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Contents
Introduction................................................................................................................ 2 A Focus Group With Wine................................................................................... 3 Boosting Brands in a Sluggish Economy........................................................ 4 The Regional Reality............................................................................................... 4 The Forbes Insights Luxury Car Buzz Index.................................................. 6 So Whats in a Name?.......................................................................................... 10 The BIG Picture........................................................................................................12 Democratizing Luxury.......................................................................................... 14 The Truth About Affluence.................................................................................16 Whats Next for American Luxury?..................................................................17 Even More of an Underdog.................................................................................19 A View From the Top.............................................................................................21 The New Contender..............................................................................................22 Conclusion................................................................................................................23 Appendix: Luxury Car Buzz Index Methodology......................................24
Introduction
Three years after a market cataclysm vaporized real estate and stock values, luxury automakers are still grappling with the consequences. In 2008, wealth plummeted $11.2 trillion compared with the year beforethe biggest annual decline in household net worth since the Federal Reserve began keeping quarterly records in 1952.
With less wealth to go around, the definition of luxury is changing, and by The Luxury Car Buzz extension, so must the companies that sell high-end cars. The go-go days of Index distills a surpassing the Joneses are gone. These snapshot of luxury are sober times. And yet Baby Boomers, brand performance. who are nearing or transitioning to retirement, still crave the trappings of wealth. Meanwhile, so do their children. Generation Y was raised in heady times, when Viking ovens, Sub-Zero refrigerators and 50-inch flat screens were the norm. Bigger was better. More wasnt enough. They grew up ensconced in a premium lifestyle and now expect that for themselves. Yet theyre broke: Unemployment among Generation Y is more than 13% by some estimates. Thus, the story of how luxury car companies are reinventing themselves in the wake of this great recession has become a tale of two generationswooing the Boomers and priming Gen Yers for future purchases. Thats why blue-blood brands like Mercedes-Benz are seeking a more youthful image and formerly conservative Lexus is jazzing up its cars like never before. Doing so appeals not only to Gen Yers, but also to Boomers, who are young at heart and would rather globetrot than retire to gated communities and games of shuffleboard. Audi, meanwhile, the up-and-coming alternative luxury brand, has shored up so much clout over the past five years that the average transaction price for one of its vehicles has jumped $5,000. The underdog is overachieving. In fact, in the midst of economic uncertainty and a painfully slow recovery, the auto industry has been bouncing back from the depths of 2009, and the thirst for luxury remains powerful. In 2011, Audi and Mercedes posted their highest sales ever. BMW had such a strong year that it knocked Lexus off the top spot to become the best-selling luxury brand in the U.S. What all of this shows is how topsy-turvy things are right now. The Forbes Insights Luxury Automotive Outlook Special Report takes an inside look at the struggles and triumphs of luxury automakers through the eyes of chief marketers and general managers. Their commentary sketches out a roadmap for where brands are headed, while data from BIGinsight, a consumer insight resource based in Worthington, Ohio, paints a detailed picture of how consumers regard them right now, as well as what those consumers intend to doand buyover the next six months. Together, the two give unparalleled insight into a market overcoming turmoil. Using data from BIGinsight, Forbes Insights has devised a Luxury Car Buzz Index to rank the leading luxury automotive brands based on a composite score that measures customer satisfaction and loyalty, car owners propensity to recommend their brand to others, and the effectiveness of marketing efforts in both traditional and digital media, as well as the impact of digital word-ofmouth through social media and blogs. The Buzz Index distills all these factors into a snapshot of luxury brand performance. (See Figure 2, page 6, for the full ranking and Appendix, page 24, for the complete methodology.)
The dinners arent about selling cars or pitching the brand. Theyre a chance to get inside the heads of car buyers.
