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Saturn of Shreveport Service Manager Russ Penick's barbecue becomes a lure for Saturn owners in Riney-created ads. AUTOMAKERS GO A LONG WAY TO KEEP FLOCK LOYAL THE COST OF CONQUEST MAKES BUILDING A LONG-TERM RELATIONSHIP FAR MORE ATTRACTIVE

By Published on .

Like some reformed Lothario who has sworn off one-night stands, auto market ers are paying serious attention to relationships.

They're putting on their best manners and courting customers to do more than just buy a single vehicle. The ultimate goal: convert buyers into loyal owners who will come back, maybe several times, for their future vehicle needs.

"A person buying his first car is going to have a long period of time buying cars and trucks, and you have to look at that whole lifetime of purchases," says Michael Losh, General Motors Corp.'s VP-group executive in charge of North American vehicle sales and marketing.

A quality product, a positive showroom experience and good after-sale service are all essential to the loyalty formula, and automakers are working to improve in those areas.

In addition, an increasing number of marketing tactics involve attempts to strengthen loyalty, either as a primary or secondary goal.

The growth in leasing, for instance, grew largely out of an attempt to make cars and trucks more affordable. But marketers also have found leasing gives them a better chance at supplying the next vehicle to a customer who will be returning to the market and to a specific dealership at a defined time.

GM, followed by Ford Motor Co., initiated credit card programs that provide rebates based on purchases to cardholders who go on to buy a respective GM or Ford make. The credit card programs provide the biggest rewards to a user who makes a commitment to GM or Ford early enough to build credits.

There's also a number of relationship-building efforts designed to enhance feelings of loyalty by nurturing emotional attachments to a brand.

Ford Motor Co. used Mustang Club members to help redesign and then participate in the launch festivities for the 1994 Mustang. Also, GM's Saturn Corp. has invited its 650,000 owners to a homecoming celebration this June in Spring Hill, Tenn.

Not to be left out, the imports are working to engender loyalty as well. Toyota Motor Corp. USA's Lexus division wants its customers to feel as though they belong to an exclusive club, and all Lexus owners receive information about new products. American Isuzu Motors has begun a program to maintain a dialog with every U.S. customer.

Despite all the programs, loyalty remains relatively elusive. Although owners may describe themselves as being loyal to a certain make, their buying behavior might say otherwise.

The overall loyalty rate among car owners stands at 36.2%, according to a survey of recent car buyers done exclusively this year for Automotive News and Advertising Age by market researcher J.D. Power & Associates. The researcher quantified loyalty as the percent of vehicle disposers buying a car of the same make as the vehicle disposed.

This result reflects the past results of similar Power surveys. Loyalty surveys done between 1985 and 1992 pinned the loyalty rate roughly between 35% and 40%.

Those percentages call into question whether the efforts being made to increase loyalty have been effective. There also is debate over whether the high cost is really worth it, at least for some brands and some segments.

"As far as the effectiveness of some of these programs, the jury is still out," says Tom Healey, Power's director of advertising and media services. "A manufacturer has to think it through on a model-by-model basis to try to refine which ones have the potential for profitable loyalty."

Luxury models, for instance, tend to have high loyalty rates because they are "aspiration" vehicles and they attract older drivers, Mr. Healey says. But a marketer with an aging customer base might need to put most of its resources on recruiting younger buyers.

American Honda Motor Co., which consistently enjoys one of the highest levels of owner loyalty, prefers to use its marketing dollars to bring new customers into the fold.

"We don't take our Accord owners for granted," says Larry Postaer, exec VP-creative director, Rubin Postaer & Associates, Santa Monica, Calif., the ad agency for Honda. "But a lot of them will buy the Accord anyway."

Loyalty advertising, for Honda, is like "preaching to the choir," Mr. Postaer says. "It's not the best use of our money."

Nevertheless, a number of automakers maintain there's a big payoff in increasing loyalty.

"One point of loyalty is worth $100 million in profits" to Ford, says Basil "Bud" Coughlan, interviewed just prior to his recent retirement as Ford's VP-North American marketing plans and operations.

Mr. Coughlan says there's a direct link between customer satisfaction and loyalty. According to Ford's research, if 95% of owners say they're "completely" or "very" satisfied with their ownership experience in the first year, then 75% of owners will intend to buy another Ford, Mr. Coughlan says.

