February 17, 2011

Confession #20: You can't run on customer loyalty forever

It’s no secret Toyota’s recently been taking its decades-old customer loyalty for granted.

And while company officials and sales figures suggest it’s managed to keep a number of those customers in the fold, could it be only a matter of time before millions of Toyota drivers leave the company?

Bloomberg’s Alan Ohnsman posed the question in a recent article describing the struggle of the Toyota Corolla, the company’s mainstay for the better part of four decades. It long ago passed the Volkswagen Beetle as the most popular nameplate in history, with more than 37 million sold since the 1960s. And, floor mat-accelerator issues aside, it’s remained a byword for durability and reliability.

2011 Toyota Corolla S (Toyota Motor photo)
Toyota’s been throwing those characteristics around in TV ads, with customer testimonials about the number of surviving Corollas in the last 20-or-so years.

But there’s a problem when the best thing a company can say about its product is that it’s durable and reliable. The Corolla’s forever been an example of an automotive appliance, just reliable transportation. And for many years that’s been fine, since that best described the small car class.

These days, General Motors, Ford, Hyundai, even Chrysler, are pulling out the stops in the class and unveiling bar-raising products.

2011 Toyota Matrix
(Toyota Motor photo)
The Corolla hasn’t really changed in the last decade, and it’s being left behind. Even though it was the best-selling compact car in the US last year, sales fell 10 percent. Considering the Matrix crossover/wagon, which is basically a Corolla with a new body, is also factored into those figures, the fact Honda shifted just 6,000 fewer Civics in 2010 shows how close Toyota came to losing the sales crown.

2011 Hyundai Elantra Limited
(Hyundai Motor America photo)
The Corolla is an adequate car, but no more. The problem is the segment is no longer happy with adequate. When Ford’s new Focus offers a self-parallel parking feature and the Hyundai Elantra has heated rear seats as an option – both with much more involving styling – Toyota will struggle to keep retail customers interested.

Honda is in a similar predicament with the Civic.

Before the financial crisis in 2008, it wanted to move the Civic up in size like it did with the Accord. But after fuel economy became the buzzword, the company went back to the drawing board and now shows a 2012 Civic that looks … a lot like the outgoing model.
2011 Honda Civic EX Sedan
(American Honda photo)

2012 Honda Civic EX Sedan
(American Honda photo)
Mercifully, the Civic does get improved fuel economy, and it was always a good car to drive, well built and not as dull as the Corolla.

But early photos show Honda has once again stood still as competitors move forward. The Pilot crossover is rated only mid-pack by Consumer Reports, who praised the first model, but now rate the current design behind GM and Ford’s crossover offerings. The Insight hybrid has been panned by critics and lags on the sales charts.

Unless the 2012 Civic gives a sparkling drive, it’s going to face customers wondering what about it is new, and why they shouldn’t buy an Elantra, Focus, Cruze or Jetta instead.

Toyota and Honda executives admit they got complacent as the 2000s signaled a massive rejection of offerings from the domestic automakers. This is a new decade, and the near-death experiences of GM and Chrysler – coupled with Ford’s own renaissance, Hyundai-Kia’s out-of-nowhere surge and Volkswagen’s quest for global supremacy – gave those companies proof everything they touched wouldn’t turn to gold.

Of course, now it’s a waiting game to see how Toyota and Honda make their fixes.

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