on actual model year purchase and lease activity. This year, we analyzed over 4.5 million household records to determine our winners. In these days of struggling sales and overall automotive industry challenges, the winners this year are a testimony to those OEMs who recognized the importance of spending their resources wisely, and focusing on areas with bottom-line impact like customer retention; which we view as a “must” for automakers hoping to compete.

In our white paper, "Managing Customer Loyalty in the Auto Industry," we share three strategic tips automakers should consider when developing their plans to manage and build their owner loyalty. I hope you find it interesting.

In closing, and on behalf of R. L. Polk & Co., I want to congratulate all of the 2009 model year winners. I hope to see you all again next year at the 15th Annual Polk Automotive Loyalty Awards. Until then, continued success in your customer loyalty efforts!

Posted by Stephen Polk, Chairman/CEO, Polk (01.14.2010)

There has been much recent news and comment with respect to Europe and the sales environment looking ahead. We know from our own experience that the introduction of scrappage incentives can have positive influence whilst in effect, but can also have negative impacts on future vehicle sales. Further, our own analysis has identified unforeseen side effects relative to these programmes with reductions in loyalty rates. Once these programmes ended the loyalty rates returned to normal – demonstrating just how sensitive repeat buyers can be to these types of programmes.

With scrappage programmes coming to an end in Europe, and market-specific influences such as the VAT increase in the UK – it begs the question as to what we can expect in the years ahead.

We will be reviewing our most recent global automotive forecasts, with a detailed view on European Car Demand at a Polk EuroCar Seminar in the UK upcoming on 20 January 2010. For those attending, we look forward to reviewing these forecasts with you, and for those who cannot attend – we hope you will follow Polk’s Forecasting Dashboards or engage with us directly.

The current and projected sales trends have caused many vehicle manufacturers and dealers to increase their focus and attention on customer retention and related programmes. Customer loyalty and optimal aftersales programmes drive positive customer behaviours, and ultimately dealer and manufacturer profitability – key in the difficult sales environment. We will explore some of the best practices we have seen at the seminar, including such areas as predictive targeting and multi-channel integrated communications. Aftersales and service matter, and there are opportunities to succeed and drive results.

And whilst there is no doubting the impact of customer loyalty and retention, no brand can excel in these times without converting the highest percentage of active prospects. There are proven approaches to prioritising focus that generate demonstrable results in increasing conversion rates – and particularly with respect to internet leads. We will discuss our experience in this area at the seminar, and the broader effects the internet and social media are having on the industry.

These are indeed interesting times, but there remain opportunities for the taking.

Posted by Norm Marks, Vice President & Managing Director, Northern Europe, Polk (01.13.2010)

Are you curious what impact the Cash for Clunkers program had on customer loyalty to OEMs? Are you interested in some strategic tips for managing customer loyalty? Do you think that understanding what drives customers' decision to repurchase is critical to building loyalty? Have you ever wondered about the financial impact of loyalty on the OEM bottom line?

If your answer to any of these questions is yes, then you may be interested in the white paper that Lonnie Miller and I have put together and released this week. Click here to get your own copy of the white paper.

Posted by Dan Zetu, Analytic Consultant, Polk (01.13.2010)

My major take-away from last night's World Congress presentation was the sharp role reversal between guest speakers Yoshimi Inaba, President and COO of Toyota Motor North America, Inc., and Mark Reuss, President of GM North America.

Mr. Inaba spoke first about Toyota's recent successes and challenges. He calmly and confidently highlighted their current and future products, large R & D investment and employee charitable volunteer activities. The audience was left with an impression of a bright future for Toyota in North America.

Mr. Reuss then took the podium and explained the sense of urgency and renewed customer focus at GM. He noted the irony that the same government once concerned about GM controlling too much of the U.S. automotive market, now controls GM. Mr. Reuss covered current and future product and outlined the recovery steps already in place at GM.

It was interesting that GM, who once enjoyed over 50% of the U.S. market, is now behaving like a new entrant OEM by actions such as encouraging engineers to drive parts to stranded customers and having its president interface with the public via Facebook. Through various reasons such as insular management, quality issues and complacent dealers, GM basically handed their market share dominance to the imports over the years.

I was impressed with the passion and commitment of Mr. Reuss, but can't help but wonder if it's too little, too late for GM. They have some great new products and the new, customer focused attitude is refreshing; but will the North American consumer be drawn from their imports back into Chevy, Buick, Cadillac or GMC vehicles going forward? As you ponder that question, consider the fact that of the 16 Polk Automotive Loyalty Awards presented last night, import OEMs captured 13 categories, Ford 2, Chrysler 1 and General Motors 0.

Posted by James Dimond, Vice President of Global Network Planning, Polk (01.13.2010)