Vehicle Quality is Rising - and You Can Benefit
The J.D. Power 2016 U.S. Initial Quality StudySM includes some good news for the automobile industry. According to the study, new vehicle quality has improved by 6%, which doubles the 3% improvement rate reported in 2015. This was the largest uptrend in new vehicle quality since 2009.
The study measures new vehicle quality in eight categories: exterior; seats; driving experience; engine-transmission; features-controls-displays; interior; heating, ventilation and air conditioning; and audio-communication-entertainment/navigation. Quality improved in every category, and for 21 of 33 vehicle brands.
Initial quality is measured by determining the number of problems vehicle owners experienced during their first 90 days of ownership. It’s a critical gauge for dealerships because expected reliability is the primary consideration buyers have when purchasing a new vehicle.
That’s the viewpoint of J.D. Power, which has studied car buyer behavior from the time people buy or lease a new vehicle until they’re back in the car-buying market again. A little more than half (54%) of car owners who experience no problems within the first 90 days stick with the same brand for their next vehicle.
But loyalty drops to 50% for those who experience one problem with their vehicle in the first 90 days, and to 45% for owners having three or more problems during this time. “While a small drop in actual loyalty may not sound like much, a percentage point drop in share can mean millions of dollars in lost revenue to an automaker,” said a J.D. Power executive.
Generating repeat business
Given the strong correlation between initial vehicle quality and customer loyalty, dealerships should look for opportunities to turn high levels of quality and loyalty into more repeat business. Doing so can boost dealership sales and profitability, since satisfied customers may be more willing to pay a higher price for their next vehicle without haggling.
For example, have your salespeople contact buyers 90 days after their purchase to ask how satisfied they are. At this time, you also can ask permission to add buyers to your mailing and email databases, so you can stay in touch.
When customers receive regular communication (such as a newsletter) from your dealership over a long period of time, they’re more likely to think of you when it’s time to car shop again. This is a long-term sales and marketing strategy that can yield powerful results when executed properly.
Jumpstart your sales
Meet with your managers to brainstorm other ways your dealership can benefit from this trend of rising vehicle quality. Doing so may help you jumpstart sales in the new year.
Dealer Insights - January/February 2017