1. automotive and vehicles
2. vehicle brands
3. audi

2012 Special report:
Luxury Automotive
Outlook
Featuring the Forbes Insights
Luxury Car Buzz Index
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 What’s in a Name?.......................................................................................... 10
The BIG Picture........................................................................................................12
Democratizing Luxury.......................................................................................... 14
The Truth About Affluence.................................................................................16
What’s 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 before—the 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 wasn’t
enough. They grew up ensconced in a premium lifestyle
and now expect that for themselves. Yet they’re 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 generations—wooing the Boomers
and priming Gen Y’ers for future purchases. That’s 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 Y’ers, 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
2 | 2012 Special report: Luxury Automotive Outlook
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 do—and buy—over 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.)
A Focus Group With Wine
One of Beth Tyler’s most memorable experiences involving Lexus has more to do with spiced lamb than her
beloved LS 460.
The Japanese luxury automaker recently selected
Tyler to host a dinner at her Annapolis, Md., home.
Professional chef Todd Gray,
who owns Equinox restaurant
in Washington, D.C., spent
hours in her kitchen cooking a six-course meal for the
gathering of 12.
“The food was out-ofthis-world fabulous. One of
the courses was chestnuts. I
never had a chestnut in my
life,” says Tyler, a real estate
agent at Long & Foster in
Annapolis.
Mark Templin, group
vice president and general
manager of Lexus, joined
Tyler, her husband, and eight
of their friends for the dinner. Nancy Hubbell, Lexus
prestige com mun ications
manager, also attended, tweeting the dinner conversation
as it unfolded to more than 250,000 Twitter followers.
It was the sixth event of its kind for Lexus in a little
over a year, all held in key luxury-car markets—Beverly
Hills, Chicago, Miami, San Francisco, among others.
“It’s a focus group, but it’s a focus group with wine,”
Templin says.
The dinners aren’t about selling cars or pitching the
brand. They’re a chance for Templin to get inside the
heads of car buyers and learn things like the fact that
several people at the dinner, including Tyler’s husband,
think that signing the paperwork for a new car shouldn’t
take more than 15 minutes.
“No one wants to sit at the
dealership for hours and get
up-sold,” Tyler says.
Interesting opinions often
come to light at the dinner
table. “The best comment
we’ve had yet was from a
woman who bought a Land
Rover,” Templin says. “She
said, ‘It’s like a bad boyfriend:
He treats you terribly, but he
looks so good,’” referring to
the SUV’s notorious reputation for being unreliable.
The fact that Templin, a
top Lexus executive, is taking time to dine with random
luxury-car buyers is remarkable on many levels. But what
it perhaps shows most clearly is how car companies are
taking drastic measures to change their image and the way
they conduct business.
The dinners aren’t
about selling cars or
pitching the brand.
They’re a chance
to get inside the heads
of car buyers.
Copyright © 2012 Forbes Insights | 3
Boosting Brands in a Sluggish
Economy
Luxury isn’t what it used to be. People
no longer flaunt wealth the way they
“People need time given
did before the market crash of 2008, says
Vicki Poponi, assistant vice president of
back to them. It’s really
product planning for Honda and Acura.
the last luxury.”
Many simply can’t afford to any longer.
But even those who can are refraining,
—Vicki Poponi
out of respect for the many whose lives
Assistant Vice President of
are in turmoil.
Product Planning for Honda
“We were wondering whether it was
and Acura USA
going to be a permanent change or not,”
she says. “At Acura, we believe it is. We
believe there’s a significant value shift in the luxury buyer.”
The reason is simple: People are happier, according
to a 2009 wealth study by the Harrison Group. It tracked
people’s attitudes after the market crash of 2008 and found
that, even though times were harder and money was
tighter, many were actually more content with their lives.
“Basically, the happiness quotient went up huge,”
Poponi says. “It’s completely paradoxical: Everybody
thinks they have less money, they’re spending less money,
but all of a sudden they’re happier. Our hypothesis is,
everybody got off this rat race of chasing the Joneses. It just
made people happier—you didn’t have the stress of looking at what somebody else had and you didn’t.”
The shift in sentiment plays to Acura’s strengths. The
company embodies “smart luxury,” Poponi says, offering
a good value relative to more expensive European luxury
cars, and reliability that saves hassle by avoiding repairs.
“People need time given back to them. It’s really sort of
like the last luxury,” she says.
