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It takes more than one recall to deter consumers

A recent study by the Polk Company reveals that it takes more than one recall to undermine the loyalty of customers toward their favorite vehicle brands.

In fact, loyalty stands firm until a customer experiences three or more recalls, and then customer loyalty quickly erodes. Polk found that in light of the recent rash of recalls in the automotive industry, it is vitally important for a manufacturer to keep the number of recalls per customer at a low level to avoid future loss of its customer base. When a customer experiences three or more recalls, special consideration should be given to boost loyalty.

The Polk study compared loyalty of consumers affected by manufacturer recalls with the loyalty of those who were not. Data was gathered through a survey research study conducted with a sample of new vehicle buyers during the first six months of the 2000 model year. It showed that, for new-vehicle buyers on average, loyalty to the previous manufacturer decreased by 9 percent for owners affected by a third or fourth recall and by 16 percent for those with five recalls or more.

"We can surmise from this that consumers are willing to tolerate mistakes, as long as they are taken care of immediately, honestly, and with minimum disruption," said Karen Piurkowski, Polk's managing director of Loyalty. "Having one or two recalls does not necessarily drive owners to defection, but as the number of recalls increases, consumer confidence decreases."

Although Ford Motor Company has been the focus of press attention over the past several months, the Polk study showed that owners of cars from most major manufacturers are experiencing recalls. More than four out of every 10 owners who purchased new vehicles during the first half of the 2000 model year claimed they had a recall on their previous vehicle.

The manufacturer with the best recall performance (lowest percent of customers being impacted by a recall) was Mercedes-Benz. Less than one of five Mercedes-Benz owners experienced a recall during ownership. Toyota Motor Sales was in second place closely behind Mercedes-Benz - a testament of the high quality of products it delivers. Interestingly enough, General Motors ranked fifth for having the lowest percent of recalls and was ranked number one in terms of owner loyalty during the first six months of the 2000 Model Year.

"Keeping the lines of communication open with consumers and the press is key to retaining customers when recalls occur," said Piurkowski. "In addition, implementing special purchase incentives and offers may help to avert defection for those impacted by multiple recalls. Not only will this treatment help a manufacturer maintain its current owner loyalty rate, it will also help in attracting new customers to the brand."

Polk's Manufacturer Loyalty Excelerator(TM) report, which is the basis for the Polk Automotive Loyalty rankings and annual awards, is the latest insight into this type of consumer behavior. This report was introduced to the automotive industry in 1995 and was created to provide household loyalty information to manufacturers at many different levels.

It is being used to provide loyalty percentages for the entire automotive industry to allow for cross-industry comparisons of loyalty behavior, and to examine loyalty at various levels from the industry level down to the vehicle line level. The report measures loyalty throughout the entire model year so that manufacturers may keep abreast of loyalty trends as they occur in the industry.

Polk has served the automotive industry for 78 years and is the longest standing curator of automobile records in the United States. Founded in Detroit in 1870, Polk launched its motor vehicle statistical operations in 1922 when the first car registration reports were published. - Business Wire

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