J.D. Power Reveals Latest Franchise Assessment
WESTLAKE VILLAGE, Calif. — J.D. Power and Associates recently shared some details stemming from their Franchise Assessment which summarizes all the information they collect from consumers, PIN and its forecasting group.
Brands such as Chevrolet, Ford, Hyundai and Lexus all received ratings that fell into J.D. Power's "excellent" category. Meanwhile brands such as Chrysler and Infiniti struggled in some areas.
Steve Witten, executive director of automotive research at J.D. Power, explained that data for this assessment was condensed into three channels: franchise fundamentals, trading patterns and competitive outlook.
The results dropped brands into four descriptors, excellent, good, fair and poor, stemming from six attributes: product quality, customer relations, reputation, social media momentum, profitability and retained value.
Witten indicated that trading patterns revealed the amount of consumers returning to market for each brand based on the vehicle they were trading. He explained it showed how many consumers left the brand, where they went and how many new customers the brand conquested from their competitors.
To capture the data clearly, J.D. Power created a score called the New Customer Ratio, a figure that articulates between the number of customers leaving the brand and the number of new customers entering the brand.
"A score of 1.0 means that for every one customer who defected, the brand conquested one new customer," Witten explained.
"A score of 2.0 means that the brand is conquesting two new customers for every one customer who defects. Likewise, a score of 0.5 means twice as many customers are leaving the brand as new customers entering the brand," he continued.
J.D. Power went on to mention that the competitive outlook shows a five-year sales trend, going back three years and forecasting sales for the next two. The company said the affect of new model introductions, redesigns and incentive programs are discussed.
Witten shared his analysis about 11 different brands discussed in the Franchise Assessment.
"Chevrolet has good fundamentals across the board expect for reputation and social media momentum," Witten explained. "Consumers just are not aware of the improvements Chevrolet has made over the past few years. Because of this, there are more people leaving the brand (trading a Chevrolet for another brand) than new customers entering the brand (trading a competitive model for a Chevrolet). Chevrolet's New Customer Ratio is only 0.78. The good news is that they are forecasted to increase their market share over the next two years. They have three new products coming out this year, and another three in 2011. The success of the new Malibu coming out in 2011 will be critical for their long term growth."
"Ford's fundamentals were also very good," Witten shared. "They improved in quality from "good" to "excellent;" however they also suffer from a reputation score of only ‘fair.' Ford has four new models launching this year and another three in 2011. While their New Customer Ratio is only 0.77 (anything less than one means the brand is shrinking), they were the most improved, so it will be interesting to see if they can continue this momentum. It does appear that the Toyota and recent Honda recalls will benefit Ford."
"Honda's fundamentals were ‘excellent' to ‘good' expect for social media momentum which was rated as ‘fair,'" Witten noted. "Honda has the highest loyalty rate which garners them a new customer ratio of 2.03; they conquest two customers for every one customer that defects from the brand. Honda's big issue in the coming years is that their two main products, the Civic and Accord are aging. Will new products offered by competitors be able to lure buyers away from Honda?"
"Hyundai has mixed fundamentals," Witten asserted. "Hyundai has "excellent" quality. They actually ranked No. 1 in Initial Quality in 2009, beating both Honda and Toyota. And while their social media momentum is also rated as "excellent" it still has not had a great influence on buyers as Hyundai reputation is ‘poor.' A lot of new car buyers still avoid Hyundai due to misperceived perceptions on quality and reliability. It will be interesting to see to what degree the positive buzz in the social media arena will have on Hyundai's image among buyers in 2010. Hyundai has six new models coming out within the next two years so this should help them continue the momentum obtained last year."
"Toyota has ‘excellent' fundamentals on all areas expect for customer relations and social media momentum," Witten mentioned. "This analysis was done before the announcement of the recalls, so you can image the state of the social media momentum today. Toyota's loyalty rate is second among non-luxury makes (Honda is first). 2011 will be a big year for Toyota with redesign for the Camry, RAV4, Avalon, and Yaris planned."
"Chrysler's fundamentals ranged from ‘poor' to ‘fair' with the exception of social media momentum which was ‘excellent," Witten detailed. "Chrysler had the second highest growth in positive online buzz. Most of the conversations centered on the cash for clunkers program and that it looks like Chrysler will survive. Chrysler's new customer ratio of 0.32 is the second lowest among non-luxury brands and to make a bad situation worse, the top two brands that Chrysler conquest customers from is Dodge and Jeep. Chrysler's old product line up is really hurting them and they have very little new product in the pipeline for the next two years."
"While Audi has mixed fundaments, ranging from ‘poor' (customer relations) to ‘excellent' (social media momentum), they seemed poised to make a move in 2010 and 2011," Witten shared. "They enjoy a respectable new customer ratio of 1.75 and conquest customers from BMW, Acura and Volkswagen. Audi is also on the top three list of brands owners defect to for BMW, Land Rover, and Porsche. Audi has strong Q5 volume and the new A3 and Q3 in 2010 and 2011 will be key in driving the brands growth."
"BMW's fundamentals range from ‘fair' to ‘excellent' with their quality dropping from last year," Witten stated. "Defection increased slightly and conquest rates remained flat. Their new models planned in the next two years come from low-volume segments and will likely just steal buyers from themselves rather than the competition."
"While Infiniti has ‘good' to ‘fair' fundamentals, they have the lowest amount of online buzz among luxury brands," Witten revealed. "Their loyalty rate dropped 14 points to 25 percent, giving them the second largest drop on the new customer ratio. They have nearly twice as many customers defecting from the brand than new customers entering. Infiniti is too reliant upon the G for sales and needs the new M to be successful to ensure a positive outlook for the future."
"It should be no surprise that Lexus is the best scoring brand," Witten pointed out. "Lexus scores ‘excellent' on every fundamental. Their loyalty rate of 57 percent is second highest in the industry giving them a new customer ration of 1.50. The new GX460 and LFA supercar debut this year and the GS and ES Series will drive activity in 2011."
"Mercedes-Benz fundamentals ranged from ‘poor' to ‘excellent," Witten noted. "They dropped in product quality but increased in reputation. This is not very surprising as reputation scores typically lag quality and customer relations scores by two or three years. Mercedes-Benz was among the highest luxury brand in online buzz but we did not a huge increase in positive buzz so they only scored a "good" on this metric. Mercedes-Benz increased in loyalty and now leads the industry with a loyalty rate of 66 percent. They also have an above average conquest rate which gives them a healthy new customer ratio of 1.71. The refreshed R-Class in 2010 and redesigns for the M-Class and CLS in 2011 will help them increase their share of market over the next two years."
J.D. Power mentioned that Witten's commentary and more details about each of these brands and more are available. The company asked interested dealers and industry executives to contact a J.D. Power representative for more information.