Figure 1: Planning to Buy/Lease: What make of vehicle are you considering? First choice plus second choice:
United States: n 5.6% Audi n 10.2% BMW n 5.5% Cadillac n 4.0% Lexus n 3.6% Mercedes-Benz
Source: BIGinsight Media Behaviors & Influence (MBI) Survey, June and December 2011
Acura owners are also some of the strongest proselytizers among luxury-car owners, according to data from BIGinsight. The Worthington, Ohio-based firm uses information from consumer surveys it conducts monthly to calculate a Net Promoter Score1, which indicates how much owners of a particular brand recommend the vehicle to others. Acura ranks third highest in this regard, behind Lexus and Mercedes, over the 12 months of 2011. Using data from BIGinsight, Forbes Insights has devised a Luxury Car Buzz Index to rank the leading luxury automotive brands based on a composite score that takes into account Brand Satisfaction (how likely a current owner is to remain loyal to a brand with his or her next purchase); Personal Promotion (the impact of proselytizing, measured by combining the Net Promoter Score with the effect of word-of-mouth on car-buying decisions); Brand Momentum (whether a brand is seeing a net gain or loss in the number of prospective car buyers considering the vehicle, versus the number of current owners); Traditional
Media (the effectiveness of its marketing efforts in TV, print, etc., as well as the impact of reviews and articles about cars); and Digital Media (marketing, as well as wordof-mouth in social media, etc.). (See Figure 2, page 6, for the full ranking and Appendix, page 24, for the complete methodology.) Acura ranks fourth in Brand Satisfaction on the Buzz Index, behind Lexus, Volvo and BMW, and it comes in fourth overall, outperforming most of its peers during 2011. One area where the company falls short is in terms of prestige. In the luxury market there is definitely a continuum of what each brand represents, Poponi says. So sometimes we find people reject Acura because they dont think its a prestigious enough brand. But those who make status a priority in their car purchase tend to be emotional buyers and arent the types of people the brand targets anyway, she says.
1
Net Promoter, NPS and Net Promoter Score are trademarks of Satmetrix Systems, Inc., Bain & Co., and Fred Reichheld.
New York: n 10.2% Audi n 17.8% BMW n 9.6% Cadillac n 2.3% Lexus n 4.9% Mercedes-Benz
California: n 8.2% Audi n 14.8% BMW n 6.1% Cadillac n 4.9% Lexus n 6.3% Mercedes-Benz Texas: n 5.0% Audi n 7.7% BMW n 4.8% Cadillac n 6.3% Lexus n 3.4% Mercedes-Benz Florida: n 5.0% Audi n 10.1% BMW n 4.1% Cadillac n 4.8% Lexus n 3.4% Mercedes-Benz
Illinois: n 7.1% Audi n 9.0% BMW n 6.3% Cadillac n 3.6% Lexus n 3.9% Mercedes-Benz
Forbes Insights
The Forbes Insights Luxury Car Buzz Index uses exclusive, forwardlooking data on consumer intentions provided by BIGinsight to assess the industrys prospects for the next six months, with a special focus on the luxury car segment. The data used to calculate the Index derives from two extensive consumer surveys conducted on a regular basis. BIGinsights monthly Consumer Survey, which has a 10-year history, includes a total monthly sample of more than 8,000 respondents and produces a uniquely powerful database, more highly predictive of consumers actions than backward-looking data on past sales. The Media Behaviors & Influence Study polls some 25,000-plus respondents and is conducted twice a year, in June and December.
Brand Satisfaction
Personal Promotion
Traditional Media
Brand Momentum
Manufacturer
Digital Media
total Score
Acura Audi BMW Cadillac Infiniti Jaguar Lexus Lincoln Mercedes-Benz Volvo
41.69 35.31 44.77 35.58 30.38 15.03 46.09 26.31 34.48 45.83
0.27 0.41 0.26 0.87 0.39 0.32 0.75 0.16 0.28 -0.21
11.50 5.24 6.71 5.35 11.31 -1.74 18.04 7.81 14.73 10.55
5.89 10.75 10.21 5.99 1.68 -0.63 2.39 0.53 6.05 1.85
7.72 18.99 21.74 10.13 1.27 -0.37 11.62 4.39 9.98 4.45
67.1 70.7 83.7 57.9 45.0 12.6 78.9 39.2 65.5 62.5
Source: Forbes Buzz Index developed from data selected from: Monthly Consumer Surveys from BIGinsight, January - December 2011; Media Behaviors & Influence Study, June and December 2011
The Buzz Index comprises five factorsBrand Satisfaction, Brand Momentum, Personal Promotion, Digital Media and Traditional Mediain a proprietary formula created by Forbes Insights and used to rank 10 leading luxury car brands: Acura, Audi, BMW, Cadillac, Infiniti, Jaguar, Lexus, Lincoln, Mercedes-Benz and Volvo. (For a full discussion of the methodology, see Appendix, page 24.) BMW emerges as the clear overall winner of the Buzz Index, which seems fitting in light of the very good year the company has had. Perhaps more surprising is Lexuss second-place finish, given that much of BMWs success has come at Lexuss expense, capitalizing on the supply problems that have troubled Lexus in the wake of last Marchs earthquake and tsunami in Japan. The rivalry between these two brands showcases an intriguing divergence in
strategy: BMW pointedly stands on the strength of its ultimate driving machine, while Lexus focuses on the total ownership experience. Two factors stand out for Lexus. It wins the Brand Satisfaction category, closely trailed by Volvo, BMW and Acura. And it utterly dominates in Personal Promotion. Lexus owners clearly love their cars and will play them up to anyone who will listen, regardless of how difficult it may be to actually obtain one at the moment.
