ROYAL OAK, Michigan (Reuters) - General Motors Co (GM.N) 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 (7203.T) - 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 (AAPL.O) and FedEx (FDX.N).
“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 do.”
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 rankings.”
To get buy-in from GM’s salaried employees, the company added customer retention as an element affecting annual bonuses, Boler-Davis said.
“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 said.
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 address.
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.”
Editing by Phil Berlowitz