What did we learn from the cash-for-clunker program?
Data from the cash-for-clunkers program showed a snap shot of the automobile industry that will be helpful to both car dealers and consumers. According to the Department of Transportation, there were over 690,114 new car sales at a taxpayer cost of $2.88 billion.
Here is a breakdown of the sales by auto manufacturer:
1. Toyota 19.4%
2. General Motors 17.6%
3. Ford 14.4%
4. Honda 13.0%
5. Nissan 8.7%
6. Hyundai 7.2%
7. Chrysler 6.6%
8. Kia 4.3%
9. Subaru 2.5%
10. Mazda 2.4%
11. Volkswagen 2.0%
12. Suzuki 0.6%
13. Mitsubishi 0.5%
14. MINI 0.4%
15. Smart 0.2%
16. Volvo 0.1%
17. All Other 0.1%
Source: Department of Transportation
This data mirrors already established trends, with Toyota overtaking General Motors in sales. Why do more people prefer Toyota over other brands? The perception of reliability which can save money for the life of the car, smoothness and comfort are rated higher than other makes. These contribute to higher resale values. Although Toyota has had to recall approximately over nine million vehicles in the last three years, these numbers have not clouded the public’s perception of reliability. In addition, Toyota has opened factories in the United States and improved its image as a contributor to American jobs, manufacturing approximately half of its product in the United States.
While other manufacturers have caught up to Toyota’s overall reliability, performance and fuel efficiency, Toyota has been investing in technology, its employees, and products for many years. Some argue that the company is sitting pretty not necessarily just by its own merit alone but with substantial help from the Japanese government. Whether through Japanese government public social policies which pay for health and retirement care or through a trade deficit with the U.S. government and other Japanese government subsidies; American auto manufacturers may have been at a disadvantage. On the other hand, there is an inherent cultural bias toward American products that Toyota and other foreign automakers have had to overcome. Others fault the auto manufacturers for bad management and unsustainable union contracts, as well as a limited vision about future trends as the contributors to playing second fiddle to Toyota. Most likely all of these are contributors. Source: Business Week.
Another way to determine consumer trends using data from the cash-for-clunkers program is to examine what types of vehicles were traded in for new cars:
1. 1998 Ford Explorer
2. 1997 Ford Explorer
3. 1996 Ford Explorer
4. 1999 Ford Explorer
5. Jeep Grand Cherokee
6. Jeep Cherokee
7. 1995 Ford Explorer
8. 1994 Ford Explorer
9. 1997 Ford Windstar
10. 1999 Dodge Caravan
Source: Department of Transportation
Clearly, consumers were trading in their SUVs for more efficient fuel vehicles. While the purpose of the program was to stimulate the suffering auto industry and to take fuel inefficient vehicles off the roads; it appears that the government may have been successful in its efforts.
The top ten vehicles sold under the cash-for-clunkers program:
1. Toyota Corolla
2. Honda Civic
3. Toyota Camry
4. Ford Focus FWD
5. Hyundai Elantra
6. Nissan Versa
7. Toyota Prius
8. Honda Accord
9. Honda Fit
10. Ford Escape FWD
Source: Department of Transportation
The Perfect Cultural Storm
It is generally agreed by credible economic forecasters that while there have been upticks in the recession measures, at its worst, there will be a jobless recovery and at the very least, consumer spending is going to be conservative for a while. The extravagant spending of the past has come to an end, as baby boomers face delaying retirement, and inflation worries abound.
Current economic, political, and technological trends affect cultural trends. So while for the most part living was good during most of the last two decades, the long term effects of the recession will shape new cultural values.
Environmentalism has been that new cultural trend and it has reached the masses. Protection and conservation in fact make perfect bedfellows with the conservative spending habits of the new consumer. The two are like the perfect storm that is moving society in a new direction.
Consider this, according to Harris Interactive data, the trends show that every year there is an increase in the amount of people that consider themselves vegetarian. The Vegetarian Resource Group estimates that 30-40 percent of the country’s consumers are a good market for meatless items. According to the Center for Disease Control, one out of every 200 American children is a vegetarian and the number is expected to climb. Vegetarians often cite conservation of the environment such as fossils fuels and social responsibility in addition to healthy lifestyle as the main reasons for dietary choices.
New terminology reflects changing cultural values. Global footprint, environmental justice, social responsibility, green jobs and sustainability are just a few examples of environmentally friendly words that are now part of our everyday language.
The IRS reports that the environmental movement has been increasingly expanding in number of organizations, members, and in total revenues. Currently there are more than 26,000 environmental and conservation organizations – 8,000 of which have revenues of $25,000 or more. Source: Urban Institute.
