Monday, May 2, 2011

7-Part Series, Beyond Market Research Numbers; Part 2, Automotive

Dennis LaFave
The automotive industry has consistently garnered a prominent position in news headlines over the last two years. Americans watched as the U.S. taxpayer bailed out General Motors, and Ford Motor Company turned down the bailout in 2009. It marked a new era for the industry.

With the federal government involvement in GM stock distribution and which GM dealerships remained in business and which ones were closed, Americans have plenty of opinions regarding the current U.S. automotive industry. Cars have become political.

Adding fuel to the political engine has been the questionable “Cash for Clunkers Program”, the introduction of more hybrid models and electric cars, and most recently, the skyrocketing price of gasoline at the pump. If there was ever a time when market research is vital to automotive industry companies, 2011 would be it.

In this environment, U.S. federal government agencies as well as automotive interests internationally are also looking for insights provided by both qualitative and quantitative research with a B2C and a B2B focus. One of the areas of expertise for global market research leader TNS Global is the automotive sector.

Cheryl Max, Senior Vice President of North American Marketing sums up TNS Global’s strengths. “Our insights assist companies in making informed business decisions of what products to develop, understand if their messages are resonating in the market, and identify changes they need to make to their mix to improve business results.”

Dennis LaFave, Vice President, Automotive Segment, shares his expert insight.

BKH: How does your market research work help a company in the automotive industry most?
DL: TNS provides information and insight regarding trends in new vehicle interest and acceptance, market response to manufacturers’ offers, advertising and communication (including in the digital space), and assessment of consumers’ changing attitudes and needs.

The intelligence provided helps manufacturers anticipate trends, understand acceptance of their products and evaluate the impact of their marketing communications.

BKH: What specifics areas of the automotive industry are you following in 2011 for clients?
DL: Our research in the US covers new vehicles across all consumer light vehicle segments. The research includes evaluating consumer interest in and acceptance of new vehicle models, their satisfaction with the vehicles they own, and their perceptions of different vehicle manufacturers.

A portion of our research focuses on onboard telematics, communication, entertainment and navigation systems. We also conduct research to evaluate dealers’ adherence to manufacturers’ standards, and best practices.

BKH: What is your automotive specific research area following most closely in automotive buying trends for clients?
DL: Our research continues to focus on trends in segment demand. We have become increasingly focused on the role of alternative communication channels, especially digital and social media, in the purchasing process.

BKH: Do you see radio, television, and traditional print (newspaper and magazine) advertising staying strong?
DL: These media channels will play a diminishing, altered role as manufacturers develop and adopt digital media strategies and attempt to exploit the direct-relationship communications potential of social media.

BKH: What do you see as the most innovative new automotive features and services trends?
DL: Alternative propulsion systems and improved fuel economy will continue to attract interest in innovation – although much of this effort can more properly be considered optimization rather than innovation. Developments of onboard telematics, communications and entertainment continue to evolve.

Driving assist systems for improved safety including lane drift warnings, backup camera’s and alarms, and automated braking are being increasingly deployed. Performance management including parking assist, fuel economy monitoring and control are increasing.

BKH: What automotive sectors do you see having the most development and innovation dollars being put into them for 2011-2012, 2013-2015?
DL: Manufacturers will continue their recent emphasis on smaller and lighter models generally with much attention focused on alternative propulsion systems such as hybrids and electric vehicles (EV). In terms of traditional segments, the continuing emphasis will be on small and compact cars and “crossover” utility vehicles.

BKH: What is the impact government programs have had on the automotive industry?
DL: In addition to the U.S. and Canadian governments’ efforts to support General Motors and Chrysler, both U.S. and foreign governments’ support for more fuel efficient and alternative propulsion vehicles has accelerated development and deployment of such products.

However, government support has not yet had a substantial impact on consumer acceptance of such products due to the still higher cost of purchase and changes in operating requirements like charging stations and restricted range of EVs.