Raymond Ketchledge, president of Sandy Corp., the developer of auto dealer training programs, says Honda built high loyalty during a time when it had a clear edge in quality. Today, quality differences between automakers are narrow, making customer-handling a more important factor, he says.

"The industry was so bad five years ago, that being No.*1 in customer satisfaction was like being the smart kid in the dumb class," Mr. Ketchledge says.

Newcomers Lexus, Infiniti and Saturn changed the class curve, forcing established makers to raise their standards for handling shoppers and owners, Mr. Ketchledge says.

Before initiating its Customer One dealer training program in 1992, Chrysler Corp. researched the operations of customer service stalwarts such as Walt Disney Co. and Ritz-Carlton Hotel Co., says Thomas Pappert, Chrysler's VP-sales.

"We learned how they developed and nurtured effective, long-term customer relationships," says Mr. Pappert, who described the goal of Customer One as no less than "a major culture change."

Chrysler has spent $60 million for training under the program; it spends $200 million a year on its Drive for the Gold program, which provides cash incentives to dealers to meet standards for handling customers.

Some critics suggest automakers are demanding more of dealers than they're willing to do themselves to build loyalty.

"Corporations have made dealers the scapegoats," says Christoph Nagel, principal of Nagel & Associates, an auto marketing consultancy.

"Factories should shoulder a little of this burden," says Mr. Nagel, who favors a systematic approach to "let owners know they are part of a family.

"The car companies are fooling themselves into thinking they're working on loyalty," Mr. Nagel says. "Owners feel they deserve to be courted."

Finding a balance between marketing programs designed to engender loyalty and those designed to conquest is difficult. Ignoring either program, however, is suicidal.

"If you spend most of your money trying to get new customers, you're going to lose, because the markets aren't growing," says Graham Phillips, vice-chairman, Ogilvy & Mather Worldwide. O&M's New York office handles Jaguar Cars, and its Detroit office handles Ford's parts and service.

Mr. Phillips compares the car industry to consumer electronics. "Everyone's got a TV set and everyone's got a microwave and VCR," he says. "If anyone is buying one of these items, they're either upgrading or replacing."

The car business is no different, he maintains.

"Customer loyalty programs are becoming a price of entry for new business," he says.

To establish consumer loyalty, the carmaker must establish two-way communication, says Chris Perry, Isuzu's national advertising manager.

"People were telling us `If you start communicating with me, it must be a dialog, and we expect a response,'*" he says.

Isuzu communicates with its owners through an Owner Communications Program, or OCP, separate from the company's customer satisfaction task force. This program came about after Isuzu realized in 1992 that one-third of the initial sales of its redesigned Trooper sport utility vehicle went to owners of older Troopers.

The OCP began its efforts with a quarterly newsletter sent to 700,000 Isuzu owners. The newsletter attempts to personalize the company through columns by various executives, while giving the owners first looks at new products.

In addition, the newsletter offers Isuzu merchandise, such as roadside assistance kits (a popular item) and a picnic pack (not as popular).

Isuzu established a toll-free telephone number for Isuzu owners with questions or requests for information or brochures.

Meanwhile, all letters from Isuzu customers are answered by senior executives.

The entire budget for the OCP represents less than 5% of the $90 million Isuzu spends on paid media advertising, Mr. Perry estimates.

"At the start, we recognized that relationship marketing and our loyal owners were an issue we wanted to address," he says. "Conquest sales are five times as expensive as sales to loyal owners."

Clearly, one of the leaders in developing a rapport with customers has been Saturn, a company that set out to position itself as the best-liked car company in America.

That led to strategies such as the elimination of price dickering, a focus on customer care that has even smoothed over the pains of product recalls, and an ad strategy that highlights Saturn owners. Hal Riney & Partners, San Francisco, is ad agency.

The homecoming celebration, being referred to jokingly as "Saturnstock," is the culmination of that effort to create emotional bonds with owners.

The program will include an outdoor concert by country music star Wynonna Judd, a vintage car show, an arts and crafts fair, children's activities and plant tours.

"We've made the company approachable," says Steve Shannon, Saturn's director of consumer marketing. "Now, we're seeing a remarkable bubbling up of people who want to have more of a relationship with the people who build Saturns."

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