J. D. Powers Customer Retention Study Shows Toyota Owners are Most Loyal

Why Does Mazda Experience One of the Lowest Retention Rates of Any Nameplate?

Is there any third party survey that Toyota or its Lexus luxury division doesnt dominate? Yes, its Lexus division only placed 5th out of 39 nameplates in the 2004 J.D. Power and Associates Customer Satisfaction Index (CSI), while the Toyota brand placed well below average in 28th.

But such results are rare, with its first place finish in the corporate ranking category of the J.D. Powers 2004 Initial Quality Study (IQS) and 2004 Vehicle Dependability Study (VDS), the two most influential surveys to North Americans.

For what would seem like good reasoning, J.D. Powers most recent Customer Retention Study (CRS), a study that is now in its second year, puts the automaker at the top of the list as well. Of the 171,000 new-vehicle buyers and lessees surveyed, of which 103,088 replaced a vehicle that was originally purchased new, 60.6 percent of Toyota owners repurchased another Toyota, which is more often than any other brand managed to retain its customers, and this while more than half of all new car buyers change brands when trading in.

"Not only does Toyota offer its owners a wide range of vehicles to move up to as their financial means and stage in life change, but also the brand is highly successful in attracting new customers to the lineup, due in large part to its strong reputation for vehicle quality and high vehicle resale values," commented Neal Oddes, director of product research at J.D. Power and Associates. "The redesigned Sienna minivan has been particularly successful in capturing former owners of Plymouth Voyager, Honda Odyssey, Dodge Caravan, Mazda MPV and Oldsmobile Silhouette models."

The study is unique in that it not only measures retention rates, but tracks which brands and models are losing out to those gaining ground, and why the new car buyers changed their brand or, alternatively, stayed loyal to a particular nameplate.

Why do owners defect from a brand? Often it is because they encountered problems with the long-term durability of their car, incurred high maintenance costs or experienced poor dealer service. But it doesnt always take something so dramatic to cause a customer to switch brands, especially this day and age when deep incentives and enticing rebates sway some buyers, exciting new styling and thrilling performance pull in others, and fuel economy becomes more critical across the sector.

Why Toyota and Honda are so strong in the market, however, is not only because they have high retention rates, but also because they pull in more new customers than they lose to their competitors. Toyotas conquest rate is stunning actually. For each customer it loses to another brand, it attracts six new ones from its competitors. Honda manages to pull in four new buyers for every person who trades in their Accord, Civic or Odyssey for a rival midsize sedan, compact car or minivan.

This is where Subaru is losing ground. While its retention rate is high, it is not succeeding at attracting new customers to its brand.

"Subaru is an example of a brand that maintains relatively high levels of customer retention, yet currently captures fewer new customers than it loses to other brands," said Oddes. "While Subaru has been successful in attracting new customers with the Forester, it will need to rely heavily on the new models it is introducing over the next few years to offset the defection rate to other brands and to establish a healthy longevity for the brand."

While Subaru finished a strong 12th place with a 48 percent retention rate, which automakers followed Toyotas first placed finish? Lexus took second spot in the CRS nameplate ranking, retaining 59.5 percent of its customers. Chevrolet took 3rd place, with a customer retention rate of 58.9 percent.

What should raise alarms among long-time leaders is Hyundais rise in appeal, retaining more customers at 57.6 percent than Hondas 55.2 percent. Hyundai was once thought only to attract needs driven buyers, the kind that are more likely to change brands if a better deal is to be had elsewhere, but now it has managed to capture 4th place, displacing most rivals. Another impressive Korean is Hyundai-owned Kia, managing to squeak in an above average 50.9 percent for 10th place.

Fords 6th place 54.6 percent retention rate is mostly due to its light duty truck and SUV customers, plus Mustang owners who are extremely loyal to their "Pony" cars. The domestic automaker hopes its new Five Hundred sedan, Freestyle crossover and upcoming Fusion midsize sedan will improve retention rates among its cars.

While premium GM brand Cadillac managed to rank 7th with a 52.8 percent retention rate, the highest placed Europeans are Mercedes-Benz with 51.6 percent for 8th place, followed closely by BMW with 51.4 percent in 9th.

Those brands at the bottom of J.D. Powers CRS no doubt are concerned, being that poor retention and dwindling conquest sales could result in insolvency. Oldsmobile, at the very bottom of the list, is being fazed out of production, so its low 4.3 percent retention rate wont worry GM. Isuzus 7.0 percent rate, however, has to concern its GM parent, an odd customer response to an all-SUV brand in an SUV crazy market.

The shocker is Mazdas horribly low 23.1 percent retention rate. The brand is on the strongest sales success curve that it has ever experienced, which means that in order for it overcome such a poor retention rate it is attracting new car buyers from other brands at an alarming rate. Mazda will without doubt want to figure out how to keep its new customers happy.

Saab and Suzuki suffer poor retention rates due to having few models to choose from, until recently for Suzuki which now offers a lineup of Korean built ex-Daewoo cars for customer to move up to. Saabs rather poor 30.5 percent rating may improve once it offers a sport utility vehicle, and Suzukis 31.4 percent could rise when more customers find out about its increased lineup of vehicles.

Infinitis retention rate is also extremely low, at 31.8 percent, a problem that should go away when its new M35 and 45 become available. In comparison Lexus experiences much greater success with its mid- and full-size car lineup, one of the reasons its retention rate is so high.

Toyota will most likely continue on attracting more buyers than any rival manufacturer and maintaining the highest retention rate in the industry as well. A recent announcement by the automaker to offer all future models with hybrid electric powertrains will go a long way to solidify its presence in the marketplace.

For the time being, which Toyotas experienced the highest retention? Topping the list is the Sienna minivan Oddes mentioned, at 68.6 percent, followed by the Highlander crossover sport utility at 68.4 percent. The Camry managed an extremely respectable 64.8 percent while the Corolla achieved a 64.5 percent retention rate.