Longer term government investment in infrastructure and emphasis on specific vehicle requirements, including the U.S. government’s commitment to purchase a large number of hybrids and EVs, will continue to reinforce the industry’s developmental efforts.

BKH: What are the most important factors in bridging the gap between SUV loving Americans and the green technology smaller vehicles?
DL: The shift from less fuel-efficient to more fuel efficient vehicles requires multifaceted changes and will be a gradual process. Shifting away from SUVs and other larger, less fuel efficient vehicles depends on shifting consumer attitudes toward increased concern for the environment and economic considerations such as cost of operation as influenced by gas prices. Consumer attitudes will also need to shift away from vehicle needs in hauling kids and equipment.

Shifting toward smaller, more fuel efficient vehicles generally imply changing consumer needs coupled with changing dimensions of vehicle appraisal. Examples of such changing criteria include increased interest in handling nimbleness, fuel efficiency, quality in lieu of cargo and hauling capacity, and power.

Manufacturers will need to continue their development of smaller and/or more fuel efficient models. Adoption of “green technology” per se brings additional challenges such as willingness to pay for the more advanced, and more expensive, technology, infrastructure development and deployment such as charging stations for EVs, and in some cases consumer acceptance of different standards of performance and capability such as range restrictions on some EVs.

BKH: Do you see Americans buying resale more than new in 2011-2013?
DL: Resale versus new purchase rates should remain consistent with recent trends. Consumers display a consistent mix of new versus used vehicle intention. While the economy seems to remain in “recovery” mode, the attraction of used vehicles due to “value” considerations is counterbalanced by the mix of the used vehicle fleet.

The resale fleet has a greater proportion of low fuel efficiency vehicles that needs to work through the stream of available vehicles which compete with a new vehicle fleet which is purposefully being replenished by higher fuel economy models.

BKH: Do you believe Americans have the economic stability to continue to purchase luxury brands?
DL: Yes. We have seen a recovery of stated interest in upscale (that is, luxury and higher-content vehicles) since the depth of the recession. Those consumers who delayed replacement vehicle purchase are also reentering the market.

The mix of luxury versus non-luxury brands with delayed replacement was roughly equivalent to sales proportions. Finally, many luxury brands have enhanced their offer at the “lower end” of the market, thus effectively lowering the price point required to move into, or stay in, a luxury brand.

BKH: What is the impact tightening credit will have on the automotive industry trends?
DL: Already tightened credit has had the effect of reducing demand to a more sustainable level. Continuing credit restrictions will favor lower cost (absolutely or cash flow) options such as leasing, lower price new vehicles and used vehicles for a portion of the consumer market.

BKH: What is the impact inflation will have on the automotive industry?
DL: Inflation generally should not profoundly affect demand in the short to intermediate term. However, fuel price inflation specifically will continue to reinforce consumer interest in more fuel efficient alternatives.

BKH: What is the impact extreme gasoline pricing will have on the automotive trends?
DL: The most direct and immediate effects will be to reinforce consumer interest in more fuel efficient vehicles including smaller vehicles, hybrids, and EVs. Sustained high gas prices will also reduce less essential automotive usage or miles driven. For some portion of the populace –and where existing transportation infrastructure allows – high fuel prices will reinforce use of alternative transportation.

BKH: Thank you Dennis. (Dennis’ international insights will be included in Part 7, Global Focus.)

TNS President, North America, David Kieselstein, concludes, “As a research company, we can help clients measure and understand many elements involved in automotive marketing – from product development to understanding the effectiveness of their communications. But the key point is that the research is a means to an end.”

“The ‘end’ is to help a company get a competitive advantage and understand what we are seeing in the research numbers and qualitative comments to help them develop a car that is more relevant to their audience. We ensure clients learn how their communications are being understood, so that they can make the adjustments necessary to be more relevant and drive greater return on their investment.”

See also:
Part 1, Insights From Global Leader TNS
Part 2 – Automotive
Part 3 – Consumer Products
Part 4 - Financial Services
Part 5 – Technology
Part 6 - Social & Polling
Part 7 – Global Focus

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