There are few things more important than brand loyalty when it comes to the automotive industry. Competition among automakers, car rental companies, gas stations, and car insurance companies is nothing short of fierce. In addition, profit margins can sometimes be razor-thin, so companies need to do as much as they can with their marketing budget and effectively sway customers with a quality product.
Luckily for us consumers, research firm Brand Keys recently came out with its 17th annual loyalty rankings that examined 375 top brands across 54 categories — including numerous automotive sectors. The score each company receives is known as the Customer Loyalty Engagement Index and encompasses a plethora of factors that allows these companies to be compared to one another.
Today, I want to look at Brand Keys’ top selections in the auto sector and not only give credence to these companies for driving customer loyalty, but also discover what attributes they may possess that could make them excellent investments.
Brand Keys’ results actually delivered a tie for first place between domestic auto giant Ford Motor Company (NYSE:F) , and South Korea’s Hyundai. I believe each company offers a unique perspective on why they’re driving significant brand loyalty.
As I noted in my recent deeper dive into Ford, CEO Alan Mulally is driving significant growth and brand loyalty with its turbocharged, but fuel-efficient, EcoBoost engines, an emphasis on reviving the American muscle car with the iconic Mustang, and the added consistency of America’s best-selling truck, the F-Series. Ford Motor Company (NYSE:F) has also taken advantage of the brand damage caused to domestic rival General Motors Company (NYSE:GM)‘ by its bankruptcy filing, and the fact that GM failed to make innovative changes to the Silverado or Sierra truck lines for nearly seven years.
Hyundai’s success derives from its incredible price points and presumably one of the best warranties available. Clearly, no one wants to use their warranty, but the peace of mind that Hyundai gives customers has been enough to keep them coming back.
Sometimes the amount of advertising an insurance company kicks out isn’t indicative of the loyalty it can generate from consumers. You might be of the opinion that loyalty and insurance are essentially oxymorons (and in some cases I’d agree), but no company has been better at capturing and hanging onto clients than privately held State Farm.
What’s interesting here is that State Farm’s advertising budget jumped dramatically in 2011, yet it’s nowhere near as high asBerkshire Hathaway Inc. (NYSE:BRK.A) -owned GEICO, which spent just shy of $1 billion on advertising in the same year. Average spending on ads as a percentage of revenue in the insurance industry is 2.4% — GEICO’s was 6.5% in 2011.
State Farm’s loyalty appears to originate from its dominant market share in the car insurance market. According to CarInsuranceCompanies.net, State Farm held 18.7% market share as of 2010, compared with just 8.5% for GEICO. I can’t also help feeling that GEICO’s aggressive advertising might also be bothersome to certain potential customers, further securing State Farm’s position at No. 1.
There are a growing number of choices when it comes to car rentals, but Avis Budget Group Inc. (NASDAQ:CAR) has claimed the crown on Brand Keys’ list for 13 consecutive years.
The keys to driving continued success for Avis appears to be its rapid adoption of mobile technologies which allow customers to make reservations online without the added redundancies of reentering flight or travel information, and the ability to provide real-time customer feedback to on-site managers which can make actionable and quick changes to customer concerns. In addition, Avis was the first car rental company to embrace a smoke-free rental car policy, taking advantage of a move toward healthier living habits.