Value of customer loyalty? GM comes up with a number
The value of loyalty is maths that many people struggle with. General Motors has given it a concrete value.
According to this US auto company, the value of loyalty is $700 million for every percentage point of improvement in customer retention rates.
GM currently keeps about 52% of its customers for repurchases, which is roughly the auto industry’s average retention rate, says Alicia Boler-Davis, GM’s new vice president for global quality and US customer experience.
The best in the auto industry, Toyota keeps about 58% of its customers returning to their car showrooms when they trade in a vehicle, she says.
At GM’s scale, adding a percentage point to the customer retention score is worth $700 million, Ms. Boler-Davis says. That reflects in part the high cost of winning a new customer out of a rival brand.
Using the Boler-Davis’s figures, GM could add $4.2 billion in annual revenue if it matched Toyota’s customer retention rates in the US alone, which makes it a very impressive equation indeed.