The Fun is Back in the Driver's Seat

Forget resale value. People who have just bought new cars and trucks say fun is what makes them loyal to the brands they like, and it's also what makes them go elsewhere. So which brands benefit from the syllogism: "If most fun equals most loyal, and brand X has the most loyal customers, then brand X has all the fun cars?" The new J.D. Power and Associates 2010 Customer Retention Study, released last week, says that would be Ford. To be fair, Honda is also number one in the study, but for more practical reasons.

In the study -- based on responses from 123,601 new-vehicle buyers and lessees, of which 81,350 replaced a vehicle that was previously acquired new -- Ford and Honda rank highest in a tie among automotive brands in retaining vehicle owners, with each retaining 62%.

Fielded between February and May, and August and October this year, the study measures the reasons for -- and the rate at which -- automotive brands retain their existing customers and gain them from competitors. For the latter, importance of a fun-to-drive and styling have also gotten more important among the reasons customers are switching to a different brand.

Raffi Festekjian, director of automotive product research at J.D. Power, says as the economy improves, consumers are responding more to emotional -- versus purely practical -- reasons for staying with their vehicle brand or switching to a different one. "We are seeing more emotional characteristics creep in," he says. "Ford is pleasing their current buyer base, producing models that resonate well. We had our Initial Quality Study in June, and in that Ford specifically ranked the highest they have ever ranked. So they are continuing to have good news with products that connect with consumers."

He says the fact that emotional factors are driving loyalty and conquest partly reflects the fact that big differences in vehicle quality and fit and finish no longer exist. "Good quality is a price of entry now."

The study finds that the importance of fun-to-drive vehicles as a reason for owner loyalty has increased by eight percentage points in 2010, compared with 2009. Meanwhile, the importance of resale value as a reason to stay loyal has decreased by 10 percentage points from 2009.

The firm says Ford's retention rate is primarily driven by the Edge, F-Series and Fusion models -- while for Honda, retention is driven by the Accord, CR-V and Pilot.

The study says Ford has an edge on fun, as owners are more likely than Honda owners to say they have remained with their brand due to the perception that their new vehicle is fun to drive or has good styling, per J.D. Power. Honda owners are more likely than Ford owners to cite resale value and safety as reasons for repurchasing the brand.

Hyundai, Lexus and Toyota are tied for third place, each getting 60% of customers to stick with the brands. The biggest improvement is from Kia, improving 21 percentage points from last year to 58% in 2010.

The firm says that this year 16 of the 34 ranked brands have improved their customer retention rates versus last year, while 14 have declined and four have remained flat. Across the industry, the rate at which customers are staying loyal to car brands hasn't changed from 2009; 48% of U.S. car and truck buyers are loyal, per the firm. Domestics are doing better at keeping their customers: this year, according to the study, 69% of owners who traded in a vehicle from a domestic brand purchased another domestic vehicle, compared with 68% last year.