In a recent poll, a majority of new car buyers reported that they pay attention to the environmental position of car manufacturers when they are considering a vehicle purchase. Toyota and Honda tied with over 35% of those surveyed cited the two among the most environmentally conscious auto manufacturers. Again, perception rather than reality may be at play here since Toyota along with other leading auto manufacturers teamed up to oppose recent CAFE legislation that will increase fuel efficiency by 40 percent to an industry average of 35 mpg by 2020 from 25 mpg. Source: BuyingAdvice.com.
In a major study that involved over 2,000 adults, BBMG a branding and marketing company found that "nearly nine in ten Americans say the words “conscious consumer” describe them well and are more likely to buy from companies that manufacture energy efficient products (90%), promote health and safety benefits (88%), support fair labor and trade practices (87%) and commit to environmentally-friendly practices (87%), if products are of equal quality and price." Furthermore, they found that there are five core values that motivate today’s consumers: health and safety, honesty, convenience, relationships and doing good. The study concluded that companies that capture trust, self-centered consciousness, and sustainability as a journey in their marketing campaigns will be more successful in capturing consumer spending.
According to Earth Advertising: "the most heavily populated environmentally conscious consumer group consists of people gravely concerned about their own health and that of their family."
What does this mean to local auto dealers?
While auto dealers all across the country saw a significant increase in foot traffic at their showroom during the cash-for-clunker period, most expect a significant decrease in the near future. There appears to be a trend to environmental and fuel efficient vehicles resulting from government design as well as recession and inflation fears. Consumers are becoming both socially conscious and conservative in their consumer behaviors.
Some foreign auto manufacturers, especially Toyota and certainly Honda and to a certain extent Volvo among others have been steadfastly working toward environmentally and socially conscious, safe and reliable vehicles. While American auto manufacturers have caught up to their foreign competitors when it comes to reliability, efficiency, and socially conscious products and practices, nevertheless, perception among the public is what matters.
As consumers become more conservative and socially conscious, it will become more important for auto dealers to promote themselves in such a way that includes the change in values that reflect consumer behaviors. For example, auto dealers are often solicited for financial donations from local community organizations and civic groups. By incorporating "good works" with "honesty" and "convenience" – into marketing campaigns rather than just focusing on "deals" and "specials" – the dealer can build a "community relationship" that will most likely motivate consumers to shop local.
Concern for one’s local community over global welfare can be used to capture and maintain local consumer support. We are already seeing these trends with other industries in which local products are preferred over global merchandise even if the cost is higher; consumers are willing to spend more in exchange for socially conscious feelings of doing good.
The combination of these strategies will ensure that various degrees of the social consumer are met. BBMG further profiled four different types of consumers:
"Enlightened consumers (10%) are the most driven by their values when making purchasing decisions and will go out of their way to reward companies who align with their social goals. Aspirationals (20%) are more likely to balance their ideals with convenience and often switch between social concerns, availability and price when making purchasing decisions. Practicals (30%) are looking for convenience and prioritize products based on price, quality and energy efficiency. Indifferents (40%) are the least motivated by social concerns and prioritize price, quality, convenience and products manufactured in the United States." Source: BBMG.
Examining Toyota’s business strategies, connections can be seen between the different profiles of the new consumer.
New trends bring with them new business practices and strategies. Auto dealers that market their good works of social responsibility, offer transparency in pricing, focus on a convenient shopping experience and promote a message that involves the dealer as a significant contributor to the local labor market and economy will reach all of the segments of the new consumer as defined by BBMG.
Auto dealerships will be wise to develop their own identities that can be both inclusive and exclusive of the makes and models that they sell. Becoming energy independent through the use of solar panels or printing brochures on recycled paper, using recycled products to remodel store, hosting green workshops or sponsoring socially responsible events and promoting these efforts can go a long way in attracting the new kind of consumer. Recognizing employees for their socially responsible behaviors within and outside of the workplace can increase employee productivity and morale.
Contributing to changing business and marketing practices is a new non-profit organization called B Lab that has created what it calls the B Corporation certification (b stands for beneficial) in which the focus is on certifying companies that are "purpose-driven and create benefit not only for shareholders, but for employees, the community, and the environment."
It is clear that unethical business practices are seen as contributors to one of the worst economic periods since the depression, fears about the environment are changing values about conservation and sustainability, and irresponsible conspicuous consumption among consumers have all come together to form a cultural movement in which social responsibility is a new way of doing business. While some corporations and businesses have foreseen this movement sooner than others, the good news is that it is easy to get on board.
Using social media such as blogs, websites, twitter, facebook, linkd, digg among others ensures that one’s marketing plan and strategies reach a wide audience in a cost effective way.