BMW emerges as the clear overall winner of the Buzz Index, which seems fitting in light of the very good year the company has had.
This leads naturally to what seems a safe prediction: As Lexuss supply problems recede into the rearview mirror,
Acura Audi BMW Cadillac Infiniti Jaguar Lexus Lincoln Mercedes-Benz Volvo
5.3 8.5 11.3 3.5 1.1 -.09 -1.3 -0.7 7.4 1.8
9.1 12.3 7.4 9.7 1.2 -1.1 2.3 2.0 7.5 1.1
6.6 14.6 8.5 6.9 0.0 -1.1 2.6 0.0 3.4 3.0
2.6 7.7 13.8 4.0 4.5 0.6 6.0 0.9 6.0 1.6
Manufacturer
Blog Score
Internet Ad Score
5.89 10.75 10.21 5.99 1.68 -0.63 2.39 0.53 6.05 1.85
Source: Forbes Buzz Index developed from data selected from: Media Behaviors & Influence Study, June and December 2011
it may well become a contender again for best-selling U.S. luxury car. BMW, Mercedes, Audi and the rest will most likely have a fight on their hands to hold onto their market share gains. BMW and Audi seem to have the most effective marketing: They rule as numbers one and two in both the Digital and
Traditional Media categories, with Audi leading in Digital and BMW winning Traditional. A look at the subfactors in Digital Media shows that BMW exerts the most influence in both Blogs and Internet Ads, with a comfortable lead over runner-up Audi. Audi takes the prize in Social Media, with Cadillac coming in second.
Cable TV
Magazine Score
Manufacturer
Newspaper Score
article Score
radio Score
Broadcast TV Score
Mercedes-Benz
Volvo
Source: Forbes Buzz Index developed from data selected from: Media Behaviors & Influence Study, June and December 2011 * N OTE: Trad Media Score is weighted to reflect greater reach vs. Digital Media, per survey responses. For 2011 data, Trad Media equals average of subscores x 2.45.
Audi also wins the Mobile Device category, with BMW coming in at number two. In Traditional Media, BMW wins four out of six subcategories: Articles, Newspapers, Radio and Broadcast TV. Audi wins Cable TV and Magazines (with BMW a very close second).
Some of these brands are tightly grouped in their overall scores, so rankings could shift within a few months. Acura, with its excellent Brand Satisfaction and solid Personal Promotion, is jockeying for third place with Audi. Mercedes, with its very strong Personal Promotion score, is nipping at Acuras heels.
So Whats in a Name?
