Jumpstart Automotive Group

Comprehensive shopping data provides 8 intriguing predictions for the remainder of 2010

Six weeks ago the famous groundhog – Punxsutawney Phil – saw his shadow, effectively predicting the horrifying weather patterns that have stymied the Midwest, East coast and even the South over the past month-and-a-half. As spot on as Phil was this year, the burrowing animal isn’t always on target — studies conducted by the National Climatic Data Center has set the groundhog’s overall predictions accuracy rate to be around 39%, not surprising given the lack of sophisticated research and statistical analysis that the little guy delivers.

There are plenty like Phil in the automotive world, who base their predictions on the direction of the wind, the phases of the moon, or even on the appearance of their shadow on an early February morning. But of course most of the prognosticators in the business utilize more scientific means to give insiders a glimpse of future car sales trends and news-making occurrences, and Jumpstart Automotive Group is no different. Through our collection of over 12 million monthly shoppers across automotive shopping sites including Vehix, Consumer Guide Automotive, and Car and Driver, to name a few (see the rest of our publishers here), we have thoroughly examined the actions and behaviors of car shoppers over the past 18 months to deliver some compelling insights on how people are responding to the madness that has overcome the industry and the economy during this time, and how dramatically behaviors and opinions have been altered as a result.

Here are some of the intriguing trends that Jumpstart has observed over the past 18 months, and some predictions to accompany the data:

1. More Consumers are Ready to Buy — Some signs of recovery are here, thanks to a late-2009 surge in vehicle sales, greatly spurred by the Cash-for-Clunkers program. In the early part of 2010, more shoppers are closer to the point of purchase than in the past 18 months. The number of shoppers making a purchase decision within three months increased by 126% in 2010 vs. 2008. Less than 30% of shoppers were prepared to buy within three months for those surveyed back in late ’08, but in 2010 that number has increased to nearly 67%. A little more consumer urgency, however, may not necessarily translate to more sales.

PREDICTION: The SAAR forecasts throughout the industry for 2010 will end up being overstated.

The rebound in car sales may not be happening at the rates some prognosticators are calling for this year. While there are more consumers closer to the bottom of the funnel, other factors will inhibit market growth. Key economic indicators are hardly returning to normal — unemployment is up as are foreclosures in the early parts of 2010. The recall fiasco taking place with Toyota and more mildly with other brands will likely curb or delay some buyers who may be more timid about purchasing a car that might not live up to safety standards. Jumpstart estimates the SAAR to deliver at around 10.5-10.8 million vehicles in 2010, while many outlets are predicting 11 million-plus.

2. More Consumers are Ready, but Undecided — The door is wide open for OEMs to market to shoppers on in-market properties for the right message, offer, or better yet a memorable creative execution. Only 14% of car shoppers know specifically which make and model of vehicle they want. Less than 50% even have an idea about what body style they want.

The use of manufacturer websites by consumers is also on the rise. According to a Jumpstart survey, 70-80% of visitors to third-party shopping sites are also using manufacturer sites during their research process. This alludes to a couple of important points — 1. OEM advertising on third-party sites is highly effective at delivering a marketing message to the most qualified intenders, and 2. Manufacturers are investing money and resources into delivering quality destination sites. OEMs have dramatically improved the usability, aesthetics and utilities on their websites, leading to growth in consumer use of these properties.

PREDICTION: The consumer will capture even more control of the car-buying process … Third-party resources will play a greater role, as people will spend more time and utilize as many outlets as possible before making a purchase decision.

With more and more data and information available to consumers (have you seen TrueCar.com yet?), the shopping process will continue to start 6-12 months prior to purchase and typically three or more resources will be utilized throughout the funnel. In the current economy consumers will seek out the most affordable price (obtaining price information was cited by shoppers as the No. 1 reason for visiting a third-party website), and focus on the vehicle options suitable to their needs. Arming themselves with the most important information, while being open to compelling marketing messages, consumers will trust third-party opinion from professional resources and then venture off to OEM sites to fine tune the details. Whether dealers like it or not, the consumer is in full control.

3. Crossing Over — The rise in popularity of the crossover vehicle has been unprecedented. We’ve watched the share of crossover sales increase by 20% for 2009 vs. 2008 to represent about 22% share of market. The future looks even rosier for this segment, as shoppers are more interested in crossovers now than any other vehicle — 32% of those surveyed were in market for a crossover, compared to 13% roughly 18 months ago — nearly a 150% jump in interest, ahead of the usually popular SUV, sedan and compact segments for the first time ever. Shopping patterns indicate more of the same, as the crossover segment experienced a compound growth in share of shopping on Jumpstart’s properties of 39% vs. last year. During the same period, only the luxury (+25%) segment grew noticeably in share.

PREDICTION: The crossover segment will continue to grow and represent over 25% share of market (vehicle sales) by the end of 2010.

Crossovers are in about 1-in-3 Jumpstart visitors’ consideration set. There are tons of options in this segment and the reasons are simple — it delivers the utility and cargo space of an SUV, with the safety, fuel economy and subtlety of a sedan.