Acura buyers are more rational than emotional when
it comes to their car purchases. They have a longer list of
requirements than those who buy other brands, and they
are looking to get the most value for their money, Poponi
says. “They’re not cheap. They’re smart, savvy, maybe a
little smug, looking around at all the research, seeing that
they’re the most informed in their product choices.”
The Regional Reality
When it comes to luxury car sales, there’s no such thing
as Anytown, U.S.A. Consumer data from BIGinsight reveals
significant regional differences in the popularity of some
luxury car brands. Figure 1 illustrates this with a few selected brands and markets, summing up the first and second
choices being considered by consumers who plan to buy
a vehicle in the next six months. (The table uses June and
December data averaged together, both to eliminate any
seasonal effects and to maximize the sample size.)
Audi, for instance, is more than twice as popular in New
York as in Texas or Florida. Cadillac is more than twice as
popular in New York as in Florida. BMW is roughly twice as
popular in New York and California as in Texas, and Lexus
is almost three times more popular in Texas than in New
York. Mercedes is almost twice as popular in California as
in Florida or Texas.
Figure 1: Planning to Buy/Lease: What make of vehicle
are you considering? First choice plus second choice:
United States:
n5.6% Audi
n10.2%BMW
n 5.5%Cadillac
n4.0% Lexus
n3.6% Mercedes-Benz
Source: BIGinsight Media Behaviors & Influence™ (MBI™) Survey, June and December 2011
4 | 2012 Special report: Luxury Automotive Outlook
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 don’t
think it’s a prestigious enough brand.” But those who make
status a priority in their car purchase tend to be emotional
buyers and aren’t the types of people the brand targets anyway, she says.
Net Promoter, NPS and Net Promoter Score are trademarks of Satmetrix Systems,
Inc., Bain & Co., and Fred Reichheld.
1
New York:
n10.2%Audi
n17.8% BMW
n 9.6%Cadillac
n2.3% Lexus
n4.9% Mercedes-Benz
California:
Illinois:
n8.2% Audi
n7.1% Audi
n14.8%BMW
n9.0% BMW
n 6.1%Cadillac
n 6.3%Cadillac
n4.9% Lexus
n3.6% Lexus
n6.3% Mercedes-Benz
n3.9% Mercedes-Benz
Texas:
Florida:
n5.0% Audi
n5.0% Audi
n7.7% BMW
n10.1% BMW
n 4.8%Cadillac
n 4.1%Cadillac
n6.3% Lexus
n4.8% Lexus
n3.4% Mercedes-Benz
n3.4% Mercedes-Benz
Copyright © 2012 Forbes Insights | 5
Forbes Insights
Luxury
Car
Buzz
Index
The Forbes Insights Luxury Car Buzz Index uses exclusive, forwardlooking data on consumer intentions provided by BIGinsight to assess
the industry’s 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.
BIGinsight’s 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.
6 | 2012 Special report: Luxury Automotive Outlook
0.26
6.71
10.75
10.21
7.72
18.99
total Score
5.24
5.89
Traditional Media
44.77
0.41
11.50
Digital Media
BMW
35.31
0.27
Personal Promotion
Audi
41.69
Brand Momentum
Acura
Brand Satisfaction
Manufacturer
• Luxury Car Buzz Index •
67.1
70.7
21.74
83.7
5.35
5.99
10.13
57.9
0.39
11.31
1.68
1.27
45.0
15.03
0.32
-1.74
-0.63
-0.37
12.6
Lexus
46.09
0.75
18.04
2.39
11.62
78.9
Lincoln
26.31
0.16
7.81
0.53
4.39
39.2
Mercedes-Benz
34.48
0.28
14.73
6.05
9.98
65.5
Volvo
45.83
-0.21
10.55
1.85
4.45
62.5
Cadillac
35.58
0.87
Infiniti
30.38
Jaguar
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 factors—Brand Satisfaction, Brand Momentum, Personal Promotion, Digital Media
and Traditional Media—in 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 Lexus’s second-place finish, given that much of BMW’s success has
come at Lexus’s expense, capitalizing on the supply problems that have troubled Lexus in the wake of last March’s
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
Lexus’s supply problems recede into the rearview mirror,
Copyright © 2012 Forbes Insights | 7
BMW
11.3
7.4
Cadillac
3.5
9.7
Infiniti
1.1
Jaguar
14.6
8.5
2.6
7.7
13.8
Digital Media Score
12.3
6.6
Internet Ad Score
8.5
9.1
mobile Device Score
Audi
5.3
Social Media Score
Acura
Blog Score
Manufacturer
• Digital Media Subfactors •
5.89
10.75
10.21
6.9
4.0
5.99
1.2
0.0
4.5
1.68
-.09
-1.1
-1.1
0.6
-0.63
Lexus
-1.3
2.3
2.6
6.0
2.39
Lincoln
-0.7
2.0
0.0
0.9
0.53
Mercedes-Benz
7.4
7.5
3.4
6.0
6.05
Volvo
1.8
1.1
3.0
1.6
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
8 | 2012 Special report: Luxury Automotive Outlook
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.