Couple that with the fact that their kidsGeneration One brand that does command a lot of clout is MercedesYwill eventually be the next Mercedes-Benz buyBenz. Yet when looking at Brand Satisfaction, the German ers and its clear why the company has been creating cars automaker scores seventh out of the 10 brands ranked in with more dynamic and youthful designs in recent years. the Buzz Index. In 2011, the company launched six new products, the Thats because it has been working through some qualmost it has ever debuted in a single year. Half are what ity issues, according to BIGinsight data. As we look at Cannon calls halo cars reasons that survey responlike the SLS AMG Roadster dents chose a car, in late and SLK convertiblewhich 2009 and 2010, Mercedes sell in relatively small numwas experiencing some qualbers but bolster the companys ity and style problems, says image with their high perforRoger Saunders, managmance and desirability. The ing director, Prosper Group other three are big sellers: the of Companies at BIGinsight. all-new C-Class coupe, and a They were capturing peoredesigned C-Class sedan and ple because of financing deals, M-Class crossover. old cars dying, high mileage. To promote these new Now they are capturing them vehicles, Mercedes has been based on style, added features Steve Cannon running edgier ads. Cannon and quality. This quality issue President and CEO, Mercedes-Benz USA is proud of them. He gets was driving people away from visibly excited showing Mercedes in the later portion a television spot, called of 2009. They appear to have Unchained, on his iPad. turned the corner in the conIn it, a C-Class sedan with sumers mind. chains attached to its rear doors accelerates away; the Mercedess Brand Satisfaction and Personal Promotion chains are anchored to the ground and rip the rear doors scores have both been moving up over the past six months. off to reveal the new C-Class coupe. U.S. sales in 2011 were up 17.5% over 2010 to a total of The C-Class is our entry price point, Cannon says, 264,460 vehicles, an all-time record for the brand. so if were going to start building bridges with younger Up until a few years ago, Mercedes was the automotive consumers as they start to move into our consideration set, icon for the established wealthy elite. But that is changthats the right vehicle to do it. We wouldnt be edgy and ing, thanks to the Baby Boomers. This sort of elitist kind kind of push the needle with something like the S-Class, of luxury is really a notion thats going by the wayside, because its our flagship. says Steve Cannon, who in January was appointed presiAt the same time, Mercedes is also playing up its dent and CEO of Mercedes-Benz USA. He was previously heritage in advertising. It celebrated 125 years in 2011 vice president of marketing. and has several TV spots that star classic Mercedes Thats because most wealth in the U.S. is generated by vehicles. Heritage plays really well with Gen Yers, entrepreneurs. Its made wealth, not inherited wealth, he Cannon says. says, and these entrepreneurs bring a middle-class menA spot that ran during the Super Bowl celebrating 125 tality to their wealth. years shows dozens of Mercedes cars, old and new, flockAnother sociological trend shifting Mercedess ing of their own volition to an aircraft hangar where the brand focus is the fact that Baby Boomers are not slowcompanys new line of vehicles is on display. Janice Joplins ing down as they approach retirement. Look at most of song Mercedes-Benz plays on the stereo of a classic SL them, theyre going to keel over in the gym somewhere, as convertible. It gives me chills, Cannon says. I watch it opposed to nursing homes, Cannon says. Theyre redewhenever I need to get charged up. fining old age; thats why we say things like 70 is the new His job is a balancing act: planting seeds in the minds 60. So theyre still youthful, theyre not going quietly into of future customers while still targeting existing ones. the night.
This sort of elitist kind of luxury is really a notion thats going by the wayside.
Because those are who Im going to get measured on: sales that we make this year, not bridges that I build for 10 years from now, he says. Marketing efforts seem to be paying off. The fact that Mercedesor any other automaker for that mattercan appeal to both Baby Boomers and Generation Y simultaneously is serendipitous. Theres usually a generation gap getting in the way. With Boomers and the Silent Generation, who were their parents, there was a lot of like, I want to make the world a different place; Im not listening to you; Im doing something completely radical, Acuras Poponi says. Whereas Gen Y and the Boomers, theyre friends theyre much more simpatico. Boomers have made a point of being as connected to their kids as they can be. The Baby Boomers are involved parents that maybe their parents werent. Theyre absolutely hands-on, Cannon says. Theyre often called helicopter parents because they kind of hover around their kids and circle and make sure that they get everything right and theyre given a trophy at the end. As much as Boomers and Gen Yers may get along famously, BIGinsights December 2011 Consumer Survey does highlight some attitudinal differences among generations. For example, the younger the respondent, the more likely he/she is to feel confident of a strong economy in the next six months (Figure 5). Forty percent of Gen Yers said they were confident/very confident. In contrast, 31.7% of Generation X respondents expressed confident/very confident views, while only 20.9% of the Boomers were confident/very confident, about half as many as Gen Y. Younger respondents are also much more likely to agree with the statement Live for today because tomorrow is so uncertain, and they are much more fashion-oriented than older consumers (Figure 6).