4. Compact Contracting — With auto companies feverishly bringing more advanced small cars to market for a variety of reasons — looming CAFé standards easily a glaring one — the demand isn’t necessarily prevalent among U.S. consumers. When gas prices rose above $4 per gallon in mid-2008, the compact segment suddenly became a shining star among shoppers, representing a 2-year high of nearly 18% of shopping share in July of 2008. Since then, fuel prices have come back to normal, as has shopping share for compacts, maintaining at less than 10% consistently. When we asked consumers about their interest in compact vehicles in Jan. 2010, only 11% indicated a desire to purchase a compact, compared to over 25% in July 2008 — a 130% plunge. In terms of share of sales, compact has slowly inched forward, nearing 20% in market share.

PREDICTION: With fuel prices remaining stable, compact share of market (vehicle sales) will stay below 20% in 2010.

The Compact/small car segment is all the rage for OEMs — Fiesta, M2, Mini, Smart, Spark, etc. — but not so much for consumers, and the segment may end up carrying more bark than bite. OEMs are looking to “balance the portfolio” and include smaller vehicles in their lineup to meet government fuel standards. There’s always been an audience for these vehicles — and the audience may be larger now than in the past — but small cars are not as profitable as larger vehicles and thus will not be the manufacturers’ bread and butter in the long run.

5. High Aspirations — Despite the fact that only 7-8% of vehicles sold are luxury vehicles, BMW, Audi and Acura make up the top brands that people are considering among over 1,000 shoppers surveyed, and in all over 50% of considered purchases leaned toward luxury makes. Additionally, the luxury segment has grown in share of Jumpstart shopping by 11% in the past 18 months, capturing share from segments like sedan (-31%) and compact (-29%) during the same period.

PREDICTION: After historically trailing Cadillac and Acura in vehicle sales, Audi will surpass both and take a commanding position among the top four luxury brands, alongside BMW, Mercedes and Lexus.

While BMW continues to command the greatest attention in the luxury segment, Audi is storming onto the scene with some great product and smarter marketing. Lexus will need time to recover from its Toyota association. The mid-luxury segment — Volvo, Buick, Saab, Lincoln — is going to have to work extra hard to get consumers to pony up more money for a “luxury” vehicle that isn’t a Lexus, Mercedes, Audi or BMW. This doesn’t necessarily mean that they don’t live up to the same quality standards … but in the end luxury segment success is primarily about brand perception.

6. Fuel Inefficiency – Although there is ongoing buzz around fuel economy, low emissions and new technologies, a recent Jumpstart poll showed that only 8% of shoppers were considering various forms of hybrid technologies, while 11% are considering diesel models. Additionally, 75% are still going with gas-powered internal combustion engines — of the standard or turbo version. In terms of shopping patterns, hybrid/fuel efficiency’s share has fallen by 47% since July 2008, when gas prices were at some of their highest levels. It’s clear that interest in hybrid and other fuel technologies rises and falls with fuel prices.

PREDICTION: Marketers will shift from fuel efficiency messages and focus on safety, in response to all of the recall fears.

Safety messaging should begin to heavily infiltrate automotive advertising for the better part of 2010. We’ve watched OEMs drive home the fuel message over and over again, and obviously incentives are readily promoted, but the safety mantra will now get a seat at the head table.

7. Toyota Troubled — Toyota’s predicament has caused 51% of Jumpstart shoppers who would have normally considered a Toyota to remove the brand from their consideration set, per a February survey. Toyota shopping has slowly diminished on Jumpstart’s properties as well. Additionally, only 5.3% of recently surveyed shoppers indicated that Toyota is on their list of vehicles to purchase, behind five other brands including Ford and Chevy.

PREDICTION: It will take Toyota 2-3 years to recover from its current state of turmoil.

The Toyota hiccup is obviously going to have a lasting effect on the brand — at this point the brand is damaged goods, and they have a herculean effort ahead of them if they intend to regain the confidence of the American consumer. How they handle this situation will make all the difference … they need to treat it delicately and with compassion for the consumer, because there are now names and faces of deceased individuals being revealed as a result of these recall issues, typically a death knell for major companies. The ones who benefit from Toyota’s issues will obviously be Ford, Honda and Chevy — our shopper polls say Chevy is the leader in replacing Toyota intenders, but that remains to be seen.

8. Ford Forging Ahead — For shoppers who have eliminated Toyota from their consideration set, 17% claim they will likely replace Toyota with a Ford vehicle, the second highest behind Chevy (48%). In a January survey, Ford was also the top non-luxury brand to be named by Jumpstart shoppers as their next considered purchase. Ford also moved to No. 1 in share of Jumpstart shoppers at 10.8% in 2009 for the first time, historically trailing Chevy.

PREDICTION: Ford will grow its market share (vehicle sales) from below 12% to over 13%, and Fusion will move into the top 5 in cars sold in 2010 (typically between No. 6-10).

Ford will continue to roll, especially given Toyota’s transgressions, and will likely capitalize the most. Ford’s positive trajectory has not only been reflected in sales growth (Ford’s sales rose 43% in Feb.), but Fusion, Fiesta, and Focus have the makings of segment leaders, with eye-catching styling, fuel efficiency and advanced technology.

Predictions aside, there’s no denying the rampantly changing patterns that the industry has endured over the past two years. Through it all – a fuel price roller-coaster, followed by a recession which included the virtual elimination of credit, the plummeting of the housing market, millions of jobs lost, along with a recall disaster for the world’s largest automaker — these crises have shaped the auto market into what it is today: an truly unpredictable landscape that’s dramatically altering which cars people are shopping for and how they make their decisions on one of their largest purchases.