Loyalty Lessons for American Auto Makers

The red color is increasingly becoming a norm for Wall Street for the past 8 months. Since after the housing bubble collapsed in September of 2008, the economy is well under and weakest since the great depression. The national debt is well over $10.9 trillion, where Americans are borrowing more, spending more and returning less. Seemingly the disparity has expanded and the fragile system of credit based lending has adversely affected the Banks. Prominent companies such as Bear Sterns, Lehman Brothers, AIG and Citigroup have foreseen the worst of the Recession. So the question arises, with a gloomy credit crisis how can businesses innovate in a financially tight situation and still gain a competitive advantage?

When businesses continue to witness a decreased trend in sales and profit, they are anticipating loses and compensating them with internal restructuring of costs, processes and reduction of employees. It is here where executives need to choose whether to continue contracting their operations or improve the efficiency and innovate within existing operations. A significant step in moving this direction requires visionary leadership that transcends beyond the current market condition. For example, the auto industry is in the hot seat for its struggling chain of manufacturing plants. With not enough working capital, they have laid off more workers than any other industry. They have failed to recognize that their business was the biggest target of the bad economy. I propose to the auto industry executives who received bailout money from the government that they should fully employ their resources in the strengths of their company. Auto industry has a significant American customer loyalty; these sole buyers are a key driver in leading exploitative improvements. A thumb of rule is that it cost five times more to acquire new customers than to keep an existing one. Because loyal customers pay more despite the low-priced competition, they are the best weapon of the company.  To retain the existing ones, auto manufacturers should contour to the needs of loyal customer by creating a collaborative environment which enhances customer feedback and their importance. Once their bond is fortified with company, they will become an external organization within themselves. We should not just sell them a car and a good warranty. We should not fail to recognize the difference between satisfaction and loyalty, where satisfaction is an attitude and loyalty is a behavior. They should become members (still customers) of the company by instilling in them a sense of American innovation and our history of collaborative work. With this notion we can move forward our auto industry in a least expensive way.

Innovation considered a big leap in this economy, it should be perceived as a medicinal anecdote for a dire disease. Innovation should be an uncontrollable urge of the company to survive even if it restricts them financially. Given the bad economy, opportunities rise and it is in these critical moments to recognize these opportunities.