Total Generation X Adults 1,835 Total Generation y Adults 2,123 Total Boomer Adults 2,891
Figure 5: Which one of the following best describes your feelings about chances for a strong economy during the next 6 months? Very confident
9.5 7.9 2.9
Confident
30.5 23.8 18.0
Little confidence
49.0 51.1 52.7
No confidence
11.0 17.2 26.4
0%
n Gen Y n Gen X
30%
n Boomers
60%
Figure 6: Which statement best applies to your feelings about fashion: Newest trends and styles are important to me
36.2 29.0 9.4
0%
n Gen Y n Gen X
30%
n Boomers
60%
Source: M onthly Consumer Survey from BIGinsight, December 2011 Total Adult Respondents 18+ 8,402
15%
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Jun 10
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Jun 11
Dec 11
Dec 08
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Jun 11
Dec 11
Over $40,000 (Price Range for a Car to Buy) Linear Trend Line
Figure 9 below provides yet another way of looking at the market: It shows aggregate luxury car demand throughout 2011 (demand for all 10 luxury brands ranked in the Buzz Index) by graphing the percentage of all prospective purchasers (all incomes) who said they were considering any of these brands as either first or second choice. This trend line also shows a steady rise. The prediction of growing luxury car sales implicit in the first half of this chart was borne out by events in the latter half of 2011. The second half of this chart signals strong results continuing through the first half of 2012.
And finally, stepping away from the luxury category for a moment provides a look at prospects for the auto industry as a whole. Figure 10 graphs the percentage of the total population with an intent to buy a vehicle over the next six months. Although the starting and ending points on the chart are not as high as with affluent consumers (Figure 7), and the trend line is not as steep, the overall direction remains relentlessly upward, predicting further growth for the next six months.
15%
8% 6% 4% 2%
10%
1 11 1 1 1 1 1 11 11 11 Jan Feb Mar 1 Apr 1 May Jun Jul 1 Aug 1 Sep 11 Oct 11 Nov 1 Dec 1
All HH Income Levels Considering Luxury Brand Linear Trend Line
0%
Dec 08
Jun 09
Dec 09
Jun 10
Dec 10
Jun 11
Dec 11
Democratizing Luxury
Thats a dramatic shift from a few years ago, when Lexuss Templin says he believes buyers are gravitating the luxury automotive sector had its own version of the more toward luxury these daysnot just for cars, but for Big Three. everything from clothing to household appliances. Everybody wants a piece of this growing marHe attributes this trend to the democratization of ket, Templin says. So even though we will grow, and luxury. Mercedes will grow, and BMW will grow, our shares The father of threeages 22, 20 and 15says chilprobably wont be as big dren like his grew up during as they were back in 2007, an economic boom, and prebecause there were really only mium goods are the stuff three players in the entire of ordinary life to them. I market then. think theres a whole generaKey to Lexuss strategy tion that wants to have those is the ownership experience. things, he says. While a brand like BMW He mentions the two Subfocuses on positioning its Zero refrigerators and the cars as the ultimate drivrestaurant-quality, six-burner ing machines, Lexus puts as stove in his kitchen, for exammuch emphasis on the expeple. To the young Templins, rience of owning its cars as it this is standard, because does the cars themselves. theyve never known anything It seems to be working. else. They dont want the Lexus ranks highest among Sears Kenmore stuff I grew up luxury brands in satisfaction with, Templin says. with the process of buying He casts this desire to a new vehicle, according to buy luxury as being practithe J.D. Power and Associates cal, more so than splurging. 2011 Sales Satisfaction Index In the old days, youd buy Study. Cadillac and Mercedessomething that was less Benz rank second and third, money, but youd have to respectively. buy it more frequently, he Tyler, who hosted the says. Over time, people Mark Templin Lexus dinner in her home, have come to the realization says she had never thought theyd rather have a premium Group Vice President and about the actual experibrand and hold on to it lonGeneral Manager, Lexus USA ence of owning her ruby ger, versus replacing that GE red LS 460 luxury sedan or that Sears Kenmore. that was sitting there sparStill, he does not expect kling, calling my name at sales of luxury cars to go Sheehy Lexus of Annapolis. gangbusters. He projects that But sure enough, she thinks her experience with Lexus luxury could rise from 11% of overall car sales to 13%. has been exceptional. Itll probably not reach 15%, because there is a price facIn fact, Tyler goes to the dealer once or twice a tor, he says. week to have her car washed for free well, you tell a Competition in the luxur y segment is heating up real estate agent car wash, Im thereand sometimes along with demand. Because of this, Templin says, brings a coworker to have lunch at the dealerships cafe, sales will be fragmented among more manufacturers. which makes a killer chicken salad sandwich. So even though Lexus expects its own sales volume If it werent a great experience, if everyone wasnt so to increase, it most likely will have a smaller share of nice, if the place wasnt so clean and bright, I wouldnt go the market.