10.0
5.5
8.0
6.7
2.8
5.8
Cable TV
radio Score
4.8
3.8
5.7
8.6
8.1
6.9
5.7
3.7
Traditional Media Score
13.7
10.1
2.2
Broadcast TV Score
BMW
11.8
1.5
Newspaper Score
Audi
3.0
Magazine Score
Acura
article Score
Manufacturer
• Traditional Media Subfactors •
7.72
18.99
21.74
10.13
Cadillac
5.8
4.4
3.3
2.1
Infiniti
0.7
0.7
-0.8
2.2
0.4
0.0
1.27
Jaguar
0.8
0.1
-0.2
-1.3
0.3
-0.6
-0.37
Lexus
9.6
4.1
4.5
2.5
4.2
3.7
11.62
Lincoln
1.4
0.3
3.9
1.1
3.8
0.4
4.39
Mercedes-Benz
4.9
3.0
4.8
3.2
3.9
4.9
9.98
Volvo
4.2
1.8
0.9
0.7
2.1
1.3
4.45
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 Acura’s heels.
Copyright © 2012 Forbes Insights | 9
So What’s in a Name?
Couple that with the fact that their kids—Generation
One brand that does command a lot of clout is MercedesY—will eventually be the next Mercedes-Benz buyBenz. Yet when looking at Brand Satisfaction, the German
ers and it’s 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
That’s 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 convertible—which
2009 and 2010, Mercedes
sell in relatively small numwas experiencing some qualbers but bolster the company’s
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
Mercedes’s 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 we’re 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 changthat’s the right vehicle to do it. We wouldn’t 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 that’s going by the wayside,”
because it’s 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
That’s because most wealth in the U.S. is generated by
vehicles. “Heritage plays really well with Gen Y’ers,”
entrepreneurs. “It’s 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 Mercedes’s
ing of their own volition to an aircraft hangar where the
brand focus is the fact that Baby Boomers are not slowcompany’s new line of vehicles is on display. Janice Joplin’s
ing down as they approach retirement. “Look at most of
song “Mercedes-Benz” plays on the stereo of a classic SL
them, they’re 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. “They’re redewhenever I need to get charged up.”
fining old age; that’s why we say things like 70 is the new
His job is a balancing act: planting seeds in the minds
60. So they’re still youthful, they’re 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 that’s going
by the wayside.”
10 | 2012 Special report: Luxury Automotive Outlook
“Because those are who I’m 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
Mercedes—or any other automaker for that matter—can
appeal to both Baby Boomers and Generation Y simultaneously is serendipitous. There’s 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; I’m not listening to you; I’m
doing something completely radical,’” Acura’s Poponi
says. “Whereas Gen Y and the Boomers, they’re friends—
they’re 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 weren’t. They’re absolutely hands-on,” Cannon says. “They’re often called
‘helicopter parents’ because they kind of hover around
their kids and circle and make sure that they get everything right and they’re given a trophy at the end.”
As much as Boomers and Gen Y’ers may get along
famously, BIGinsight’s 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 Y’ers 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
30%
n Gen X
60%
n Boomers
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
I prefer a traditional conservative look
27.1
32.8
37.9
Fashion is less important than value and comfort to me
36.7
38.2
52.7
0%
n Gen Y
30%
n Gen X
60%
n Boomers
Source: M onthly Consumer Survey from BIGinsight™, December 2011
Total Adult Respondents 18+ 8,402
Copyright © 2012 Forbes Insights | 11
The Big Picture
Data from BIGinsight can provide perspective on the outlook for the forest,
not just the trees. Figure 7 below graphs
the percentage of affluent consumers
(household income $100,000 or more)
who plan to purchase a vehicle in the
next six months. One can readily see the
big dips of 2009 and early 2010, as well
as the drop in July/August 2011 amid the
uncertainty of the debt ceiling debate and
the U.S. credit downgrade. Just as clear
is the overall trend line, which has moved
steadily upward for the past three years. Given that the data
looks ahead six months, that steady trend line bodes well for
the industry.
