Honda Is No. 1 in Customer Retention (No Bailout Needed)

(MoneyWatch)  If you had to pick only one or two statistics to show why GM and Chrysler are on their knees in Washington asking for a bailout, with Ford not far behind, the 2008 J.D. Power Customer Retention Study makes the short list.

The brands at the top of the chart with the highest loyalty are No. 1 Honda, which kept 64.7 percent of its customers, followed by Toyota, Lexus, Mercedes-Benz and BMW.

You would expect luxury brands to have a loyal following, because of the prestige factor, and since they can spend more money keeping customers happy. But high loyalty for mass-market brands like Honda and Toyota represents a huge competitive advantage. It takes a lot more energy and resources to conquer a new customer than it does to retain an existing customer.

The fact that many buyers are opting out of big pickups and SUVs and getting into smaller cars and crossovers is another strike against loyalty to the domestic brands, since their product lineups are so truck-heavy. That's changing, but not fast enough.

Ford was the top domestic brand at 52.5 percent customer retention, followed by Chevrolet and Nissan. Then came Subaru, Cadillac and Land Rover. All other domestic brands, including all Chrysler brands, are below the industry average of 48 percent loyalty.

The 2008 study, which was published Dec. 10, marked the first time Honda was No. 1. This was the sixth year of the study. It measures how many of a brand's owners who buy or lease another vehicle in the period of the study ?€" in this case from November 2007 to May 2008 -- bought or leased another vehicle from the same brand. The study included results for close to 150,000 customers.

Honda owners cited Honda's reputation for creating safe vehicles with high resale value, said Debbie Ortuño, manager of product research and analysis at J.D. Power and Associates.

Since the 2008 study ended, the domestic automakers have also cut back sharply on leasing. (Automotive News may require subscription for full article.) Assuming that situation persists, a lower percentage of leasing will likely hurt customer retention in future studies, because lease customers tend to be more loyal to a particular brand.

Lease customers have to return their vehicle at the end of a lease, which gives the selling dealer "dibs" on leasing that customer another car. The fact that leases expire at a known point in time also allows the car companies to more precisely target marketing efforts at lease customers who are likely to be in the market, as opposed to wasting efforts on someone who's not looking at the moment.