GM Aims For Its Achilles’ Heel: Customer Loyalty

General Motors (NYSE:GM) is on a mission: to achieve the best customer service in the auto industry. Internally, the wheels have already been set in motion to accomplish that goal, as the company has been doubling down and investing more money and employees into working with people to resolve conflicts and improve vehicle quality and service.

Last year, the company initiated a policy that bases the bonus given to the 27,000 salaried workers in the U.S. on goals related to customer retention. And last year, the goals were not met — but GM North America President Mark Reuss says that it will happen this year.

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“In all likelihood we will make it this year,” Reuss said. “But last year we did not. So that’s why it’s there. It’s not an easy hurdle that we set to meet.” As the auto landscape becomes more and more competitive, companies can only add so many features to a vehicle, making customer loyalty programs and retention crucially important. GM’s rate of retention — the number of customers who come back to purchase another GM model — is disappointingly low, sliding to 35 percent before and after the company’s 2009 bankruptcy. Reuss attributed the slide to the ”crappy cars” that GM was building.

Now, after the first quarter, retention rates are back up to over 50 percent, signaling that the company is on the right track. Although it’s a significant improvement, it still falls short of Toyota’s (NYSE:TM) industry-leading retention rate of 58 percent.

“We’ve got a long way to go, but there are some big improvements happening,” Reuss said.

To give an idea of how valuable customer retention is, consider this: GM’s global product development chief, Mary Barra, said that gaining one percentage point of customer retention equals about 25,000 new vehicle sales worth roughly $700 million in revenue a year.

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Reuss has also gone about setting up a rewards program to encourage employees to offer superior service to their customers. Known as the Mark of Customer Excellence, the distinction is meant to help motivate and empower the company’s U.S. work force.

“It’s like a Stanley Cup trophy,” Reuss said. ”Whoever wins it gets to stand on stage and be recognized, and they take the big trophy to their workplace for a quarter until the next person [wins].”

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