Figure 8 below underlines that rosy forecast: It graphs the
percentage of those affluent prospective purchasers who
intend to buy a car in the most expensive category (over
$40,000). Once again, the trend line cuts through the
noisy clutter of month-to-month fluctuations, revealing a
steady, continuing upward trend—encouraging news for
the next six months.
Figure 7: HH Income $100,000+
Figure 8: HH Income $100,000+
25%
40%
35%
20%
30%
25%
15%
20%
10%
15%
10%
5%
5%
0%
Dec ‘08
Jun ‘09
Dec ‘09
Jun ‘10
Dec ‘10
Jun ‘11
Dec ‘11
0%
Dec ‘08
Jun ‘09
Dec ‘09
Jun ‘10
Dec ‘10
Yes (Planning to Buy Car/Truck)
Over $40,000 (Price Range for a Car to Buy)
Linear Trend Line
Linear Trend Line
12 | 2012 Special report: Luxury Automotive Outlook
Jun ‘11
Dec ‘11
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.
Figure 9: Aggregate Luxury Demand (1st and 2nd Choice)
Figure 10: Planning to Buy Car/Truck
20%
16%
14%
12%
10%
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
0%
Dec ‘08
Jun ‘09
Dec ‘09
All HH Income Levels Considering Luxury Brand
All HH Income Levels
Linear Trend Line
Linear Trend Line
Jun ‘10
Dec ‘10
Jun ‘11
Dec ‘11
Source: Monthly Consumer Survey from BIGinsight™
Copyright © 2012 Forbes Insights | 13
Democratizing Luxury
That’s a dramatic shift from a few years ago, when
Lexus’s Templin says he believes buyers are gravitating
the luxury automotive sector had its own version of the
more toward luxury these days—not 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 three—ages 22, 20 and 15—says chilprobably won’t 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 there’s a whole generaKey to Lexus’s 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.
they’ve never known anything
It seems to be working.
else. “They don’t 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, you’d buy
Study. Cadillac and Mercedessomething that was less
Benz rank second and third,
money, but you’d 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
they’d 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.
“It’ll 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,’ I’m there”—and sometimes
along with demand. Because of this, Templin says,
brings a coworker to have lunch at the dealership’s 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 weren’t a great experience, if everyone wasn’t so
to increase, it most likely will have a smaller share of
nice, if the place wasn’t so clean and bright, I wouldn’t 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 won’t be as big as
they were back in 2007,
because there were really
only three players in the
entire market then.”
14 | 2012 Special report: Luxury Automotive Outlook
to lunch there every week,” Tyler says. “I’d just slam in
to get my car washed and leave; or maybe I’d go to the
normal car wash. But it feels good.”
The dinner she hosted in her home was no different—five-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 it’s 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. “I’m not trying to sell them a
car—that’s not what it’s about,” he says. “We want open,
candid conversation.”
Tyler was instructed not to invite a bunch of Lexus
owners. “They said, ‘Basically, we don’t 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 Lexus’s
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. “They’re 20-somethings,
they’re Gen Y’ers,” Cannon says. “Only about a quarter of them are actual Mercedes-Benz owners, the rest of
them aren’t in our consuming demographic. But they are
our Gen Y sounding board. There’s about 500 of them at
any given time.”
It was through their feedback that he discovered that
imagery surrounding the company’s 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.
Copyright © 2012 Forbes Insights | 15
The Truth About Affluence
Figure 11: HH Income $100,000+
7%
6%
5%
4%
3%
2%
1%
0%
Dec ‘08
Jun ‘09
Dec ‘09
Jun ‘10
Dec ‘10
Jun ‘11
Dec ‘11
Audi (Make of Vehicle - First Choice)
Linear Trend Line
Source: Monthly Consumer Survey from BIGinsight™
“So you come roaring
into your driveway in
an R8 and little Tommy
next door comes around
and he’ll go, ‘That’s the
car from Iron Man.’ Bam.”
—Scott Keogh
Chief Marketing Officer,
Audi of America
16 | 2012 Special report: Luxury Automotive Outlook
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 it’s 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. It’s 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 he’ll go, ‘That’s the
car for me,’ or ‘That’s the car from Iron Man,’ or ‘That’s
the R8 from Audi.’ Bam.”
After some racy Super Bowl spots—remember 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 Audi’s 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.
