CARS LOOK FOR NEW LEASE ON LOYALTY

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Auto marketers are keying in on ways to develop loyalty among the increasing numbers of customers who are leasing rather than buying new vehicles.

Leasing will account for 24.6% of new car and truck retail deliveries this year, according to consultancy CNW Marketing/Research, Bandon, Ore., reflecting a steady growth since 1990, when the figure was 13.5%. By 1998, the percentage is expected to hit 33.6%.

Leading the way in trying to keep customers loyal is Ford Motor Co.

The company uses telemarketing to contact consumers four months before their lease expires to explain options, such as turning in the vehicle or buying it. The customer is invited to bring the vehicle in for an early inspection to determine any add-on charges for excess wear and tear. Phoenix Group, Farmington Hills, Mich., handles the national telemarketing effort, with local dealers brought in to answer specific concerns.

"The whole concept we're pursuing is to create a relationship with the customer," said Mike Jordan, Ford's executive director-sales operations. "We want to make the end process painless, so people will have a great experience and will do it again."

The program illustrates how Ford has been a leader in leveraging the long-term marketing potential of leasing, said Art Spinella, VP-general manager of CNW.

"A lot of companies originally looked at leasing as just another rebate program," he said, referring to the practice of subsidizing attractive monthly lease rates.

The Ford program demonstrates "pinpoint marketing," Mr. Spinella said. Ford knows exactly when an owner is going to be in the market for another product. Such information isn't readily available to rivals, because a leased car or truck is registered in the name of the finance company that owns it.

While leasing has long been important in the luxury car segment, Ford triggered an explosion in the broader market in late 1992 when it advertised a two-year Taurus lease program. The campaign, from J. Walter Thompson USA, Detroit, helped propel the Taurus past Honda Accord as the best-selling car.

Some rivals question whether Ford can handle the flood of 2-year-old Tauruses and other models that will soon be returned.

"Quite frankly, we think some of our competitors perhaps went a little too far in terms of their incentivization of leasing, and the extent to which leasing represents an overwhelming share of their volume," said J. Michael Losh, exec VP at General Motors Corp.

GM will expand leasing "very prudently," Mr. Losh said. "We don't want to create the kind of problems with leasing returns" created in the early '90s when low-mileage former rental cars undercut sales of new vehicles.

GM expects about 12% of its 1994 retail deliveries will involve leasing, while Ford puts its total at 20%.

Mr. Jordan said Ford's ability to keep customers will help it avoid the problem of too many used cars coming back to dealerships.

So far, 90% of lease customers stay with Ford, either by leasing or buying a new vehicle or by purchasing the car or truck they had leased. By comparison, the average loyalty rate among owners of a domestic vehicle is less than 50%, he said.

Mr. Spinella predicted leasing will expand as marketers such as GM and Ford selectively promote leasing programs for certain models.

For example, GM's Chevrolet division may come out with an aggressive two-year leasing program for the redesigned Lumina midsize sedan, to compete with the Taurus. And Ford might sweeten the leasing deals on its Taurus and on its F-Series full-size pickups if the Accord and Chevrolet full-size pickup continue to challenge Ford for overall car and truck sales leadership, respectively.

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