Everybody wants a piece of this growing market. So even though we will grow, and Mercedes will grow, and BMW will grow, our shares probably wont be as big as they were back in 2007, because there were really only three players in the entire market then.
to lunch there every week, Tyler says. Id just slam in to get my car washed and leave; or maybe Id go to the normal car wash. But it feels good. The dinner she hosted in her home was no differentfive-star all the way, from setup to service to the food and wine, she says. Tyler was chosen to host the dinner because she participates in a group called the Lexus Advisory Board, which answers online surveys the company conducts periodically. Lexus keeps in regular email contact with about 30,000 customers who participate on the advisory board. When its time to schedule a new dinner, they ask for volunteers and pick based on their location and the layout of their home, among other factors. The dinners operate under what Templin calls a truth serum theme. Im not trying to sell them a carthats not what its about, he says. We want open, candid conversation. Tyler was instructed not to invite a bunch of Lexus owners. They said, Basically, we dont want a Lexus love fest. So only one other person [at the dinner] owns a Lexus car, currently, she says. We had a diehard Cadillac couple. Two people have Mini Cooper convertibles, one couple is both Mercedes. Mercedes uses online communities similar to Lexuss Advisory Board to get feedback directly from consumers on the Web. One is called Mercedes-Benz Advisors and consists of typical Mercedes owners. Another group, called Gen Benzers, is younger. Theyre 20-somethings, theyre Gen Yers, Cannon says. Only about a quarter of them are actual Mercedes-Benz owners, the rest of them arent in our consuming demographic. But they are our Gen Y sounding board. Theres about 500 of them at any given time. It was through their feedback that he discovered that imagery surrounding the companys heritage and historical footage would appeal to that age group. Last year was a tough one for Lexus, in terms of sales. It ended 2011 having sold 13.7% fewer cars in the U.S. than it did in 2010. As was the case with Acura, which saw annual sales decline 8%, the natural disasters that pounded Japan in 2011 had a huge impact on production capacity.
6%
5%
4%
3%
2%
1%
So you come roaring into your driveway in an R8 and little Tommy next door comes around and hell go, Thats the car from Iron Man. Bam.
Scott Keogh Chief Marketing Officer, Audi of America
As both Lexus and Mercedes infuse their brands with youthful vibrance, Audi looks to mature. The automaker has been steadily heading upmarket and will continue. Audi was a second-tier luxury brand not 10 years ago. The way it set about changing that has been methodical. One of the first big moves was poaching Scott Keogh from Mercedes to be chief marketing officer. Having worked at Mercedes for more than a decade, he knew about clout and creating what he calls purchase confirmation. The truth about affluence is its all predicated on confirmation, Keogh says. This is why affluent people live in the same zip codes, go to the same country clubs, go to the same restaurants, talk about the same schools. Its all this concept of confirmation. Back when he started at Audi, the company was going for a sort of under-the-radar mystique, looking to do surgical marketing, as Keogh calls it, to target only people in the know. The strategy he and his team have been implementing is different. It hinges on making the brand and its cars memorable to everyone. What I wanted to make sure we did is that when someone purchased an Audi, they got that confirmation, he says. So you come roaring into your driveway in an R8 and little Tommy next door comes around and hell go, Thats the car for me, or Thats the car from Iron Man, or Thats the R8 from Audi. Bam. After some racy Super Bowl spotsremember the R8 commercial that took a pot shot at old-school luxury with a spoof of the Godfather scene with the horse head in the bed?and high-profile product placements in the Iron Man movies, Audi put itself on the pop-culture map. The brand has gone from seventh place on consumers luxury-car shopping lists four years ago to second place today, Keogh says. The company set a record sales year in 2011, with an increase of 15.7% over 2010 for a total of 117,561 units. Tight inventory shows healthy demand, and average transaction prices are up by about $5,000 this year compared with 2010. (The trend line in Figure 11 shows a steady rise in Audis popularity among affluent consumers.) The next step is to move further upmarket by focusing on selling more midsize and large sedans, as opposed to compact models like the A4, on which it has relied heavily in the past.