What’s Next for American
Luxury?
Having successfully climbed its way up the luxury-car ladder, Audi has created room for a new challenger: Cadillac.
With General Motors’ bankruptcy fading from memory, Cadillac fills Audi’s spot as a key contender with
top-tier brands and is wasting no time.
“Cadillac was, for the better part of the last century,
the standard of the world,” says Don Butler, vice president
of marketing at Cadillac. “That’s what we were known
for. So we aspire to return to that.”
The company is counting on an all-new large sedan
called the XTS, on sale in spring 2012, to help achieve
that. It will have a new look, higher levels of craftsmanship
and innovative technology. It will be the first model to
feature the company’s new CUE interface, which takes an
iPad approach to stereo, climate and navigation controls. A
smaller sedan, the ATS, set to go on sale summer 2012, has
the unenviable task of trying to beat BMW’s new 3 Series,
the leader in its segment.
Butler says these new Cadillacs aren’t for everyone.
“I’m not going for broad acceptance, I’m going for that
deep meaningful connection with a few customers. And
if I get that deep meaningful connection with a few customers, then they will become ambassadors for the brand,
and they will find like-minded customers and bring them
along,” he says.
The type of customer Cadillac targets is pretty specific:
“emotionally engaging, on the extroverted side, swagger without being annoying, and then kind of early in the
know,” Butler says (see Figure 12).
That sort of describes Butler, who carries himself with
good-natured exuberance. He was handpicked by GM
President Mark Reuss.
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:
Total Adults
Population
Current Cadillac
Drivers
Planning to Buy/Lease in Next 6 Months,
Considering Buying Cadillac
(1st or 2nd Choice)
45.3 years
53.0 years
37.6 years
24.2%
22.5%
39.6%
$55,807
$65,518
$75,406
Is more likely to make purchases or
influence purchases at their company
19.7%
21.8%
54.6%
Is more fashion oriented
19.0%
26.4%
63.0%
Is more likely to say they “Live for today because tomorrow is so uncertain”
31.8%
38.6%
72.4%
Is more confident in a strong economy
in the next six months
27.0%
27.4%
50.5%
Is more likely to be employed full time
33.6%
24.0%
46.7%
Is more likely to invest in the stock
market (said they probably/definitely
would invest)
31.2%
39.8%
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
. . . than current Cadillac drivers, and total population.
Copyright © 2012 Forbes Insights | 17
“The surprise and the shock when they see that we are
Butler had left GM’s OnStar division at the end of 2009
better than a BMW M5—it’s 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. “It’s the
employees on how to create a
tip of the spear for GM,”
five-star experience. It’s a lot
Butler says. “Definitely it’s
of change, but dealers seem
been tarnished, but we’re polto be on board. In the most
ishing it up, we’re making it
recent National Automobile
brighter. So literally it’s 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
“There’s a huge amount of
a few months. “The biggest
respect for Cadillac,” Butler
factor was Mark [Reuss] him—Don 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 don’t want to hang
approached things—kind 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 today’s 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 company’s 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, don’t advertise against
them, we don’t 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 world’s fastest
production sedan? Let’s tell people about it.’ Let’s show
that—guess what—in this area, we are the standard of
the world.”
That’s 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-V—particularly those who
drive competing Audi, BMW or Mercedes AMG cars.
“We build the world’s
fastest production sedan?
Let’s tell people about it.
Let’s show that—guess
what—in this area, we are
the standard of the world.”
18 | 2012 Special report: Luxury Automotive Outlook
Even More of an Underdog
Another company facing a similar challenge to Cadillac
is Lincoln.
“Most consumers we talk to today in research have
warm-to-fond feelings toward the Lincoln brand,
and they very much want us to succeed,” says C.J.
O’Donnell, group marketing manager for Lincoln.
“There’s an openness in the marketplace for us. And the
surprise in that is that many of us thought there would
be negative feelings or perceptions around the brand,
and that hasn’t been the case.”
The problem is that people’s perceptions of the brand
aren’t flattering. It’s viewed as antiquated, perhaps a bit
stale. “The words ‘Town Car’ and ‘Continental’ frequently rise up in conversation,” O’Donnell says. “That’s
the general perception. Those that have contact with
our MK product range take a somewhat different view.
They see us as being much more relevant, much more
contemporary.”
