Wednesday, January 16, 2013

Interview: Is the Near Luxury upsell an endangered business model?

I recently interviewed Jeff Campana who is Sr. Vice President of GfK Automotive. Jeff has more than 26 years' experience in automotive marketing research and consulting. Before joining GfK in 1997 he spent 10 years at General Motors. GfK Automotive conducts research for the global automotive industry.

A Downshift in Auto Luxury upsell: 78% of Those Considering "Near-Entry" Luxury Cars Also Look at Non-Luxury Vehicles.

"Adding sexier looks to better perceived value for the money and fuels economy has been a winning combination for non-luxury cars,"

The rate of switching to a non-luxury model has grown -37% in 2012 versus 29% in 2007.

Will non-luxury vehicles take sales away from entry luxury vehicles? (examples: Ford Fusion Titanium and Lincoln MKZ, 2013 Nissan Sentra)

Yes - we see non-luxury sedans (especially Lower Middle) taking away sales from Near-Entry Luxury cars due to improved feature content, quality, styling, and perceived price/value by non-luxury sedans. Improved product offerings by non-luxury sedans give consumers a strong alternative to a Near-Entry Luxury car - much more so than 5-10 years ago.

Should all luxury automakers offer an entry level car?

This isn't an easy question. Each luxury brand needs to determine if it can offer a Near-Entry Luxury car that is true to their brand positioning and doesn't dilute its brand image. If so, then they should feel comfortable offering a Near-Entry Luxury Car.

What do luxury automakers need to do to distance themselves from near luxury vehicles?

To be successful in the Near-Entry Luxury segment, manufacturers need to be more compelling in their products and marketing by positioning critical enduring features (i.e., quality, trust, prestige) as key reasons to purchase luxury. Helping new vehicle intenders to actualize these enduring reasons for buying the more distinctive and prestigious Near-Entry Luxury car segment can provide for greater success at sales.

What do you think will happen to luxury brands in the future?

There will always be a market for luxury-branded vehicles. The key to success will be to offer products that justify the price premium.

Is there a new definition of luxury?

The definition of luxury is changing in the sense that there is no single definition of luxury. Brands like Lexus, Audi, and BMW take different approaches to luxury. What is clear is that consumers now want more luxury/prestige alone. Product features/technologies must provide clear benefits that improve their driving and ownership experience - and not just provide bells and whistles. Quality, value, safety, and brand reputation are all important.

How do you feel about Infiniti's recent decision to change their model's names?

We don't like to comment on specific manufacturers. What I can comment on is that there has been a proliferation of alphanumeric names by luxury brands, so simplification of model names by Infiniti should make it easier to build model name Awareness and imagery.

I have to give a big thanks to David Stanton for setting up this interview. I also want to thank Jeff Campana for taking the time to answer my questions.

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