Editorial: Who Needs Quality? Or, the Myth of Brand Loyalty
Quick question: what was the number one factor in your most recent new vehicle purchase? Was it styling? Performance? Features? Financing? Price? Comfort? Practicality? Or that old stalwart, quality? If you answered in the affirmative to that last suggestion, you’re part of a shrinking bloc. There were a lot of winners in the 2014 auto sales race, but quality wasn’t one of them.
Consider the top 5 market share-gaining brands in the 2014 calendar year. They were Maserati (up 171%), Jeep (up 41.2%), Ram (up 27.5%), Mitsubishi (up 24.8%), and Subaru (up 21.0%). If we leave out the ultra-luxe niche brands and those purchased exclusively by the brain-eating undead, we have Jeep, Ram, Subaru, Lincoln (up 15.6%), and Audi (up 15.2%). If we re-organize once more and focus on groups with a wide variety of offerings, it’s Subaru at the head of the line, followed by Fiat-Chrysler (up 16.1%), Nissan Motor Group (up 11.1%), Kia (up 8.4%) and Mazda (up 7.7%). Now that that’s out of the way, let’s take a look at the results of J.D. Power’s 2014 Initial Quality Study.
Hmm, that’s interesting. Of the non-luxury brands that gained the most market share, only Kia beat the industry average for defects per 100 vehicles. Ram tied the average, Nissan slipped below it, and Subaru, Mazda, Mitsubishi, and Jeep are all slumming it near the bottom. How about J.D. Power’s 2014 Vehicle Dependability Study, which looks at the number of problems experienced by owners of 3 year old vehicles in the previous 12 months?
Things are looking a little better for Subaru and Mazda now, who both beat the industry average by a statistically meaningless margin. Nissan and Kia slipped below it, and Ram, Mitsubishi and Jeep are again in the basement. So there you have it: 2014’s biggest market share gainers were solidly mediocre to poor in J.D. Power’s quality studies. Of course, there is bound to be an outcry here that J.D. Power can’t possibly represent everyone’s lived experience, and that’s fair. But perusing the likes of TrueDelta and Consumer Reports won’t poke any big holes in J.D. Power’s reports; they’re all more or less the same, with a few minor variances. More importantly, perennial quality mavens Honda and Toyota posted year-over-year sales gains of 1.0% and 5.8%, respectively. For Toyota, it was a solid if uninspiring year buoyed by strong performance at Lexus. For Honda, it was the kind of year that makes upper management start to look around for parachutes. What gives?
In the press release for the Initial Quality Study, there’s this interesting nugget about how vehicle defects impact brand loyalty:
Combined data from previous years’ IQS results and the Power Information Network® (PIN) from J.D. Power show that 57 percent of owners who reported no problems stayed with the same brand when they purchased their next new vehicle. Brand loyalty slips to 53 percent among owners who reported just a single problem and to only 48 percent among owners who reported two or more problems.
So according to J.D. Power, there’s only a 57% chance that owning a car with zero defects will lead to trading in your vehicle for the same make the next time around. If you have two or more problems with it (and keep in mind, we’re not talking about weighting these stats to reflect severity in any way), it slips to 48%. Those two numbers both have something in common: they’re F grades. The popular meme says that those who own ultra-reliable cars will return to dealerships like migrating geese, but the data says otherwise. Billions and billions of dollars spent on quality control, and the customer loyalty reward is little better than a coin flip. The Power data is the most compelling evidence yet that the “there are no bad cars anymore” chestnut has really penetrated the mainstream. If even the owners of the best-made cars are largely up for grabs, then what does that say about the conventional wisdom that quality conquers all?
Even if you don’t believe it, assume for the sake of argument that it’s true that it’s not that difficult to build a reliable car anymore. Even the most problem-plagued models are likely to have faults more of the annoying variety, with serious mechanical failures few and far between. Most consumers will have their expectations of reliability met, unless they get a statistically rare lemon. If’s that’s the case, then how long can quality endure as a selling point? This is analogous to the problem Volvo is facing right now in regards to safety. Safety has been a key selling point for Volvo for decades. But who makes unsafe cars anymore? Safety standards are stringent, and even cheap cars have an increasing number of whiz-bang safety technologies. Take away safety, and suddenly Volvo loses what little distinctiveness it had left. Volvo’s only hope now is to become the Chinese answer to Audi in the United States. Good luck with that.
There is at least one man in the auto industry who firmly understands that quality isn’t the make-or-break proposition it once was: Carlos Ghosn. As the other manufacturers choked on their passenger cars in 2014, Nissan grew sedan sales 15%. Of full-line brands including trucks, only FCA had a better year. All of this came on the back of a brand which, quite frankly, has shrugged its shoulders at quality for most of the last decade and a half. Nissan’s quality record in the United States is mixed, but looking back through the last couple of years of J.D. Power studies tends to support the conclusion that the company has been solidly below average since around the turn of the millennium. Clearly, there is something besides quality that is pulling people into Nissan dealers. Maybe it’s styling. Maybe it’s value for the money. Maybe it’s performance, or fuel efficiency. At the end of the day, it doesn’t really matter; all that it demonstrates is that it’s possible to build sales success on the back of supposedly subpar quality. FCA’s sales data says much the same thing. Inversely, the recent success of the brands with iffy quality means that Volkswagen’s sales disaster can’t be traced to reliability woes alone. Weak or missing product, poor marketing, and an infamous dealership experience are all more salient factors. Perhaps it’s time to question the value of endlessly harping on quality as the sole determinant of success. Or at least, devise better statistical tools to understand reliability. That last point is especially important, given how automobile technology has changed so much since the introduction of these surveys.
Like safety, quality is rapidly disappearing as an independently marketable category. The days where squishy, bland cars could be counted on to generate sales by virtue of quality alone are numbered. Toyota has certainly realized this, which explains the direction of much of their new product. The racy new Camry and the pseudo-premium flavor the Corolla both speak to a changed mentality. The FR-S is an attempt to bring some pizzazz back to showrooms, and even the “We ain’t got no room for boring” Highlander commercials are an attempt to push back against the brand’s staid image. Then there’s the un-blanding of Lexus, as that brand heads in a more Germanic direction. At Toyota, quality is still a priority, but in the marketing department it’s already taken a back seat to other virtues. And if Toyota won’t rest on quality alone to sell its vehicles, then who will?
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- NotMyCircusNotMyMonkeys for that money, it had better be built by people listening to ABBA
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I used to buy "reliable" used cars - notably from the Japanese big three, two B-Body car, and even a Grand Marquis. None ever left me stranded on the road, but (to my surprise) the Honda Accords were the most troublesome of the lot. The Marquis, a Avalon, and a Buick Roadmaster the least troublesome. I generally buy a used car every 2-3 years - right now I'm venturing into the Euro camp even after years of fear that I would rack up big repair bills. A '04 BMW 325i has proven to be pretty reliable - so far I replaced a cracked intake tube, had the front bushings done at a shop, and then replaced a rear window regulator myself. It is the base of the base models with a stick shift but is a real joy to drive. My other money pit is the wife's used 2003 Mini Cooper S. It came with a pile of paperwork - work done at a local shop - but so far it has been reliable. Perhaps all the bugs *knock on wood* have been worked out. It's fun as h*ll to drive though so I give it some leeway when the passenger headlight Xenon light doesn't always come on. My wife is absolutely crazy for the car, the only one that she has ever driven that gets washed regularly.
So the moral of the story is, the actual best car at time of issue is a Lexus, and the best car after three years is a Lexus. And there are many people who can put a car together and get it to last a few months (Land Rover and Dodge); but fall to the pits afterward.