Lincoln will launch seven all-new or significantly
redesigned products in the next few years. An updated
MKS sedan and MKT crossover, on sale in spring 2012,
are the first to get new styling that will carry over to the
entire lineup. Improving craftsmanship and performance
are key points. Eventually, the brand will push beyond
its overriding focus on value and seek a more affluent
buyer, while still holding onto the current customer base,
O’Donnell says.
He sees the larger sedan and coupe categories
becoming obsolete. “The important new battleground
is in midsize and smaller luxury cars, and the same
for crossover utility vehicles. I believe that every
manufacturer is focused on this sort of trend toward
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:
Total Adults
Population
Current Lincoln
Drivers
Planning to Buy/Lease in Next 6 Months,
Considering Buying Lincoln
(1st or 2nd Choice)
45.3 years
60.4 years
44.0 years
Is more likely to work in sales
4.2%
1.0%
25.4%
Is more likely to make purchases or
influence purchases at their company
19.7%
10.3%
25.6%
Is more fashion oriented
19.0%
12.7%
55.9%
Is more likely to say they “Live for today because tomorrow is so uncertain”
31.8%
28.1%
47.4%
Is more confident in a strong economy
in the next six months
27.0%
20.7%
38.3%
Is more likely to be employed full time
33.6%
12.1%
39.9%
Is more likely to invest in the stock
market (said they probably/definitely
would invest)
31.2%
32.4%
55.7%
Planning to Buy/Lease
Is likely younger
. . . than current Lincoln drivers, and total population.
Copyright © 2012 Forbes Insights | 19
“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. O’Donnell
Group Marketing Manager, Lincoln
downsizing and getting their mid- to
small-package vehicles in a position
where they’re seen as true luxury
products,” he says.
O’Donnell 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.
“We’ve put some hard hours in over
this past year, and even though we’ve
added to the team, we’re moving forward faster, but the workload hasn’t
seemed to decrease.”
But there is a sense of a higher calling that keeps the team invigorated.
“The fun part is that there’s a group of
people here that feel part of something
20 | 2012 Special report: Luxury Automotive Outlook
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 they’re just so gassed by the
concept of revitalizing Lincoln,” O’Donnell 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 year—down by only 0.7% through November. But
O’Donnell 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 it’s in markets
like that—like L.A., New York and Miami—where we’re
making some really significant gains.”
A View From the Top
anything to do with the technology of the powertrain, it’s
One company at the opposite end of the spectrum from
simply the characteristics of the car itself.”
Lincoln in terms of brand power is BMW. It scored the
He also points out that efficiency and sustainabilhighest in the overall Buzz Index. Part of that is because
ity have long been a priority in other markets, where the
the company focuses so keenly on conveying that its cars
company already offers smaller diesel engines, for examare “The Ultimate Driving Machine,” and actually backs
ple. Plus, focusing on these
it up with vehicles that truly
attributes is critical if the
are fun to drive.
brand is to remain relevant to
Although 2011 turned
Generation Y.
out to be BMW’s second-best
“We’re moving that way,”
sales year in the U.S.—with
Willisch says. “Still having in
305,418 vehicles sold, for an
mind that BMW will always
increase of 14.9% over 2010—
stay the ultimate driving
it still beat every other luxury
machine, but proving pretty
automaker.
soon that even with electroLudwig Willisch, presmobility, even with hybrid
ident and CEO of BMW
technology, you will be able
North America, took over
to provide the ultimate drivBMW NA in October from
ing machine.”
Jim O’Donnell, who is retiring. He spent the first several
months getting his bear–LuDwig Willisch
ings. He’s new to the North
President and CEO, BMW North America
American
market,
having most recently headed up
BMW Group’s European
sales region.
The biggest surprise so far
has been finding out exactly how tough the competition is.
“I have to say frankly, and I’ve been around quite a bit, I’ve
not encountered any market that is as competitive as the
U.S. market,” he says.
Willisch speaks of this not with concern, but with the
same unflappable calm he brings to everything he does.
Colleagues say it is one of his defining qualities. Another
is the fact that he genuinely loves cars—so much so that
part of him misses being president of BMW’s high-performance M division, which he was before becoming
head of European sales in 2009. “I am a car guy, I really
am. So I thought that was really the place to be and to
stay,” he says.
Amid many new products, including the company’s
most popular models, the 3 Series and 5 Series, next-generation alternative propulsion has become a key priority, as
previewed in two concept vehicles, the i3 electric car and
i8 hybrid.