Figure 12: The December 2011 Survey from BIGinsight reveals that a consumer planning on purchasing a vehicle and considering a Cadillac as a first or second choice:
Planning to Buy/Lease in Next 6 Months, Considering Buying Cadillac (1st or 2nd Choice) 37.6 years 39.6% $75,406 54.6% 63.0% 72.4% 50.5% 46.7% 64.4%
Planning to Buy/Lease Is likely younger Is more likely to be business owner or professional/managerial Tends to have higher HH Income Is more likely to make purchases or influence purchases at their company Is more fashion oriented Is more likely to say they Live for today because tomorrow is so uncertain Is more confident in a strong economy in the next six months Is more likely to be employed full time Is more likely to invest in the stock market (said they probably/definitely would invest)
Total Adults Population 45.3 years 24.2% $55,807 19.7% 19.0% 31.8% 27.0% 33.6% 31.2%
Current Cadillac Drivers 53.0 years 22.5% $65,518 21.8% 26.4% 38.6% 27.4% 24.0% 39.8%
The surprise and the shock when they see that we are Butler had left GMs OnStar division at the end of 2009 better than a BMW M5its just kind of like, Whoa, to work at Inrix, a navigation and traffic services provider Butler says. based in Kirkland, Wash. He ran into Reuss, who had just On a broader scale, the company is improving its dealbeen named president that December, at the Detroit Metro erships. Facilities are being airport. A couple phone calls upgraded to a new high-end and a few months later, Butler look, but more importantly, was heading up Cadillac Cadillac has partnered marketing. with Ritz-Carlton to train He was ecstatic. Its the employees on how to create a tip of the spear for GM, five-star experience. Its a lot Butler says. Definitely its of change, but dealers seem been tarnished, but were polto be on board. In the most ishing it up, were making it recent National Automobile brighter. So literally its this Dealers Association annual job that brought me back to ranking of what dealer bodthe company. ies think of manufacturers, Getting to work with Cadillac came in ninth out Reuss was key to persuadof 33, compared with 24th in ing Butler to jump back to 2009. GM after being gone only Theres a huge amount of a few months. The biggest respect for Cadillac, Butler factor was Mark [Reuss] himDon Butler says. But for a lot of people, self, he says, just knowing Vice President of Marketing, Cadillac that respect is analogous to, I him, knowing what he was respect and I love my grandabout, knowing the way he dad, but I dont want to hang approached thingskind of out with him all the time. So no nonsense, no politics, no the challenge that I have is, b.s. how do I take that residual positive sentiment and make it Thanks to Reuss, the corporate culture at Cadillac is relevant for todays buyer? much more streamlined now, Butler says. He has enough Overall sales for the brand were up 3.7% in 2011. autonomy to push through important ideas quickly, like Factor out fleet sales to rental and limo companies, and the featuring the companys high-performance V-series vehisales increase more than triples to 10.5% over the previous cles prominently in advertising for the first time ever. year. The Cadillac SRX crossover was particularly hot in Niche models like the CTS-V were kept out of the mix 2011, with double-digit sales increases. previously because Cadillac sells only about 6,000 a year in North America. Typically, the practice is, dont advertise against them, we dont want to burden them with ad dollars because we sell so few, Butler says. And for me, I was like, Are you kidding me? We build the worlds fastest production sedan? Lets tell people about it. Lets show thatguess whatin this area, we are the standard of the world. Thats how a 30-second television spot titled Bellissimo came about. It shows a bright red Ferrari 458 chasing a Cadillac CTS-V coupe. The upshot is that Ferrari borrowed Magnetic Ride Control suspension technology from the Cadillac. The company is also conducting V Labs at five different racetracks around the country to put people behind the wheel of a CTS-Vparticularly those who drive competing Audi, BMW or Mercedes AMG cars.
