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Auto buyers trading in loyalty for lure of new models: J.D. Power

March 15, 2013
Customers like Kelleigh Sheehy of Marietta, Ga., who recently traded the keys of her Volkswagen Jetta for a 2013 Buick Encore, are helping to boost the rate at which some automakers gain new customers.
 
It is known as conquesting — when automakers steal buyers from other brands — and it’s rising for some brands, especially certain models.
 
One brand that’s gaining new buyers is Buick, which says its conquest rate has grown from 28 percent in 2007 to 43 percent in 2012, and continues to grow. Buick credits its growth to vehicles such as the Verano sedan and the all-new Encore crossover, which just hit showrooms. Sheehy is representative of those new buyers.
 
“I buy more according to what meets my needs,” Sheehy said in a telephone interview, adding she also looked at the Toyota RAV4. “So if I have to change brands, I’ll do so.”
 
Car shoppers today are more willing to make a change in brands, now that there have been widespread improvements in quality, analysts say.
 
J.D. Power and Associates tracks loyalty and conquest rates for automakers using vehicle trade-in data: those who trade in a brand from a different automaker or have no trade-in at all. Deirdre Borrego of J.D. Power said high conquest rates could continue in 2013 with product launches and the many choices auto shoppers will have.
 
“Everyone is continuing to try to grow their share of retail,” Borrego said in an interview last month at the National Automobile Dealers Association Convention and Expo in Orlando.
 
“Vehicle quality has improved significantly across the board, so that’s another thing. … People in some instances are more open to migrating to a brand they may have not considered before because quality has improved, and as new models have launched, portfolios have expanded.”
 
One reason for migration among buyers is the shortage of lease customers coming back to the market. Many automakers stopped leasing during the recession, and others cut back. That also cut the numbers of buyers coming back to trade-in leased vehicles for new ones, Borrego said.
 
She also pointed to the inventory shortages at Toyota and Honda in 2011 that pushed buyers to other brands.
The opposite of conquests are loyalists — those who don’t change brands. And they are just as critical, or even more so, to a company’s success, analysts say. The loss of loyalists — and ultimately market share — hurts automakers’ bottom lines, said Scott Waldron, president of Experian Automotive.
 
Experian found that Toyota Motor Corp.’s corporate loyalty rate of 46.9 percent in third-quarter 2012 rose from 41.6 percent during the same period in 2011. And with that gain of car owners remaining loyal to that manufacturer, Toyota saw a surge of 33,677 new-car registrations in third-quarter 2012. Using a $30,000 price per vehicle as a basis, Toyota’s loyalty increase impact on sales was worth nearly $1 billion, Waldron said.
 
The automotive data provider also found that Honda Motor Co., Volkswagen AG, Mercedes-Benz USA, Subaru of America and Chrysler Group LLC also had gains in loyalty over the period, and saw positive upticks in new vehicle registrations.
 
Conversely, some automakers saw corporate loyalty rates fall during the same period: Ford Motor Co., General Motors Co., BMW of North America, Hyundai Motor America and Nissan Motor Co., all had defections in corporate loyalty during the third quarter, which translated into lost revenue, Waldron said.
 
“These companies and what they do with loyalty really do matter, and it adds up,” Waldron said during a news conference at the Orlando convention.
 
GM’s Cadillac brand is seeing growth with conquests: More than 75 percent of customers buying the new ATS sports sedan so far this year are newcomers to the Cadillac brand — and nearly 60 percent are new to GM, the automaker said. GM said it mostly is seeing customers trade in the BMW 3-Series and Lincoln MKZ for an ATS.
 
GM’s Kurt McNeil, vice president of U.S. sales operations, said GM will continue to go after new business, particularly along the coasts and with a better retail experience at dealerships.
 
 

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