To play up fuel efficiency this prominently might seem
incongruous for a brand so focused on high performance,
but Willisch insists it’s not. “Fun-to-drive doesn’t have
“I have to say frankly, and
I’ve been around quite a bit,
I’ve not encountered any
market that is as competitive
as the U.S. market.”
Copyright © 2012 Forbes Insights | 21
The New Contender
As if the competition weren’t fierce
enough for BMW and other luxury
“We’re going to take
brands, a new contender has eyes on their
territory: Hyundai Motor America. It
the dealership out of the
would seem unlikely that a 47-year-old
equation. So if you want
Korean manufacturer of budget-priced
a test drive, we’ll bring
cars could compete with true luxury
brands, but as we’ve already established,
you the car; if you want
these are strange times.
to buy one and get it
“I think maybe it was being lucky,
serviced, we’ll come
maybe it was being brilliant,” says Steve
Shannon, Hyundai Motor America’s
and get it for you.”
vice president of marketing. He’s talking
about the company’s decision to push into
—Steve Shannon
the premium segment in the U.S. “Lucky
Vice President of Marketing,
in terms of being just when the market
Hyundai Motor America
kind of took a dip a couple of years ago
when the Equus was coming out.”
The Equus is Hyundai’s priciest car
by far. The full-size sedan is loaded up
with a powerful V-8 and every conceivable luxury. It has
a suggested starting price of $59,000—stratospheric for a
company that has built its business on economy cars costing less than $20,000.
Most of the 3,193 Equus sedans the company sold
in 2011 were bought by people who already owned a
Hyundai. In terms of luxury car trade-ins, the Lexus LS
was the most frequent among Equus buyers, Shannon
says. “No surprise, the character of the cars is similar. But
what’s been exciting to see is a handful of BMW 7 Series,
S-Class and Audi A8s, some E-Class” being traded for
the Equus.
The Hyundai Equus was the highest-ranked large
premium sedan in J.D. Power and Associates’ “2011
Automotive Performance, Execution and Layout Study,”
which surveys owners and asks them to rank their vehicles on design, content and performance. In terms of resale
value, Automotive Lease Guides rates the Equus the same
three out of five stars as the BMW 5 Series, Lexus LS and
Mercedes E-Class.
Still, with only 3,193 sales in 2011, Hyundai lags in
brand clout. What it lacks in that regard, the company
is trying to make up for in other ways. For instance, it
offered a free iPad with the Equus sedan when it launched
the 2011 Equus in December of 2010. Hyundai gave away
2,842 iPads in total and is no longer offering them.
A more lasting strategy falls in line with Acura’s focus
on time as the ultimate luxury. “In the luxury space, there
22 | 2012 Special report: Luxury Automotive Outlook
was a kind of arms race to see who could have the best
cappuccino machines and the most amount of marble
and granite in their dealerships,” Shannon says. “But for
Hyundai, we’re going to take the dealership even out of
the equation. So if you want a test drive, we’ll bring you
the car; if you want to buy one and get it serviced, we’ll
come and get it for you. So that’s kind of a way of saying,
‘Okay, we may not be able to outdo Mercedes and Lexus
selling $115,000 cars, so let’s come up with some really
innovative ideas that help satisfy that luxury customer in
a unique way.’”
The further downmarket from the Equus you go,
the better the story gets for Hyundai. Sales of its midsize Genesis premium sedan—with a starting price of
$34,200—saw record sales in 2011, up 13% compared with
2010 for a total of 32,998. Its Elantra compact sedan, redesigned for 2011, won the 2012 North American Car of the
Year from an independent panel of 50 automotive journalists. Last and far from least, total sales for the company hit
a record high of 645,691 units for 2011, up 20% from the
year before.
So it’s clear that Hyundai has positive momentum.
The question is: How well can it parlay that into success within the luxury-car market? On the one hand, the
time seems right, with even affluent buyers looking to be
more sensible and less showy. There’s also the trend toward
democratizing luxury, as Lexus’s Templin called it, which
plays to Hyundai’s strengths, too.
If anything, Hyundai’s efforts are just another example of how jumbled things are in the luxury market—so
much so that even savvy customers like Tyler, the Lexus
LS owner who hosted the dinner in her home, are confounded. “You know, I’m not real sure what a luxury
car is anymore when you can buy a $60,000 Hyundai,”
she says.
