Auto Loyalty Down As Buyers Seek Gadgets

By Danny King October 28, 2011

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Technology is trumping brand loyalty as younger buyers increase their presence in the U.S. new-car market, a new study has found. Prospective U.S. car buyers are less likely now than a decade ago to replace their vehicles with one from the same make as enhancements such as vehicle connectivity have them brand-hopping, according to New York-based market research firm GfK Custom Research North America. One exception has been Ford Motor Co., whose Ford brand managed to buck the trend of declining loyalty because it has been adding small cars to its lineup and boosting the fuel efficiency of all of its cars and trucks, the researchers said. Ford also has benefitted, the GfK report said, by introducing features such as the SYNC communications system, which was built on Microsoft's Windows platform – although the system’s early glitches recently have given Ford a reliability headache.

Brand loyalty is viewed as a major factor in automaker profitability because carmakers, and their dealers, spend about twice as much money to lure buyers away from another brand as they spend to keep existing customers with the brand, said Doug Scott, senior vice president of GfK North America’s automotive group. About 49 percent of the nearly 700,000 car shoppers surveyed for GfK's Automotive Intentions and Purchases study this year said they intended their next vehicle to be of the same make as their current one.

That’s down from about 54 percent in early 2001. Less than 40 percent of post-Baby Boomers -- consumers born after 1964 -- planned on staying with their present brand, according to GfK. The so-called Generation X and Generation Y contingent makes up 46 percent of the U.S. car-buying public, up from 34 percent a decade ago. GfK North America, which has been conducting its automotive shoppers study since 1980, is an arm of Germany’s GfK Group, a global consumer, business and media research giant.

Reliability And Loyalty
The brand-loyalty decline GfK has identified reflects the impacts of both an increasingly technologically-minded car-buyer and the financial and safety issues that have plagued companies such as General Motors, Chrysler and Toyota over the past few years. The bar for more traditional vehicle qualities such as ride, handling and safety has been raised across the board, and that is helping to erase those qualities as drivers of brand loyalty, GfK found. That means that consumers looking for new features such as enhanced navigation systems, voice-activated services and Internet radio are more likely now to jump from brand to brand to find what they want.

If manufacturers are going to get into a race to attract [loyal] Generation X and Generation Y buyers, “they're going to do it through technology," Scott said. The recent bankruptcies of General Motors and Chrysler and the product-recall issues experienced by Toyota also have caused brand loyalty to drop, the study found. Separately, research shows that a year after discontinuing the Pontiac brand, General Motors has retained 39.9 percent of former Pontiac owners, its highest retention rate for that brand’s owners since 2007.

Meanwhile, Ford has managed to buck the declining loyalty trend by offering a broader range of smaller, more fuel efficient cars and by engaging worldwide software leader Microsoft in a vehicle-communications partnership that began about a decade ago. "That has given them a bit of an edge in what I call a technological arms race," Scott said in an interview with AutoObserver. Whether such technical advancements continue to help Ford win repeat customers remains to be seen, though. Consumer Reports has just said Ford dropped from 10th to 20th among major automakers in the magazine's annual reader survey. Ford took a hit because of problems with its redesigned Fiesta and Focus -- models either debuting or in their first year after a redesign tend to have more problems – and because the new Microsoft-based MyFord Touch information and entertainment system has had troubles. Still, Ford through the first nine months of the year boosted U.S. vehicle sales by 11 percent from a year earlier to 1.6 million vehicles, with the Fiesta and Fusion garnering big year-over-year gains.

Overall, Toyota and Honda have the highest brand loyalty among the major automakers, with more than 60 percent of those vehicles' owners intending to stay with the brands. But Toyota's loyalty is lower than it had been, falling about 10 percentage points over the past three years largely because of safety and recall issues. At the other end of the spectrum, bankruptcy-stricken GM and Chrysler had brand-loyalty ratings of about 40 percent and 35 percent, respectively. Scott said GM has the greatest potential of the two to boost its numbers, thanks to its own vehicle-connectivity efforts.

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