Research Company Reports: Lexus Ranks Highest in Customer Retention

Vehicle Quality and Customer Service Experiences Play Key Roles in Influencing Customer Retention

WESTLAKE VILLAGE, Calif., Dec. 8 -- Lexus leads the industry in retaining the highest percentage of new-vehicle owners, according to the J.D. Power and Associates 2005 Customer Retention Study(SM) released today.

The study, now in its third year, measures the percentage of new-vehicle buyers and lessees who replace a vehicle that was previously purchased new with a new vehicle from the same nameplate. With a 3.5 percentage-point increase from 2004, Lexus ranks highest, retaining 63.0 percent of its customers. The industry average is 49.6 percent.

Lexus is followed in the rankings by Toyota (62.6%), Honda (59.9%), Chevrolet (57.3%) and Hyundai (56.3%), respectively.

"By satisfying its customers on many different levels, Lexus consistently enjoys high retention rates," said Neal Oddes, director of product research at J.D. Power and Associates. "Customer retention is extremely valuable in the auto industry because it costs manufacturers less to keep existing customers than to attract new ones, and strong retention fosters favorable word of mouth."

Although Suzuki retains just 28.6 percent of its customers, the brand records the greatest improvement, increasing its retention rate by 38 percent from 2003, which was the inaugural year of the study. Acura is also enjoying strong increases in retention rates, improving 25 percent from 2003 to retain 45.7 percent of its customer base in 2005.

"Suzuki has made tremendous strides in better retaining its customers, due partly to the fact that it has expanded its lineup to include more segments of the market, which offers buyers a wider variety of models in different segments as their needs and wants change over time," said Oddes. "Suzuki has also been focusing heavily on quality, improving its performance in the J.D. Power and Associates Initial Quality Study(SM) by 35 percent over the past five years."

The study finds that quality and customer service experiences play key roles in influencing customer retention. About 23 percent of respondents did not buy a vehicle from the same brand because they felt that too many things went wrong with their previous vehicle. In fact, the nameplates with the fewest customers leaving for this reason also performed relatively well in the J.D. Power and Associates 2005 Vehicle Dependability Study(SM), which measures problems experienced during the first three years of ownership.

Experiences with the dealer service and sales departments also have an important impact on whether customers return to the brand when they are in the market to buy a replacement vehicle. Nameplates performing well in the firm's 2005 Customer Service Index (CSI) Study, which measures satisfaction with the service department, and the 2005 Sales Satisfaction Index (SSI) Study, which measures satisfaction during the new-vehicle sales process, tend to have relatively few customers who cite poor service as a reason for defecting to another brand.

"Although acquiring new customers is an integral part of any OEM's strategic plan, strong nameplate retention is essential to grow and expand its customer base over time," said Oddes. "Manufacturers cannot underestimate the power of excellent service and short- and long-term quality in convincing their customers to come back to the brand time and again."

The 2005 Customer Retention Study is based on responses from 177,941 new-vehicle buyers and lessees, of which 106,275 replaced a previous vehicle that was originally acquired new.

About J.D. Power and Associates

Headquartered in Westlake Village, Calif., J.D. Power and Associates is an ISO 9001-registered global marketing information services firm operating in key business sectors including market research, forecasting, consulting, training and customer satisfaction. The firm's quality and satisfaction measurements are based on responses from millions of consumers annually. J.D. Power and Associates is a business unit of The McGraw-Hill Companies.