Toyota Snags Double Win in Customer Satisfaction Ratings

Toyota headlines the automobile industry when it comes to customer satisfaction, earning the top spot among both luxury and mass-market brands in this year’s American Customer Satisfaction Index. Toyota’s Lexus is the luxury leader at 86 (100-point scale), followed by an improved Mercedes-Benz at 84. For mass-market plates, Toyota’s namesake brand comes in first with an equally high score of 86, with Subaru closing in at 85.

General Motors is the only domestic automaker in the top five overall, with its GMC nameplate grabbing third place at a stable score of 84. Among luxury plates, two domestic offerings tie for third: GM’s Cadillac and Ford’s Lincoln. For the former, 2017 is a comeback year as Cadillac gains 5% to earn its berth on the leader board. Not so for Lincoln, which tumbles after holding first place among all vehicles a year ago—down 5% from 87 to tie with Cadillac (83).

While the overall trend for autos in 2017 is one of receding satisfaction, Toyota brands are on an upswing. Likewise, Korea’s Hyundai earns a slot at number four among mass-market cars with a 2% gain. In fact, five of the six top-scoring mass-market vehicles are imports, and all show ACSI gains.

Historically, Toyota has been a consistent leader in customer satisfaction. For three years running, the Japanese carmaker has placed in the top two among mass-market cars, while its Lexus nameplate hit number one in 2015 and tied for third in 2016 among upscale vehicles.

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Autos: Ongoing Recalls Deflate Driver Satisfaction

With automobile recalls at record-high levels, it comes as no surprise that car buyer satisfaction declines for a third straight year, according to recent results from the American Customer Satisfaction Index (ACSI). At the industry level, driver satisfaction falls 3.7% to 79 on ACSI’s 100-point scale in 2015, and nearly all nameplates lose ground in the eyes of their customers.

While consumers are seeing a rapid influx of technology innovation that is transforming the driving experience, recalls are becoming a more common occurrence for car owners. The ACSI automobile customer satisfaction survey asks all respondents to indicate whether or not their car has been the subject of a recall since the time of purchase, allowing researchers to investigate the impact of recalls on satisfaction.

In 2011, ACSI researchers used a pooled sample of 2010 and 2011 data to show that customers who experience recalls are significantly less satisfied with their cars than those who have not. One of the industry’s highest-profile recalls happened before and during that period—Japanese automaker Toyota’s massive, worldwide safety recall that started in 2009.

Recalls generally signal major quality defects, so it is not unexpected that they will depress satisfaction. But, as automobiles become more and more complex, there is the possibility that consumers could come to accept recalls as a normal part of car ownership. Nevertheless, ACSI data from the past three years confirm the 2011 findings. Customer satisfaction for owners who experience recalls is significantly lower than non-recall respondents, and the percentage of owners that say they have gone through a recall has increased substantially in 2015.

2015-auto-recall-satisfaction

The negative impact of recalls on automakers does not end with lower satisfaction. Because there is nearly a one-to-one relationship between satisfaction and customer loyalty for this industry, recalls create customers who are significantly more likely to defect to a competitor the next time they purchase a car. And because current customers are generally “cheaper” customers for automakers (requiring fewer acquisition costs), recalls have tangible and negative economic consequences for automakers. A pooled sample of 2013 to 2015 data for all nameplates shows that customers who experience recalls are significantly less likely to be repeat buyers.

2015-auto-recall-retention

Satisfaction declines caused by recalls also have a host of indirect, negative consequences because satisfaction drives behaviors such as word-of-mouth, cross-selling, up-selling, brand image, and corporate reputation. Like many other nameplates, Volkswagen’s driver satisfaction tumbles 5% in 2015, but the drop is based on interviews that took place prior to the company’s well-publicized emissions scandal. Although diesel engines are less widely used in the United States than elsewhere around the globe, the revelation of emissions rigging by Volkswagen—along with the sheer number of vehicles that the company will now recall and refit—could be devastating on future satisfaction. Current customers may be even less likely to repurchase from Volkswagen if they perceive the company’s actions as a breach of trust.

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ACSI Research Insights: Automobile Satisfaction and Recalls

Earlier this month, ACSI released its 2011 report on the Automobiles and Light Vehicles industry. The August ACSI Commentary focused on the difficult situation faced by U.S. automakers as they experience declining customer satisfaction, while the Japanese automakers gain in satisfaction and the Europeans maintain their lead.  Here we offer a few additional research insights gleaned from the ACSI study, focusing on the effects of automobile recalls. The ACSI customer satisfaction survey asks all respondents to the auto study to indicate whether their car has been the subject of a recall since the time of purchase, providing the data that allows us to investigate the impact of recalls on satisfaction.

Over the last few years, a series of high-profile auto recalls (most notably, the massive, worldwide Toyota recall that began in 2009) have garnered significant media attention. What impact, if any, does the experience of a recall have on customer satisfaction? While it may seem obvious that a recall signals a significant quality defect and therefore depresses satisfaction, it is also possible that consumers have come to accept recalls (a fairly common event) as a normal part of car ownership.

Using a pooled sample of 2010 and 2011 data for all of the nameplates measured within the industry, ACSI data suggests that customers who have experienced a recall are significantly less satisfied with their car than those who have not. As shown in the first chart below, car owners who experienced a recall have an ACSI score of 79, compared to a significantly higher score of 84 for those who have not.

But the negative impact of a recall for an automaker does not end with lower satisfaction. Because there is a nearly 1-to-1 relationship between satisfaction and customer loyalty for this industry, these findings also show that recalls create customers who are significantly more likely to defect to a competitor the next time they purchase a car.  Again using a pooled sample of 2010 and 2011 data for all nameplates measured by ACSI, the data shows that customers who have experienced a recall indicate they are 4 percentage points less likely to remain customers of the same automaker when they next purchase an automobile, as shown in the second chart above.

There are two vital conclusions that should be drawn from these findings. First, auto recalls, no matter how common, well-publicized, or necessary for public safety, have a negative impact on customer satisfaction for an automaker. As satisfaction drives behaviors like word-of-mouth, cross-selling, up-selling, brand image, corporate reputation, and so forth, the drop in satisfaction caused by a recall has a number of negative indirect consequences for carmakers. Perhaps more significantly, however, is the impact of a recall on customer loyalty. Customers who have experienced a recall indicate that they are significantly less likely to be retained as customers in the future. As current customers are generally “cheaper” customers for any firm (requiring fewer acquisition costs), the impact of a recall on loyalty represents a tangible and negative economic consequence for an automaker.