* Retaining customers cheaper than wooing new ones
* GM focusing on third-party measures over internal metrics
* GM now retains about 52 percent to 53 pct of its customers
By Ben Klayman
ROYAL OAK, Mich., Sept 19 General Motors Co
is aiming for industry-leading customer loyalty rates
that could add more than $4 billion in annual revenue, product
development and quality executives for the No. 1 U.S. automaker
said on Wednesday.
GM wants to push its customer retention rates to at least 58
percent - the rate of industry-leader Toyota Motor Corp
- from about 52 percent to 53 percent, the industry average in
the United States.
"We believe a single percentage point improvement in sales
retention is about 25,000 vehicles, or about $700 million in
revenue annually, so it's a pretty big financial incentive," GM
global product development chief Mary Barra told reporters at an
event outside Detroit.
With more than 70 percent of its U.S. product lineup being
redesigned or refreshed this year and in 2013, GM executives see
an opportunity to change how consumers view the Detroit
automaker, which filed for bankruptcy and received a $50 billion
bailout package from the U.S. Treasury in 2009.
"We believe in the auto industry no one really stands out as
the clear winner in managing that overall customer experience,"
Barra said, adding GM was aiming for the even higher loyalty
rates of Apple and FedEx.
"We see this as a true opportunity to really create a
differentiated place for General Motors and we're working very
hard in that direction," Barra said. "We've got more work to
Barra acknowledged all automakers are working to improve
product quality and customer loyalty rates, so GM's improvements
cannot be incremental.
She said GM in the past was more focused on internal data,
such as cutting its warranty costs 50 percent in the last five
years. However, scores in external studies - like Consumer
Reports and J.D. Power and Associates - that consumers use when
shopping for new cars did not reflect that success.
"We're also changing the way we benchmark and decide how
we're going to design and engineer our vehicles with a much
stronger focus on external, third-party measurements," Barra
said. "There have been times when we had success beating our
internal objectives only to be disappointed when we got the
actual customer feedback from some of these third-party
To get buy-in from GM's salaried employees, the company
added customer retention as an element affecting annual bonuses,
"The biggest thing we wanted to do is make sure that
everyone understood that this wasn't just a new program of the
day, that it wasn't something nice, it wasn't a new buzzword,
that this is something that we absolutely had to do and it has a
direct impact on our success from a financial perspective," she
GM in May combined its customer experience and product
quality organizations under one person, Alicia Boler-Davis.
Boler-Davis, whose global team numbers about 2,300 people,
said GM's North American Chief Mark Reuss last September set a
target of GM achieving industry-leading customer retention rates
within two years. She added that GM doesn't want to stop there,
feeling the company can push the rates even higher.
Improving customer retention rates is important in an
industry where Boler-Davis said it costs five times as much to
attract a new buyer as it does to retain an existing one. And if
GM improves its quality for the customers it has, it will
attract new ones.
As part of GM's efforts to improve customer service and
ultimately buyer loyalty, 88 percent of its U.S. dealers have
been or are being renovated, it has boosted mystery shopper
programs at dealers and is adding customer specialists across
the dealer network, Boler-Davis said. Call center agents also
have more power to respond to customer problems and the company
trolls Internet sites like Twitter looking for issues to
By combining the customer experience and product quality
organizations, GM also feels it can get feedback into the hands
of designers and engineers faster to improve the cars and
trucks, she said.
For example, Boler-Davis said GM received a complaint the
other day from a Cadillac XTS customer who said her audiobook
kept playing on mute while she answered a phone call. The
company is already working on a fix, she said.
"It's not rocket science," Boler-Davis said. "You build them
right and you treat people right and they come back for more."