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 BIGinsight’s Automotive InsightCenter™
www.autoinsightcenter.com/autoinfo/
Copyright © 2012 Forbes Insights | 23
APPENDIX: LUXURY CAR BUZZ INDEX
METHODOLOGY
The data used to calculate the Forbes Insights Luxury Car
Buzz Index derives from some 150,000 consumer interviews conducted in 2011 by BIGinsight. BIGinsight’s
monthly Consumer Survey, which has a 10-year history, includes a total monthly sample of more than 8,500
respondents. The Media Behaviors & Influence™ Study
polls some 25,000 respondents and is conducted twice a
year, in June and December.
The numbers from the monthly survey used to determine the Buzz Index are year-to-date through December
2011. The data extracted from the Media Behaviors &
Influence™ Study is from June and December 2011.
U.S. Census data is used to statistically weight the surveys. A proprietary mathematical formula is then employed
to further weight and balance the samples to the consumers
within the database. This weighting and balancing creates a
highly reliable forecast with great predictive power, even for
relatively small subsamples within the surveys.
The Buzz Index comprises five factors—Brand
Satisfaction, Brand Momentum, Personal Promotion,
Digital Media and Traditional Media—used to rank 10
leading luxury car brands: Acura, Audi, BMW, Cadillac,
Infiniti, Jaguar, Lexus, Lincoln, Mercedes-Benz and
Volvo. Certain brands, such as Porsche, Land Rover and
Ferrari, constituted too small a sample within the surveys
to include in this report.
Brand Satisfaction is derived from the monthly survey.
It examines those consumers who already drive one of the
10 luxury brands in question—say, Acura, for the sake of
illustration—and who say they intend to buy a car/truck in
the next six months. The percentage of that group who say
Acura is their first choice for their next car, plus the percentage of that group who say Acura is their second choice
(accorded a lower weighting) equals the Brand Satisfaction
score for that month. The 12 months of 2011 have been
averaged to yield the overall 2011 Brand Satisfaction score.
Brand Momentum is simply the 2011 average of
monthly share point gains and losses in the monthly survey. Positive values mean more vehicle purchasers are
considering the vehicle compared with the number of
those who currently own the vehicle. Negative values
mean fewer people are considering the vehicle compared
with the number of those who currently own the vehicle.
Personal Promotion is a hybrid factor derived from both
the monthly and Media Behaviors & Influence™ surveys.
24 | 2012 Special report: Luxury Automotive Outlook
The monthly survey provides the Net Promoter Score
(NPS): Respondents were asked to rate, on a scale from
0 (not at all likely) to 10 (extremely likely), the probability they would recommend the make/model of the vehicle
they currently drive to a friend or colleague. Ten and 9
responses indicate Promoters, 8 and 7 responses are Passives,
and 0 through 6 are Detractors. NPS is calculated by subtracting the percentage of Detractors from the percentage
of Promoters. In the Media Behaviors & Influence™ data,
the Personal Promotion factor looks at those within the target demographic (household income of $100,000 or more)
who are in the market for a vehicle to determine the percentage among them who say word of mouth is a significant
influence on their car-buying decision. NPS multiplied by
this percentage yields the Personal Promotion score. Again,
scores for the 12 months of 2011 were averaged to reach an
overall Personal Promotion score for each brand.
Both Digital and Traditional Media are derived from
the Media Behaviors & Influence™ data. The Digital Media
term comprises four subfactors: Blogs, Social Media, Mobile
Devices and Internet Ads. Each of these subfactors looks at
prospective vehicle purchasers—planning to buy within
the next six months—with $100,000 or more in household
income. Then, for example, the Blogs subfactor focuses on
those among that group who say blogs are a significant influence on their car-buying decision. In the case of Acura, for
instance, the formula takes the percentage of that group who
are considering the car (as either first or second choice) and
subtracts the percentage of that same blog-influenced group
who already drive an Acura. (This is to differentiate those
drawn to the car by marketing—or digital word of mouth—
from those whose opinion of the car is based on their personal
experience with it.) Each of the four subfactors is calculated
the same way. Results from the June and December surveys
are averaged together, and the four subfactors are averaged to
yield a Digital Media score for each brand.
Traditional Media includes six subfactors: Reading an
Article (about the car), Magazines, Newspapers, Broadcast
TV, Cable TV and Radio. Each of these subfactors is calculated the same way as the subfactors for Digital Media, then
averaged together. The Traditional Media term is weighted
versus Digital Media to account for traditional media’s greater
reach, as reported by the survey respondents themselves.
The sum of the five main factors equals the overall
Luxury Car Buzz Index score for each brand.
About
Forbes Insights
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