We build the worlds fastest production sedan? Lets tell people about it. Lets show thatguess whatin this area, we are the standard of the world.
Figure 13: The December 2011 Survey from BIGinsight shows that a consumer planning on purchasing a vehicle and considering a Lincoln as a first or second choice:
Planning to Buy/Lease Is likely younger Is more likely to work in sales Is more likely to make purchases or influence purchases at their company Is more fashion oriented Is more likely to say they Live for today because tomorrow is so uncertain Is more confident in a strong economy in the next six months Is more likely to be employed full time Is more likely to invest in the stock market (said they probably/definitely would invest)
Total Adults Population 45.3 years 4.2% 19.7% 19.0% 31.8% 27.0% 33.6% 31.2%
Current Lincoln Drivers 60.4 years 1.0% 10.3% 12.7% 28.1% 20.7% 12.1% 32.4%
Planning to Buy/Lease in Next 6 Months, Considering Buying Lincoln (1st or 2nd Choice) 44.0 years 25.4% 25.6% 55.9% 47.4% 38.3% 39.9% 55.7%
The important new battleground is in midsize and smaller luxury cars, and the same for crossover utility vehicles. Every manufacturer is focused on getting their mid- to small-package vehicles seen as true luxury products.
C.J. ODonnell Group Marketing Manager, Lincoln
downsizing and getting their mid- to small-package vehicles in a position where theyre seen as true luxury products, he says. ODonnell is optimistic about the future for the company and is confident of the team that has been built up at Lincoln over the past 20 months. He left Jaguar in May 2010 to join Lincoln. It has been a long, tough slog, he says. Weve put some hard hours in over this past year, and even though weve added to the team, were moving forward faster, but the workload hasnt seemed to decrease. But there is a sense of a higher calling that keeps the team invigorated. The fun part is that theres a group of people here that feel part of something
really special. They joined up because they knew the work would be hard, they knew the payoff would be years out, and they come in every day and give me the energy to push on because theyre just so gassed by the concept of revitalizing Lincoln, ODonnell says. At the dealership level, things are already looking up. Lincoln is the most improved luxury brand in terms of its dealership experience, according to the J.D. Power and Associates 2011 U.S. Sales Satisfaction Index, jumping to sixth place from ninth in 2010. U.S. sales for the brand have been holding steady this yeardown by only 0.7% through November. But ODonnell says Lincoln is up more than 20% in key luxury markets. The top 10 metro areas make up almost half of all the luxury sales in the country, and its in markets like thatlike L.A., New York and Miamiwhere were making some really significant gains.
I have to say frankly, and Ive been around quite a bit, Ive not encountered any market that is as competitive as the U.S. market.
Conclusion
Barring some cataclysmic event in the next several months, it seems wise to take consumers at their word as far as their purchase plans. The data is signaling that the first half of 2012 will continue to be quite positive for the auto market overall in the U.S., and especially rosy for the luxury sector.
The percentage of affluent consumers who say they intend to buy or lease a vehicle in the next six months continues to climb. Furthermore, the price range of the vehicle they plan to purchase is also rising on a steady upward trend. As the Japanese automakers recover from their supply problems, they may well win some market share back, especially Lexus, thanks largely to loyal customers. But BMW and Audi now dominate the marketing wars, and Mercedes seems to be on an upswing. The U.S. luxury auto market is volatile and intensely competitive. With American brands busy reinventing themselves, and even newcomers like Hyundai edging into the luxury space, the overall shape of this sector by 2013 can barely be glimpsed through a (tinted) windshield darkly. But overall, through midyear 2012 at least, the good times should continue to roll.
To keep up with the latest consumer automotive trends and data, visit BIGinsights Automotive InsightCenter www.autoinsightcenter.com/autoinfo/
Bruce Rogers
Chief Insights Officer
Brenna Sniderman
Senior Director
Christiaan Rizy
Director
Hugo S. Moreno
Editorial Director
Matthew de Paula
Report Author
Taryn Sefecka
designer